Sharing with the small guys

According to a report entitled ‘Modern Business Service Sector in Poland 2017’ by the Association of Business Service Leaders (ABSL), 27,000 out of the 32,000 new jobs created by the business service sector in Poland last year were located in the seven largest cities. Even though the high share taken up by the larger cities (85 pct) is rather unsurprising, since this business needs a pool of labour in order to develop and tends to recruit from the largest university centres, the last few years have seen a shift towards smaller locations. According to Agnieszka Sosnowska, a senior market analyst at JLL, last year towns with less than 400,000 inhabitants have increased their share of the market to 15 pct, up from 8–10 pct in 2013/2014.

The kingdom of the giants

Of course, this does not change the fact that the four main locations of BPO/SSC centres are the four most populated cities in Poland. As many as 55,800 people work in the sector in Kraków, while there are 42,600 such employees in Warsaw, 40,000 in Wrocław and 18,000 in Łódź. Companies that provide business services are also heavily represented in the twelve other cities with more than 200,000 inhabitants. But in towns with less than this, the figures start to plummet: out of all 900 official Polish towns with less than 200,000 inhabitants (including a few with populations of only a few thousand), only a select few have managed to attract this kind of business. The exceptions certainly include Rzeszów, with a population of almost 190,000, which is the location for fourteen companies from the sector, including Asseco, Deloitte CE Business Services, Nestlé, Unicall and UTC Aerospace Systems. Another significant centre is Opole, which has a population of 130,000 and is host to seven companies, among them Atos, Capgemini and PwC Service. Another notable location is Olsztyn, with a population of almost 180,000 and which has drawn in such companies as Billennium, Citibank and Transcom WorldWide. The investment map also includes Zielona Góra (138,000 inhabitants), Bielsko-Biała (174,000) and Płock (121,000) with five companies (in total). Among towns with fewer than 100,000 inhabitants, Piła, with a population of 77,000, hosts companies such as Quad/Graphics and Philips Lighting, and there is also Sandomierz, with just 25,000 inhabitants, where Pilkington has opened a shared service centre for its car windows factory in the town. “These are admittedly facilities located near the production plants that exist there; however, they prove that smaller locations also have the chance to attract new projects from the business service sector,” points out Agnieszka Sosnowska.

But why should – let’s call them medium-sized – towns with populations of 100,000–400,000, such as Rzeszów, Kielce, Bydgoszcz and Białystok, become more significant to this sector? “Their attractiveness is down to the availability of qualified labour, the lower costs of property and their dramatically improving road and office infrastructure. Furthermore, these locations offer the possibility of becoming one of the main employers on the local market from this sector, rather than just one of many companies, as is the case in the larger urban centres,” emphasises Agnieszka Sosnowska. These are also places, however, that are somewhat off the beaten track and are only starting to be considered by investors.

Small town, bigger problems

When it comes to the smaller towns, with populations of less than 100,000, investors do have some reservations. Those companies that come to Poland with slightly more demanding processes are not even looking in their direction. “Some things are not possible to do in smaller towns because the language skills are inadequate or there is an insufficient number of experienced people,” explains Paweł Panczyj, the managing director of ABSL. Some companies are also worried about the limited opportunities for further expansion in such places, even if their initial needs are met. So what lies in the future for smaller centres? According to the managing director of ABSL, even though no great surge in the sector should be expected, such development will take place as the entire market grows. “Poland’s greatest charm lies in the fact that companies can carry out a variety of processes here, choosing locations according to their needs,” believes Paweł Paczyj.

Far from the madding crowd

ABSL is now planning to introduce the BPO/SSC concept to smaller locations. This idea was mooted in its recent ‘Modern Business Service Sector in Poland 2017’ report. This has been inspired by the experience in India of Ruralshores – where the outsourcing company has built a chain of very small service centres in rural areas over the last ten years. The firm employs people to carry out simple computer-based tasks that cannot be automated. “Companies such as Accenture, Capgemini and Infosys can subcontract these small centres, treating them as a cost optimisation method as well as a contribution to corporate social responsibility. These activities help to build up the affluence of relatively poor, rural communities,” explains Wojciech Popławski, the vice-president of ABSL and managing director at Accenture Operations. According to ABSL’s concept, the Polish model would be limited to urban locations and not necessarily the smallest ones: a chain of smaller centres (of up to 100 people) within a 50 km radius of a centre in the main town in the area, which might have a population of 100,000. “I think that even a town with a population of 20,000–30,000 could have a few dozen people who were quite good at German at secondary school. But if they do not use a language, they will lose this ability over time. These people often cannot find suitable jobs in the town they live in, so they work below their qualifications,” believes Wojciech Popławski. The local centres would be subcontractors for larger service centres operating in large cities. “ABSL is able to play leading major role in terms of the execution of such projects because we know how they could work. I think that such a project could be carried out with the involvement of local authorities, who could allow facilities owned by the town available to function as the centres,” argues Wojciech Popławski. ABSL is planning to carry out a demographic study in the near future to assess the potential of the model, establish the investment requirements and then look for a partner. “It could be a private or PPP initiative based on the funding from such programmes,” claims Wojciech Popławski, who believes that the project could enter the implementation phase within a year or two.

Growth expected

Meanwhile, Poland can still boast its status as the European leader in modern business services. According to the recent ‘Investment Attractiveness of Poland 2017’ report published by EY, Poland attracted 38 investments in shared service centres last year – more than any other European country. This constitutes 24 pct of the total (161 investments were announced in this period across Europe). Poland is followed in the ranking by the UK (22 pct), Ireland (9 pct), Lithuania (6 pct) and the Netherlands (5 pct). US-based analysts Everest Group also count Poland as the European leader in this field, even though they use different criteria. “Our survey is based on the total headcount involved in services exports across countries in the region,” explains Anurag Srivastava, a global service analyst at Everest. In their ranking Poland is also the fifth main location in the world for such centres, after India, the Philippines, Canada and China (in that order). According to ABSL, the number of people employed in the sector in Poland has increased by an average of 19 pct in each of the last three years and should surpass 300,000 by 2020.