Offshoring to Central and Eastern Europe

The offshoring/outsourcing impetus still seems to feed on steroids, despite the recent withdrawal of JP Morgan-Chase from its $5B/7-year outsourcing contract with IBM. No doubt, the offshoring/outsourced movement will have its ups and downs. Yet, for those companies looking for such options beyond your typical Asian players, Central and East European IT service providers look like a promising destination. The West Europeans have already gotten a taste of the opportunity in areas ranging from games to customer service, and to enterprise software.

For the US based entities looking to offshore IT projects in Central and East Europe a few things are worth considering: The supply is rather small when considered against the demand of large projects, yet it makes up in eagerness and skills. Good engineering education and strong American cultural ties also help. The supply is skilled in Microsoft, Java, and Unix/Linux technologies. Not so great are the web-services skills nor their familiarity with best practices in the enterprise environment. The price may be moderately higher than in several Asian countries. One may very well consider these places as alternative destinations for R&D campuses.

Addendum: Reaping the benefits of business-process outsourcing (Bloch & Spang / McKinsey)

1 comment:

fCh said...

Questions for your money manager...

Look at assets-, stock prices-, and currency-evolutions / appreciations all over Central and Eastern European states in 2+ waves. In the first wave, see the newly EU integrated states, in the second wave watch Romania and Bulgaria (scheduled to join in 2007.) Then, in not too distant future, how about Moldova, Ukraine, and states further east?

Be prepared to anticipate the following:

* not very well defined / unstructured market(s),
* too many small and discontinuous market(s),
* capital liquidity problems, etc.

Yet, at least these countries have been on a march towards integration with the EU. Political-stability, and military-stability have been achieved.

This may well be the equivalent of one small cap allocation in terms of emerging markets.