For European businesses,
Romanian IT workers are cheaper and have fewer
cultural differences than in India--making the
country the first choice for outsourcing, a
report says.
The rising costs for U.K. companies that provide
and use Indian offshore information technology
services could drive businesses to cheaper
locations, such as Eastern Europe, according to
a new report.
A report by Pierre Audoin Consultants (PAC) says
that Romania and other Eastern European
countries are virtually ignored by U.K.
companies but are predominantly the first
outsourcing choice for the rest of Western
Europe.
The report, Offshore Romania 2003, claims that
not only is the cost of using and providing IT
services in Romania much cheaper than in India,
but the country is also home to an abundance of
well-educated and highly skilled workers who
have a better understanding of Western European
culture than their Asian counterparts.
Companies in the United States have also
recently started considering Eastern Europe as a
resource for outsourcing, which is the sending
of tasks such as such as data center or payroll
operations to other companies. Hector Ruiz,
chief executive of chipmaker Advanced Micro
Devices, said earlier this year that he has his
eye on Eastern Europe, citing the availability
of engineering talent in Hungary, Poland, the
Czech Republic and Russia. Complex math "is one
area that Russia really put a lot of effort
into, and it is paying off," he said. The
Sunnyvale, Calif.-based chipmaker has built a
factory in Dresden, formerly part of East
Germany.
Pete Foster, a research director at PAC, said
the United Kingdom's use of India is largely
driven by historical and cultural links to the
country, but companies may be forced to look
elsewhere, as skills and resources become
scarcer and costs start to rise.
"There is great competition for cost, and there
is a view that India is getting more expensive.
Europe represents a good opportunity and a new
area to find resources--but it is virtually
ignored by the U.K.," he said.
There is the opportunity both for service
providers to improve their competitive edge--by
acquiring resources and companies in Romania
more cheaply than in India--and for users to buy
comparable levels of IT service at a much lower
cost.
"(Romania) is the area of choice for everyone
else in Europe," Foster said. "From the business
point of view, it is quite backward compared to
Western Europe and probably no better than the
Indian and Asian alternatives. But it is
arguably closer in cultural affinity. The
language and education are good enough."
But while Eastern European engineers are often
well-educated, it remains difficult to find good
managers in the area, Jonathan Schwartz,
executive vice president of software at Sun
Microsystems, said in a recent interview. Often,
people from these formerly socialist nations
lack entrepreneurial zeal, he said.
The report reveals that the midrange price for
offshore software development in Romania is
about $160 (100 pounds) per person, per day, and
that the cost of employing a recently qualified
graduate from an approved specialist university
is approximately $6,500 a year. Experienced
project managers can also be recruited for
between $21,500 and $32,000 a year.
PAC estimates that in 2003, Romanian revenue
from European countries will reach $124.2
million, mostly from France, Germany, the United
Kingdom and the Netherlands.
