In a little over a decade the business services sector has exploded in Poland, creating over 160,000 jobs and accounting for millions in investment. The sector is now the country’s second biggest, having surpassed mining, with only the automotive industry employing more people in Poland. The wave of foreign investment has transformed economies in Poland’s regional cities (see page 37), while an increasing number of investors are looking at the capital, Warsaw, as a location for their more complex operations (see page 33).
Business services is a term adopted by the industry which includes business process outsourcing (BPO), and shared services centres (SS C). BPO/ SS C operations are usually associated with simple back-office activities, such as payroll processing, human resources management and accounting functions, as well as customer service services, usually in call centres. Those were indeed the first types of investments that came to Poland, but businesses soon learned that the country’s well educated, hard working, polyglot labour force offered the talent they needed to complete more complex operations. These include research and development (R&D) and information and communications technology (ICT) services. Together all of these types of operations come under the ‘business services’ umbrella.
Poland is now a well established location for investment from this sector – Kraków, Warsaw and Wrocław are frequently ranked within the top 100 business services investment destinations worldwide. Kraków is regularly ranked within the top 10 in the world and first in Europe. The list of investors reads like a who’s who of major global technology, financial and consulting firms.
The sector pays well, too. Estimates put the average wage for mid-level jobs in the sector in Poland at around 6,000 złoty per month, nearly twice the national average. As tens of thousands of Poles leave their home country to work in other parts of Europe – mainly to find higher wages and a better standard of living – the sector offers hope of creating the high-paying jobs that Poles yearn for. However, it was the low wages here in Poland that originally drew business services investment to the country in the first place. Now, in places like Kraków, the Polish city with the highest number of employees in the industry, employers complain that the labour market is becoming overheated. Wages are beginning to rise to Western European levels, especially when it comes to workers in advanced ICT services or with rare language skills.
At the same time, Asian locations continue to move up the ranks for business services investment locations. Poland already can’t compete with wages in most of those countries – as salaries rise, it will become even less labour-cost competitive.
Poland must therefore continue to move up the business services value chain, say experts. The future of the industry in the country does not lie in payroll processing and call centres. Instead, Poland will need to attract more R&D and ICT operations – the kind that pay high wages and add intellectual capital. If it does, the sector could take the lead in finally transforming Poland into a knowledge-based economy.
“We have an overproduction of highly educated young people,” said Jacek Brzozowski, an advisor at business advocacy group Employers of Poland (Pracodawcy RP). “The business services sector absorbs these people, and in the future can do so on a larger scale. These Poles are adaptable, they can speak foreign languages, they are well educated. We won’t become a second Germany – we don’t have huge conglomerates like VW or Siemens. So services should be a key element of future growth.”
Prescription for growth
The potential is eye-popping. Consulting firm McKinsey predicts that with the right mix of incentives, the sector could expand four-fold, to 600,000 jobs, over the next 10 years. That could bring with it up to 150,000 additional jobs in related support services. The advantages don’t end with more workplaces, either.
“Potential benefits include rising management capabilities in areas such as multicultural and dispersed team management, more niche specialists … and greater availability of world-class management processes,” the company wrote in a recent report.
‘The future of the industry in the country does not lie in payroll processing and call centres. Instead, Poland will need to attract more R&D and ICT operations’
So what needs to be done? “First we have to assess our potential, and then sell that potential,” said Brzozowski. For some years now, Polish cities have been marketing themselves abroad as excellent destinations for business services investments, but experts agree a national promotion strategy is in order. The McKinsey report calls on Poland to “develop and finance a broad international promotion campaign for Poland as a European champion of outsourced business services.”
Just as important, the industry and academia need to start working more closely together to ensure that the graduates coming out of Polish universities have the skills investors will be looking for. “Universities should engage more with business, get more information about businesses’ needs and include that in their curricula,” said Brzozowski. Possible courses of study could focus on anti-money laundering services, financial fraud detection, corporate compliance, big data business analytics, advanced software programming and supply-chain optimisation, according to McKinsey.
The cooperation is already happening on a small scale in some places. For example, the private Kozminski University in Warsaw offers an internationally recognised certificate of specialisation in anti-money laundering processes.
Universities also need to help develop skills in management, teamwork and leadership. Other recommendations include raising the level of foreign-language proficiency throughout Poland’s educational system. Schools should encourage students to learn more than one foreign language, the report says. It predicts that French, Spanish and Nordic language skills will prove particularly valuable.
Finally, entrepreneurship in the industry should be fostered. So far, the growth in Poland’s business services sector has come almost exclusively from foreign investment. In places like India, domestic companies that offer business services have sprung up, allowing international firms that don’t want or need their own centre to simply hire out those processes. But this segment is only still in its nascent stages in Poland.
“For Poland to become an international leader in the provision of business services, new international private companies will have to be created here,” says the report. It suggests consolidation and acquisition of mid-scale, international business services companies from Western Europe.
“It is high time for local companies to start providing their services all over the world,” agreed Brzozowski. “There are more and more people with great experience in the sector, so the local firms should appear soon. However, it will only be possible in the case of simple services – the more advanced ones seem to be too important for the companies to outsource them to external providers.”
Nevertheless, a robust cadre of home-grown providers will further solidify Poland’s position as the premier business services location in Europe. If academia can be brought more in tune with the sector’s needs and a national programme promoting the country’s potential in business services can be initiated, the industry will be poised to reach the growth and sophistication necessary to drive Poland’s development to the next level.