The 2014 A.T. Kearney global research for the establishment of an offshore company
- Offshoring itself, which consists of locating resources in low-cost countries, using centers owned and operated by the offshorer
- Outsourcing, in which back-office operations are performed by specialized third parties under agreed contractual terms, which makes geography relatively indifferent to the company hiring the services
- Automation, a wave that is still in its infancy, in which robots are programmed to perform routine tasks even less expensively than low-cost labor
Europe Europe offers a split between established players with mature business environments and a high level of human capital, and emerging locations where costs are lower and the industry and regulatory landscape are still developing. Central Europe offers a mature industry and highly skilled players. While relatively expensive compared to offshore locations in other regions, there is still substantial arbitrage to be had. The region’s leader, Poland (11), moves up 13 spots in the index this year. The biggest country in Central and Eastern Europe, it boasts a large labor force and multitude of city options. With industry dispersed across Warsaw, Krakow, Lodz, Katowice, and other cities, the country has a reasonable cost profile that, while slowly converging with Western Europe, is still lower by several magnitudes. Multinationals Sabre and Motorola operate large software development centers in Poland, accompanied by Comarch, Capgemini, and HCL in IT consulting. Elsewhere in the region, the Czech Republic (33) is integrated into the regulatory framework of the European Union (EU) and offers a stable, low-risk environment. Hungary (31) and Slovakia (35) are relatively smaller but also offer close proximity to Europe’s business centers. Southeast Europe presents deeper arbitrage opportunities, although its industry and regulatory framework are less developed. Bulgaria (9) is home to advanced IT centers serving both multinationals and local companies, focused mostly on traditional software development for captive players such as CSC and SAP. One drawback is that Bulgaria has not yet implemented EU data security directives and therefore may not be suitable to handle sensitive customer information for clients with a European customer base. Another recent EU member, Romania (18) offers a sound regulatory environment. The country’s size guarantees a robust pipeline of talent from its network of universities. Transylvania is home to a large German-speaking population. French and Italian speakers are also relatively easy to find thanks to Romania’s linguistic and cultural affinity to Latin countries. The Romanian government is actively courting the sector: companies that operate in the IT sector are able to deduct the payroll tax for their employees, making for a more attractive financial environment. Supported by government incentives, IBM is expanding from 300 FTEs to more than 1,200. Offering a large, qualified labor pool at post-recession prices, Spain (32) jumps 10 spots. Although lower-cost locations on the European periphery have taken share from Spain over the past decade, it is once again gaining traction as a nearshore location for European firms in need of well-educated talent. Moreover, its cultural and linguistic ties to Latin America are useful for multinationals doing business in the region.