Outsourcing or not

Outsourcing is an industry in which someone is well aware of where in the world to develop a particular business. Now in Bulgaria, and in a few years at some other place, a destination may emerge where a service is offered with a sufficiently high quality at a better price. This industry of shared services is as dynamic as the world itself - it works on a global scale, with global clients, for global companies.

Territory

In Bulgaria, there are world-class companies with large volumes of work and high turnover because they have the know-how, but also the flexibility to offer services in a way some other business needs. The outsourcing is actually the sector with the most dynamic technological transformation. Robots, automation, artificial intelligence and chat bots are being introduced – all of them innovations that first begаn to appear here. Few of the classic industries can afford to make such investments. This is the sector in which constant added value is observed. In the early phase, this business started with telephone and transaction-related services that had to do only with the number of workers, while the focus now is on technological change, which also offers more challenging career development opportunities for people involved in this industry.

Growth

In recent years, there have been two main trends. One of them is related to the entrepreneurial business - after the entry of multinational market setters who create the market, the time of the emergence of successful Bulgarian companies with a modern spirit came. The other is that certain companies, which themselves are too far from a certain business, started to open shared services centres. They developed quickly and achieved high quality. But in this exact sector, change is the most constant thing. That is why, if conditions are created in Bulgaria for the development of this business, then, despite the increase of the labour costs, in case that this labour generates high added value, the sector will continue to grow.

Where to

The business is based on dynamics, and the possible migration of outsourcing companies to other destinations should not bother us, says Stefan Bumov, Chief Operating Officer of HeleCloud and co-founder of the Bulgarian Outsourcing Association (BOA). He explains: “Let’s have a clear understanding of how to minimise the risk with specialisation in certain areas. It’s not a problem part of the traditionally oriented outsourcing businesses to leave the country in search of cheaper opportunities. The main risk will be the loss of competitiveness associated with new high-tech development trends - automation of processes and use of artificial intelligence. The question is to what extent the business in Bulgaria will be able to further develop their staff in this direction. But people here are qualitative and learn fast.”

Own Products

We also come to the question of why outsourcing, and not our own products. “The product know-how in Bulgaria is not well developed yet and this is a consequence of the transition period the country went through. Outsourcing was the first step that had to drive the knowledge economy, because the risks here are significantly smaller. Own products will be the next step in development. But there is a problem: Bulgaria, despite its low taxes, is not the best place to create high-tech products. Product companies prefer to position themselves in the United States, the United Kingdom and Israel, where the legislation is much better adjusted to protect intellectual property. There are many supporting R&D activities there, while in our country, there is not even a focus on the accumulation of intellectual property. Key item that could easily make the product globally appealing are lacking,” says Plamen Tsekov, co-founder and CEO of ScaleFocus and a member of the Board of BOA. It is a flaw that technological know-how is not valued and the state does not support the companies that create it. When there are birds, houses should be made for them, Plamen Tsekov adds.

Protection

Outsourcing will continue to thrive at the expense of the development of own products, until the right conditions are created. Currently, in the big race among the high-tech R&D companies, Bulgaria is neither a factor nor a driving force. Our country has great potential for innovative developments, but here is not the best ground for their cultivation. Now, if someone has a good technological idea, they patent it in the United States, since there, they will find the best protection, and can also be supported by investment funds. Bulgaria would become an attractive place for product companies if they are sure that their know-how here will be protected and supported.

Maybe it is time to roll out the red carpet for Bulgarian investments in high-tech products created in Bulgaria...

Market Presence

- The outsourcing sector in Bulgaria forms 2.4% of the labour market and more than 67,300 people have been employed there by the end of 2017. By 2021 the number is expected to exceed 79,000.

- The revenues are more than EUR 2.1 billion for 2017, forming 4.8% of GDP, compared to 4.2% in 2016. The revenue of the sector is expected to double to EUR 4 billion by 2021 and its relative share of GDP to reach 7.9%.

- More than 480 companies are involved in Business Processes Outsourcing (BPO) and IT Outsourcing (ITO), with the ratio being almost flat, with a slight dominance of BPO at 51%.