The overlooked potential for outsourcing in Eastern Europe

Eastern Europe is a small player in the global market for IT and business process outsourcing, but that's likely to change as companies in Western Europe become more comfortable with offshoring.
Service providers in Eastern Europe offer geographic proximity combined with cultural and language affinities that Western European companies can't easily find further afield.
The region is likely to remain competitive, given its low level of wage inflation (outside of popular centers like Prague and Budapest), along with thousands of qualified graduates entering the marketplace each year.
As Eastern European service providers develop their capabilities, they should capture a larger share of the market for IT and business process services. source McKinsey

Eastern Europe: Outsourcing hot spot?

ZDNet Tags: Europe, Outsourcing, Offshoring,
Eastern Europe could soon become a favorite location for offshore outsourcing, with activity in the region estimated to triple between 2005 and 2008. That's according to consulting firm McKinsey, which predicts that the business process outsourcing (BPO) industry will support 130,000 jobs in the region by 2008.

The next Google will come out of Eastern Europe

(BusinessWeek) Skype Technologies' (EBAY ) brash European founders, Niklas Zennström and Janus Friius, had no product in 2003 when they pitched their business plan to Luxembourg venture fund Mangrove Capital Partners. Their idea was to attack a complacent global telecom industry with an ad-based service that offered free phone calls over the Internet--a plan that 20 venture capital groups already had rejected....
....Mangrove is also betting some of the biggest Net hits will come out of Eastern and Central Europe, where engineering and mathematical skills run deep. "We see Eastern European entrepreneurs as more fervently capitalist than Western Europeans," says Lopez....

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Bill Gates says West not supplying enough IT talent

MOSCOW (Reuters) - A shortage of information technology graduates from Western universities is leading companies to call on developing countries to meet research demand, Microsoft chairman Bill Gates said on Tuesday.
After the break-up of the Soviet Union, Russia's internationally renowned education system became a cheap talent pool for the West. Now dozens of Russian language Web sites offer computer programming jobs in the United States, alongside visa support and language training.
"Worldwide, a lot of the developed countries are not graduating as many IT students as they were in the past, which is kind of ironic as it does mean it does increase the opportunities," Gates said.
Many Western firms have also outsourced data management, software development and other high tech operations to lower cost operators in Asia, where education standards are high in some countries but wages are still comparatively low.

"There is a shortage of IT skills on a worldwide basis. Anybody who can get those skills here now will have a lot of opportunity," Gates said.

Outsourcing and innovation 2006: a happy couple?

Key Findings from the report of Quint
IT Outsourcing has become a mature market with a strong growth in application outsourcing.
A more selective sourcing strategy is on the rise in the Benelux market.
Over 75% of the respondents still focus on cost reduction and control as their main outsourcing goal.

the future of outsourcing

As far as Daniel Marovitz (Deutsche Bank) is concerned, offshore outsourcing no longer a cost-cutting option for the world's biggest financial institutions. Nor is it even a source of competitive advantage. "The issue is that if you don't do it, you won't survive," says Marovitz >. Read more in the Businessweek.

Bucharest rivals Bangalore

...Language skills and low wages are only part of the appeal, though. IT executives rave about the topnotch training and problem-solving prowess of Romanian computer specialists. Student teams from Romanian universities routinely take first place in global software-development contests sponsored by Microsoft (MSFT ) and Oracle.

"If you want 5,000 people doing coding, India is a better choice." But for more advanced research and development, "it's better in Romania," says Eugen Schwab-Chesaru, who heads the local office of Pierre Audoin Consultants, which has helped broker several multinational investments, including the recent Adecco deal...

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The article is published at BusinessWeek Online.

Cultural differences cause offshoring problems

Two-thirds of execs say it's the main reason deals run into trouble…
Source: By Andy McCue
Published: Monday 17 July 2006
Cultural differences are one of the biggest reasons why offshore outsourcing deals fail or run into problems, according to new research.

In an Accenture study, two-thirds of 200 US business executives said that miscommunication arising from cultural differences has caused problems when outsourcing offshore.

Different communication styles was identified as the key factor causing problems between onshore and offshore workers by over three-quarters (76 per cent) of the managers questioned.

Different approaches to completing tasks, different attitudes toward conflict and different decision-making styles were cited as the other main cultural factors that frequently cause upsets when managing an offshore outsourcing relationship.

Kris Wadia, senior executive in Accenture’s network of global delivery centres, said that the physical obstacles to offshore outsourcing such as telecoms and facilities have largely been resolved.

He said in a statement: "However, the soft issues, particularly cross-cultural communication, will continue to present the main challenges to realising global sourcing's full potential for the foreseeable future."

Over half of National Outsourcing Association (NOA) members surveyed recently also said cultural differences are still an issue in offshore outsourcing deals.

At a NOA event last week David Skinner, partner at law firm Morrison & Foerster, said this is particularly true in multi-sourcing where the client is often dealing with many managers from different suppliers in different countries.

He said: "It is one of the biggest multi-sourcing issues. You have got to manage the cultural differences."

India: Why Apple Walked Away

"India isn't as inexpensive as it used to be," the source says. "The turnover is high, and the competition for good people is strong." Apple feels it "can do [such work] more efficiently elsewhere."

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Top 10

It's an older articel but still quite valid. The top 10 of things that you need to think of when going offshore
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Nearshoring: Looking closer to home

Companies looking for savings but worried about the risks and cultural barriers involved in offshore outsourcing could benefit from nearshoring. Danny Bradbury investigates the pros and cons
Read article in Computerweekly

Progress and Levi9

Levi9 Global Sourcing has opened their Progress centre of excellence in Bucharest.
The centre has been set up with training and quality assurance of Progress (NL).
Read article in ComputerPartner

Globalization and Offshoring of Software

Conclusion of research by the he Association for Computing Machinery (ACM)

Globalization of, and offshoring within, the software industry will continue and, in fact, increase. This increase will be fueled by information technology itself as well as government action and economic factors and will result in more global competition in both lower-end software skills and higher-end endeavors such as research. Current data and economic theory suggest that despite offshoring, career opportunities in IT will remain strong in the countries where they have been strong in the past even as they grow in the countries that are targets of offshoring. The future, however, is one in which the individual will be situated in a more global competition. The brightness of the future for individuals, companies, or countries is centered on their ability to invest in building the foundations that foster innovation and invention.

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Levi9 and Compuware on BNR

Listen to the podcast about nearshore development on the Balkan and the partnership between Compuware and Levi9 Global Sourcing.