Nearshoring to Poland – is it still an attractive prospect for companies from Western Europe looking to boost their competitiveness?
Back in 2005 I read a McKinsey report indicating that Poland could become one of the most important players in the modern services sector.
I was extremely excited. After the dynamism of the 1990s, the beginning of the 2000s in Poland had witnessed a period of high unemployment. The report stated that Poland could generate jobs for highly qualified professionals and strengthen its advantages by creating SSC, BPO, and R&D centres. Working for KPMG at the time, I got involved in preparing investment attractiveness reports aimed at bringing foreign investment to Poland. I was thrilled. Working as an auditor, I only had time to work on these reports over the weekends – and, much to the displeasure of my family, I kept writing the Tri-City report during the Easter holidays.
The final result exceeded even the enthusiastic expectations of the report authors, myself, and all of us involved in the development of the Business Services. Over the last two decades Poland has grown to join the ranks of world leaders in this sector. Nowadays, Poland is among the largest outsourcing markets in Europe and it is a leader in the CEE region. According to ABSL, the sector currently employs 350,000 people, and 1,600 companies have located their SSC, GBS, ITO, and R&D centres here. Poland and Polish cities are among the top choices in many international outsourcing investment attractiveness rankings and often occupy top spots in Europe (according to the Kearney Report, CEOWORLD analysts, Everest, E&Y Attractiveness Survey, and Tholons just to name a few).
This remarkable success is the joint result of numerous factors. The diversified, huge, and affordable labor market and the human capital that has been nourished over the years. Poland has a very high share of population aged 25–34 years holding a tertiary degree – 43%, which is above the EU average. According to the latest Eurostat report from 2021, in Germany that number stands at 35%, in Italy it is 29%, in Hungary it’s 31%, and in Bulgaria and the Czech Republic it stands at 33%. The number of students in Poland stands at over 1,4 million and is higher than the total number of students in all other CEE countries put together! Over the past 30 years Poland has been active in building excellent linguistic capabilities. According to ABSL data, GBS and BPO-type operations in Poland deliver services in 38 different languages, where 100% of centers have English language speakers, 80% German, 63% French, and 50% have Italian speakers on board.
Do the changes currently taking place in the Polish labor market, the maturity of the modern services sector, and the widespread automation and use of artificial intelligence constitute a threat to the further growth of the industry? Are they not adversely affecting the attractiveness of Poland in the eyes of international corporations? Can European companies still strengthen competitiveness by nearshoring to Poland?
On top of excellent numbers, Poland has also become a synonym for the quality of skills, comparable to those offer in Germany or Scandinavia. Quality of services generates trust – a key component in any business. We have built the BSS market from scratch. Initially, the processes transferred by foreign corporations to Poland were relatively simple and mainly comprised F&A transactional back-office functions (AP and AR), customer service or simple IT processes (such as user support). What proved helpful was that, right from the beginning of the 1990s, large international corporations established their regional headquarters in Poland and started introducing modern management methods, as well as creating competences and skillsets that could later be utilized by other companies entering the Polish market – including those locating their SSCs here. Polish specialists and managers accumulated their experience the same way I did – working for large multinationals such as KPMG, Deloitte, Philips, GE, Siemens, Volkswagen, Unilever, Nestle, LG, Dell, HP, or Citibank.
As the market developed, the so-phistication of services delivered by the Polish talent shot up – but without negatively affecting the price factor. Poles know very well that the only constant in life is change; and the modern business services sector exemplifies this perfectly. Evolution and upgrading of qualifications are etched into the sector’s DNA. These are also embedded in the Polish work culture. This is a true match made in heaven.
The organic development of SSC, GBS, and BPO centres has directly influenced the sophistication level of functions being relocated to Poland. The last 5–7 years in particular, have seen a significant jump in strategic processes being moved here as companies are increasingly willing to drive their core business competences from Poland. This would not have happened had it not been for the trust capital fostered over years of excellent cooperation.
Poland is therefore building its position as a partner-country, where back-office processes are being replaced by middle-office and knowledge-intensive functions. This, in turn, forces a flexible approach and the need for the talent to adapt to new market realities, given that many processes initially moved to Poland are now going through a process of automation. Employees constantly improve their skills through postgraduate diplomas, courses, trainings, and webinars – all to keep pace with evolving market demands. Adaptability and resilience are what sets us apart.
