Outsourcing to Europe

By Vera Leonik

Source: Qulixsystems

While information technology (IT) has risen progressively over the past decades, the level of board oversight regarding IT, its strategy has not kept pace. The criticality to IT is keeping rising due to innovation demands and competition.

The board of directors in the company is monitoring lots of areas such as strategy development, management of operations and control. Ever - growing importance of IT is combined with complex environment in which boards now operate. While being a mystery to the board IT is not a new matter for them.

In the 50`s of 20th century IT was used primarily as a tool for automating business. Nowadays IT is used as a means to implement strategic goals and plans of the company. Business and IT strategies are highly integrated. IT is generally an expensive company matter. It is not always easy to measure IT value, performance and risks.

The world`s largest companies are engaged in outsourcing for a variety of reasons to reduce costs, increase flexibility and performance of business.

The European IT outsourcing market is expected to grow from about 3 percent (2004) to 7 percent (2007). The European companies are being presented with opportunities to realize the value propo¬sitions of IT outsourcing, access to IT expertise, rapid development and cost savings.

Outsourcing stands for contracting another company or person for implementing a particular function. Almost every organization outsources in some way. Usually the domain being outsourced is the one which is not essential to business. Although outsourcing has been around as work specification has existed .Companies and organizations began using outsourcing model to manage narrow functions. Some processes can be done more successfully by other companies with special toolkit and specially trained personnel.

Outsourcing has many forms nowadays. Outsourcing, Business process Outsourcing (BPO), Knowledge Process Outsourcing (KPO), Business Transformation Outsourcing (BTO) etc.

BPO is distinct from information technology (IT) outsourcing, which means hiring a third-party company or service provider to do IT-related activities, such as application management and application development, data center operations, or testing and quality assurance.

Now it is a beaten path for organizations to outsource financial and administration (F&A) processes, human resources (HR) and PR (public relations) functions, call center and customer service activities and accounting and payroll. Such deals usually involve many– year contracts that can run into millions of dollars. Business process outsourcing involves offshoring – hiring a company based in another country to do the work. Due to current data India is a popular location for BPO.

According to recent surveys Europe is becoming a second favorite spot. European Software programmers possess required development skills and ability to managing complex projects. European culture is closer to Western European culture than the Indian is. Eastern Europe is in a more convenient time zone. Besides Europe and Russia have to market its brand to the world. Also they should try to get as much government support as they can.

Outsourcing continues to promote in Europe. The UK still stands out as Europe's dominant market, but outsourcing has gained ground in Germany, Spain, and France. Belarus and Russia is a production line of skillful mathematicians and developers. Poland, Romania, Hungary and their neighbors also attract attention.

It is anything but a secret that you could choose India if searching offshore IT services in 2005. Due to researches of that time Indian market was enclosing 90% of the total offshore dollars. There was nobody as a head- to –head competitor. There was no alternative to India at those times. There were no large companies with excellent processes and experience in outsourcing. Nowadays it is much easier to bring the key people to countries where they can gain expertise in the domain needed. There even was a trend of creating so–called “captive” centers when companies were able to build their own facilities in India by hiring their own developers and creating workplaces in their country. Companies were able to operate domestically which had a growing popularity. There was no contest.

Nowadays China, Russia, Brazil and European countries are those that possess the greatest potential to compete for India`s scope. They have rising population factor, good education systems, strong focus on IT marketplace.

When Deutsche Bank was looking for an offshore partner to grow a cutting-edge customer relationship management system, the company's first move was to go to India with main outsourcing operations.

But Daniel Marovitz, managing director and COO of Deutsche's eGCI Group, found it difficult to get traction in a market. "What we realized is that in India there is so much overhead cost, because of communication, because of travel, time zones and, frankly, culture. If you're only looking to do something small and you don't know how fast it will grow, it is almost impossible to get something going and have it be successful," Marovitz said. Deutsche ended up. Their decision was simple. They addressed to one of the Russian companies for solid ties with universities getting ability to attract talented youth.

Today European countries have recently started to look for their niche on the IT outsourcing arena. Belarus is one of such countries. Since the 1980`s the capital city Minsk had arrangements with Bangalore which was a major center of Indian outsourcing. Nowadays Belarus, the former Soviet republic located between Poland and Russia, is becoming a new sonorous name among IT sharks.

With a huge quantity of experienced software developers primarily it was one of the most established European IT providers for Eastern Germany.

On September 22, 2005 the President of Belarus signed the Decree “On the High-Tech Park”. The Decree is aimed at boosting the competitive power of the national new and high technology-based sectors, developing modern technologies and expanding their exports, as well as attracting to the sector both Belarusian and foreign technologies.

Among its residents are EPAM Systems, Sakrament, System technologies, ScienceSoft, Design bureau of system programming, Applied Systems, Intellectual systems, Avest, Top Soft, LAKSHMI, SaM Solutions, Itransition, Marco, Soft Perspectiva, VirusBlokAda Ltd., EffectiveSoft, Invention Machine, BelHard Development, IT Park.

Great many representative offices are opening in Minsk. The opening of the representative office in Belarus is caused by fast development of the information technologies market, for which growth favorable conditions are provided after creation of High Technologies Park in the country. No doubt that European outsourcing companies are worth working with. This is lack of cultural differences and presence of experienced software developers.