Stefano Malnati is currently VP Engin at HireRight. He used to be VP Engin at PRAJA and before that a director at COmputer Vision. He has long experience in outsourcing. He worked with several companies in India for about a decade — even before outsourcing started becoming well-known.
He is now working with a team in Estonia. Estonia is a small country of 1.2M population and I had to ask him about the exact location. His experience is that outsourcing is more effective in Estonia because people are on average better trained and more hungry. Also, the language is not a big problem because they are managed by people who speak their language and those people are good in English. He considers outsourcing to Estonia significantly more cost-effective compared to India.
Currently oursourcing is generally considered equivalent to India. But other countries are trying to catch up fast. I saw a similar strong desire in Bulgaria. Naturally the lure of outsourced work is strong for several developing countries because of low resource requirement. India is definitely going to face increasing competition. So far things have been great for India — but are Indian leaders (both business and politics) ready for the challenge?
The impact of Eastern Europe on the out sourcing business really depends on the segment of outsourcing you consider: IT, contact centres or BPO. In addition, the impact — however small it is — will be felt not just by India, but by the Philippines and South/ Central America as well. At the moment, the bulk of the outsourcing (from the US) to Eastern Europe is IT Infrastructure Management Services (IMS) — and the numbers are very small. According to the Weissman Center for International Banking at Baruch College and The Paaras Group, only 4 % of US companies outsource their IT to Eastern Europe compared 91 % for India, 17 % for the Philippines and 13 % for South/ Central America (the figure does not add up to 100 because companies outsource to multiple destinations).
The Philippines are a bigger threat to India than Eastern Europe — they have price and time advantages similar to India. What the Philippines does not have is as vast a pool of trained professionals.
The ultimate fall out of Eastern Europe engaging in the out sourcing business should be a happy one — Eastern Europe has the potential to make the demand for QoS reach new peaks.
The problem is that India is well known for its great education system. The people are well educated. Eastern Europe is not well known for its well educated population. As a sfotware development manager, a company from Eastern Europe would have a lot to prove in terms of educated staff, technological skills, and communication skills before I made the switch from an Indian offshore outsourcing provider to an eastern European one.
The Philippines is catching up on outsourcing as well. I have to disagree though in saying that “Eastern Europe is not well known for its well educated population.” The argument is not well documented empirically.
More power!
India has emerged out to be one of the hottest destinations for offshore outsourcing in the recent years. Also, I agree that Philippines too is catching outsourcing pretty well, more so in the last 2 years.
Cost effective still remains the primary reason for most of the companies outsourcing their business activities to outsourcing companies.
The Philippines has really caught on as an outsourcing destination. We’ve opened up an office in Davao City, Philippines to cut the costs even further from Manila and Cebu and have had great success. It’s great to hear that Estonia is catching on as well.
The secret’s out. Estonia has become a target of several other companies hoping to take operations offshore at the right price. Internet calling company Skype has set up shop in Estonia’s capital city, Tallinn, home to the largest office of the eBay subsidiary. Estonia has become such an attractive destination that this year it made its debut at No. 15 on A.T. Kearney’s list of the top 50 global offshore outsourcing locations, beating out more established countries such as Russia, Argentina, and Canada.
I wonder if the Estonian one can be still considered as a profitable market. Prices rised a lot in the past few years while infrastructures did not.
Would you outsource – in 2009 – to Estonia?
Eastern Europeans like Polish, Germans and so ahead of India in every way,they are more educated than most Americans are.
I mean have you ever spoke with the customer service from India over the phone ? cant hardly understand their English. Well educated? gimme a break!