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The Warsaw Voice » Business » January 28, 2015
Business & Economy
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Outsourcing Drives Economy
January 28, 2015   
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Outsourcing is one of the fastest growing sectors of the Polish economy. The number of business services centers in Poland has nearly doubled over the past five years.

A decade ago, when outsourcing was only beginning to develop in Poland, it was largely perceived by the public as a way to reduce costs in companies. Today, the modern business services sector is becoming one of the strongest pillars of the Polish economy. The industry is noting growth not seen in other segments of the economy, at the same time stimulating the development of other areas of the market.

There are already 470 foreign-owned outsourcing centers in Poland. Business services are a segment characterized by a rapid increase in employment. Since the beginning of 2012, the number of employees in the industry has doubled. At the moment, service centers operating in Poland have a total of 130,000 workers, and employment is projected to rise to 150,000-170,000 by the end of 2015.

“Key to the development of the Polish outsourcing market are the high ratings of the country in global standings,” said Mikołaj Pluciński, CEO of TMF Poland, part of the TMF Group, which is a global provider of business services active in 120 countries. “Poland is currently among countries topping the list in world rankings of the most attractive investment destinations for modern business services. Cracow is rated the highest, followed by the Warsaw and Wrocław.”

For several years Poland has been excelling in global rankings in terms of investment attractiveness. According to the latest report by analytical firm Gartner, Poland is the best destination for new business service centers in the Europe, Middle East and Africa (EMEA) region. In turn, the Tholons Top 100 Outsourcing Destinations 2014 report ranks Cracow in ninth place among global outsourcing destinations. Ranked higher on the list are only six cities in India, which is the global leader in the industry, as well as two locations in the Philippines. In the race for pole position Poland has outperformed powerhouse China. In this league table, Warsaw was ranked 32nd (moving up by four places) and Wrocław was 65th (advancing by 10 notches).

The high marks for Poland translate into tangible benefits. The largest number of foreign investment projects in Poland is now being noted in the modern business services segment. In recent years, Polish companies have trained many professionals who no longer limit themselves to handling basic tasks, but provide advanced business processes and strategic operations for the world’s largest companies. Financial and accounting services as well as IT outsourcing for companies are becoming a Polish specialty.

The development of the business services segment is benefiting many companies working with BPO/SSC (Business Process Outsourcing/Shared Service Centers) firms. “Thanks to this, additional jobs are also being created in retail and transport companies as well as those providing training, food-service, cleaning and security services,” says Pluciński.

The growth of the sector is also associated with high demand for office space, and that’s why it also drives the office market in the largest urban areas in the country. Foreign-owned business service centers have for several years been the main driver of office markets outside of Warsaw, and contracts signed by the sector are usually characterized by a large volume of space.

“The current data shows that foreign-owned business service centers have signed, from the beginning of the year to the end of September, about 100 leases for nearly 200,000 sq m on the largest office markets outside the capital, which represents about 63.5 percent of the demand,” says Anna Młyniec, Director of Office Agency and Tenant Representation at real estate services firm JLL.

This means that the demand for office space from the business services sector as of the third quarter of last year reached a level comparable to that recorded in 2013 as a whole, when about 200,000 sq m was leased. The high demand for office space that has been noted for several years now is the result of a steady increase in employment in foreign-owned business service centers in major Polish cities. The largest center for the business services sector in Poland is Cracow. The city leads the way in terms of employment in the sector. The city’s 85 foreign-owned service centers employ a combined 30,600 professionals. That’s over 5,000 more than a year ago.

JLL estimates show that foreign companies in the modern business services sector in Poland occupy around 1,300,000 sq m of office space altogether. The share of the services sector in the total area occupied by tenants in individual cities stands at 55 percent in Cracow, 44 percent in ŁódĽ, and 41 percent in Wrocław.

In other Central and Eastern European countries, the outsourcing sector is also recording dynamic growth. According to a recent report by the DTZ real estate services company entitled Outsourcing Sector in Key CEE Markets, the countries of Central and Eastern Europe are steadily gaining popularity as a destination to open new outsourcing sector centers. This is promoted by factors such as access to qualified workers, lower operating costs and a good location in close proximity to Western European markets. “We predict that, in the coming years, more newly opened centers will provide services with higher value added and requiring higher staff qualifications,” says Kamila Wykrota, Head of Consulting and Research at DTZ in Poland. She said this trend will, on the one hand, strengthen the position of popular locations such as Cracow, Warsaw, Prague, and Budapest and, on the other, attract investment projects to other regional cities as well as countries such as Romania and Bulgaria—due to a gradual increase in labor costs and growing competition in the largest outsourcing centers.
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