Over the course of my career in Frista or ITELENCE I have been lucky to work with highly motivated specialists and managers whose aspirations propelled them to continuous development. I believe that many leaders who are involved in setting up professional environments in Poland have shared a similar experience. Many team members who started out in the transaction-focused teams I have set up for our international clients including accounting and supply chain – have developed their skillsets in business analytics, RPA, or have been promoted to SAP and BI consultants and pursued their careers in IT. Many Help Desk and Customer Service specialists have gone on to become developers, cloud, UX, SEO or re-commerce experts.
Incoming investors are increasingly willing to utilize the know-how of local managers in order to carry out complete process migration to Poland, both in the nearshoring and offshoring model – drawing up a project plan first, managing expectations, mapping the process, documenting it and then moving on to transition, standardization, and – finally – automation. Our foreign partners know that they can place their trust in us to properly implement a particular process, as well as execute even the most demanding transformation project. The success stories they have heard of other companies only further enhance their confidence.
I was lucky enough to witness it first-hand when I was building a GBS-type operations as well as a large outsourcing organization, both in Warsaw. While working on a rapidly growing BPOs, with plans to reach 400 FTEs by the end of this year, I am finding large international corporations and support them in transferring back-office, middle-office, and IT processes at various sophistication levels.
Initial co-operation with our clients was focused on transactional processes – we optimized those processes, gradually nurturing their trust in Polish specialists. Step by step, we took over increasingly strategic functions. A technology hub I set up for a Swiss client is among the truly spectacular success stories – the hub’s core responsibilities have covered the implementation and, later on, maintenance of an e-commerce platform for a leading fashion brand. Other fantastic success stories included assembling a complete SAP have implementation team or putting together a business analytics and data science team.
In recent years, my clients from Western Europe and the US have been particularly interested in the transfer of advanced IT functions, including technologies based on artificial intelligence and cloud solutions, Big Data, as well as business analytics, SAP, and data analysis and integration functions. The Polish labour market responds very actively to the growing investors’ expectations regarding the sophisticated skills their employees need to possess. Having conducted various recruitment processes over the years I have not come across even one technology that I couldn’t source in Poland.
Polish universities – almost 400 of them – as well as international organizations operating in Poland are constantly producing new talent. According to Eurostat, Poland ranks 4th in Europe in terms of the number of STEM graduates in the 20–29 age group. Poland is becoming a real hub for machine learning, cloud infrastructure, and artificial intelligence; Google, Microsoft, Nvidia and many others are expanding their Polish centres by working on these technologies. HackerRank ranks Polish developers among the top three in the world.
We are becoming a true competitor for Germany or the UK, particularly in terms of knowledge base, experience, and tech-savviness. On the other hand, Poland remains a more attractive location paywise than Western Europe. According to Eurostat, the average salary in Poland is still only 30% of that in Germany and 35% of the average salary in France.
Coming back to the original question, nearshoring to Poland still represents a multipronged way for companies from the West to bolster competitiveness: from having access to specialists with rare and very sophisticated skills, through a general operating cost cut, a rise in quality of delivered processes, all the way to having access to the latest management methodologies. Poland is also becoming the best possible choice for any international corporation embarking on its business and digital transformation journey. It is a place where, for a reasonable price, alone or in cooperation with a trusted partner, one can transfer and centralize global back-office processes. Specialists fluent in 38 languages are at your disposal while you expand your international middle-office competences in HR, marketing, controlling, and business analytics; or you’re assembling highly qualified IT teams in the area of e-commerce, cloud, AI, BI, cybersecurity, automation, software development, and implementation of large ERP systems.
P.S. Two new McKinsey reports have been published recently and both indicating that Poland may become one of the European leaders in artificial intelligence and cloud solutions. These reports are correct – I’m familiar with the potential of Polish engineers and I keep experiencing the large interest in this area among foreign and local clients. The fact that I get to actively participate in shaping Poland’s future by building fast growing outsourcing provider ITELENCE excites me as much as it used to back in the day.