'Nearshoring' to Eastern Europe

Rich Tehrani called my attention to this item from the Wall Street Journal:

Eastern Europe Cuts in on India (Unfortunately, this article might not be available much longer without a subscription.)

In part, the article is a profile of Transcom Worldwide SA, a Stockholm-based outsourcing company with a growing presence in Eastern Europe, where it has 1,100 employees. Transcom hopes that its Eastern European operations will help it dominate the growing European call-center market. The article tells how they plan to do that:

"The key, says Chief Executive Keith Russell, is taking advantage of a strategy called nearshoring, a lesser-known cousin of offshoring. In offshoring, businesses seek to lower costs by contracting with offshore service centers to perform functions ranging from telemarketing to technical-support "help desks." India snared a huge share of this market. In nearshoring, the call center is located closer to the targeted customers of the businesses that hire center operators.

"Three years ago, as it became apparent that eight former Soviet-bloc countries would be joining the European Union in 2004, Transcom decided that Eastern Europe could emulate India as a base for setting up call centers. It since has opened centers in Estonia, Latvia, Lithuania, Poland and Hungary, bolstering a network of 42 centers in 23 mostly European countries.

"The idea, says Mr. Russell, is to market a combination of India-like cheap labor, strong skills in English and other European languages and a sensitivity to Western culture. Many European companies don't feel comfortable doing business with somewhere as distant geographically and culturally as India, he adds."

According to the article, some companies are looking for outsourced resources in areas where wages are lower; some are looking for areas where good-quality workers are available. The following table is interesting in this regard:

The WSJ article says that Estonia has drawn a lot of attention from call-center companies since the country joined the EU in May 2004. Since then, 54 call centers have moved into the country, employing 1,700 people.

AB -- 4/13/05