Computacenter: Nearshoring model has come of age

Brit services firm tells CRN it plans to double Budapest headcount as nearshoring becomes a key cog in its service delivery model

Computacenter claims the "nearshoring" model has proven itself as it prepares to double staff numbers at its new Budapest services centre.

The London-listed outfit is among a growing band of UK channel stalwarts to have hived off some support or back-office functions to eastern Europe in recent months having opened a service desk in the Hungarian capital in January.

Talking to CRN, Computacenter's international services director Mark Badi, revealed plans to boost staff numbers there to over 100 by the end of 2014 as nearshoring becomes a key cog in the firm's wider international service delivery model.

The practice of transferring IT processes to lower-cost eastern European destinations that are geographically and culturally less remote than India or Malaysia has gathered steam slowly since the model first surfaced in the late 1990s, Badi said.

"It's now a lower risk for new companies coming in," he said. "The fact that all the big names - IBM, HP, BP - are here and employing hundreds of thousands of staff is a clear signal that the nearshore model is working and that the benefits to be gained are achievable."

Eastern promises

Computacenter's Budapest centre is designed to complement the native language support it carries out from its international services hub in Barcelona, which now employs 700 staff and is close to full capacity. The desk currently provides first- and second-line support to just one client - a major France-based managed services customer - but a second is close to going live, Badi said.

"Budapest is another option for customers who have perhaps gone from having their own internal desk, to using an external desk but keeping local language support, to external language support," he explained.

Distributor Ingram Micro last week revealed plans to double staff at its Bulgarian shared services centre to 500 as it transfers more transactional support functions from its country operations in western Europe to Sofia, with labour costs cited as a key factor.

"Bulgaria is probably a lower-cost location even compared to Budapest in terms of labour and real estate, but it doesn't have the same intellectual capital" Badi said.

"It may be an option for lower-cost, back-office transactional services but it would be harder to deliver high-quality, customer-facing services from there."

Hungary was consistently outscored by neighbouring countries such as Poland in Gartner's recently released 2014 study of the 30 top locations for offshore services. For instance, Poland is the only country in the region to score higher than "good" in terms of its labour pool, government support, political and economic environment and cultural compatibility.

Budapest, along with Prague, initially dominated the nearshoring market, with officials claiming that Hungary now plays host to 80 shared service centres employing 30,000 staff. But fears that Hungary's labour pool has been milked dry are wide of the mark, Badi said.

"A few years ago, Budapest and Prague were very popular with shared service centres and service desks, with 70-80 per cent coming here, and over the past few years other countries have become more popular," he said. "Gartner may be looking at whether the available labour pool is saturated but the president of the Hungarian Investment Trade Agency (HITA) has said he is in discussions with 30 shared service centres today and the reason for that is it is not yet saturated and the benefits are still very strong."

Pretty vacant

Vacancy rates in Budapest - which fellow VAR giant Misco also recently chose to house its European back-office hub - have doubled to 25 per cent in the last five years, Badi (pictured) said. This means that real estate costs are relatively low, but Hungary's ability to go on producing a large talent pool of young workers with good language skills is the real jewel in its crown, he added.

"We've looked at eastern Europe several times over the past few years, and Hungary stood out for its language skills," he said. "University graduates typically have two language degrees, and high-school leavers have one foreign language," Badi said, adding that Hungarians also boast good "soft" skills.

In a 2011 study by A.T. Kearney, Hungary finished 31st in a list of the best offshore locations, based on its financial attractiveness, people skills and availability, and business environment. This was ahead of the Czech Republic in 35th but behind Romania (25th), Poland (24th), Russia (20th) and Bulgaria (17th). The Baltic countries topped the pile, however, finishing 14th (Lithuania), 13th (Latvia) and 11th (Estonia).

Badi concluded: "Other countries offer cheaper labour pools but Budapest offers a desirable location that's easy to get to for our own staff."