With the negative association with the word "offshoring"¯, outsourcers in certain locations are increasingly using the term "nearshoring". For The UK market, this usually means Eastern Europe. We take a closer look at what is happening in the nearshore call centre market.
What is meant by Nearshore?
Nearshoring is about trading risk for price. A nearshore option is considered lower risk but higher priced than the typical offshore locations but higher risk and lower cost than an onshore location. For British companies, this used to mean The Republic of Ireland. However, Ireland's booming economy means that the cost of operating centres there is now in many cases more expensive than The UK. Even Irish companies are now "nearshoring" their own work to cheaper locations in Northern Ireland.
A number of the new EU entrants now have call centres servicing the English speaking market. Poland has the largest market but there are also "nearshore" centres in The Czech Republic, Slovakia, Lithuania and elsewhere, Romania and Bulgaria.
What are the advantages?
One key advantage with nearshore is the pure geography. It is much simpler for a client to have positive input into a call centre when it is only a 2 hour flight away to address any problems quickly.
If stereotypes are to believed, the Eastern Europeans who have come to work in The UK are renowned for their strong work ethic and without evidence to the contrary, we can only assume that this is the same for their call centre agents.
While Eastern Europe does not have the same widespread English language skills of India or The Philippines, it does have other language abilities. Many Eastern Europeans were taught Russian to a high-level in school. With the Russian economy booming from "energy wealth" and Moscow quickly becoming one of Europe's most expensive cities, companies are looking at Eastern Europe to be a low-risk option to service the Russian market compared with the potentially volatile business climate in Russia. Eastern Europe also has a high proficiency in other languages including German and in some places Italian, French, Spanish and those Scandinavian languages which are so hard to find outside of their homeland.
It's also important to note that "nearshoring" isn't just about "outsourcing". As fellow EU members, it is comparatively easier to incorporate and operate a business in these countries.
What are the disadvantages?
We need to be realistic about the English language skills in Eastern Europe. Despite the fact there are 100's of 1000's of Eastern Europeans working in The UK and Ireland, very few are working in call centres despite the large number of vacancies in British call centres because of their level of English. However, since the fall of the Berlin Wall, young Eastern Europeans have been quick to embrace learning English and many have now worked in English speaking countries and are now returning home with new language skills.
The economies of Eastern Europe are growing faster that the West and wage inflation is on the rise. Once they adopt The Euro as their collective currency, it is likely that this will accelerate in the short-term. The European Minimum Wage does not apply for the new EU entrants and wages are still considerably lower than the UK but the differential is diminishing.
The most recent report on the competitiveness of certain cities around the world, the Indian centres came out far more competitive than any city in Eastern Europe. With New Delhi ranked as 100%, this is how other offshore destinations stacked up.
Krakow, Poland 70.6%
Warsaw, Poland 71.1%
Prague, Czech Republic 72.8%
Budapest, Hungary 73.3%
Manila, Philippines 87.7%
Mumbai, India 92.6%
Bangalore 97.8%
New Delhi 100%
However, the figures looking very different when comparing the ability of languages especially German where Polish cities score very highly.
Northern Ireland.
Northern Ireland still represents a cost-effective solution for companies looking for a solution closer to home. In an unusual twist, ICICI One Source and HCL Technologies (2 of India's largest outsourced providers) have established operations in Northern Ireland. Despite economic growth spurned by relative stability in the province, unemployment is still relatively high and Northern Ireland has a high percentage of "20-somethings" in its population. Northern Ireland now has the highest house price inflation in the UK with property increasing by 35% last year and wages are bound to grow over recent years diminishing its competitive advantage. However, it looks set to continue its expansion servicing the British and Irish markets.
Conclusion
The lack of available English speakers, the high cost and increasing employment opportunities in Eastern Europe means that it is unlikely to ever compete directly with The Philippines. However, as the industry continually looks to source good quality agents, these "nearshore" location will act as a niche player for smaller centres, companies wishing to centralise European operations or for companies wanting to have greater control over the call centre. This is especially true of Poland, Lithuania and Estonia which are considered better locations than The Czech Republic, Romania, Hungary or Bulgaria.
The theory remains the same for nearshoring as for offshoring or domestic call centres. A customer or prospect has the same level of expectation from a call as they do with a UK call-centre!
If you would like more information on The Philippines as a destination for UK call centre traffic, then contact Rob O’Malley, rob.omalley@call-centres.com or call his mobile phone on (+44) 77400 96598