It’s not always size that counts

The business services revolution in Poland is extending deep down the city food chain, with cities all around the country offering firms a specific set of pros (and cons).

Entrepreneurs, both local and global, encounter moments during their career when they have to answer the simple question of ‘where can I grow my business?’

Poland, in its current business climate, has great potential to serve as an answer to this question. The Business Support Services (BSS) sector – a collective term for Business Process Outsourcing (BPO), Shared Service Centres (SSC) and IT or R&D organisations – which currently has major recruitment and office needs, highlights the business potential of Poland.

It’s of course no surprise that the larger cities in Poland are good locations for business. Reports by consulting, real estate and HR agencies show the big cities – the so-called Tier 1 locations – currently have an excellent business environment. Kraków, Warsaw and Wrocław are the most popular areas for BSS, with Kraków the ninth most attractive area for BSS in the world and all three in the Tholons Top 100 list for outsourcing locations world-wide. Running a business in a large city can bring lots of opportunities but also a number of challenges. The bigger the city is, the more human resources and office space there is available, but it also means greater competition and higher costs. With small operations centres of around 50 people, costs donot matter as much as in a larger centre, with 200-300 people, where you have to analyse all aspects of the investment and costs really begin to matter.

The city of Olsztyn (pop. 88,000) might not yet be on the mind of many firms, but it is working hard to change that image.
Universities abound

That said, the question that entrepreneurs are starting to ask is if other Polish cities are large enough to accommodate their business. Are consulting companies from the US, the UK or India fully aware of the business potential in Poland’s secondary cities?

Since 2008, Kraków, Warsaw and Wrocław have lost their dominance in the BSS field and there has been a growth in the so-called Tier 2 group of cities. Places like Gdańsk, Łódź, Poznań and Katowice have fostered a strong position and obtained a number of new operation centres. All four have developed their modern office infrastructure and each have universities, technicalschools and a number of private universities with multilingual education focused on economy, law, IT and financial studies. In the last seven years, the BSS industry in all four, has grown even faster than in some Tier 1 cities.

The reason why is quite simple. In the Tier 2 cities, there is a significant HR talent pool available and both local and international real estate developers have built a number of modern office buildings that are available on much more competitive financial conditions compared to Tier 1 locations. Poznań, Gdańsk and Łódź especially have proven to be fast-growing locations chosen by large international companies. In Poznań there are operation centres for Bridgestone and Franklin Templeton while State Street, Thomson Reuters and Alexander Mann Solutions are based in Gdańsk and Infosys, Fujitsu and Nordea call Łódź home.

By developing state-of-the-art office buildings, the city of Bydgoszcz (pop. 360,000) aims to attract businesses to the region.
Opportunities for local developers

But business potential doesn’t stop at the Tier 2 cities. There is already a strong list of Tier 3 cities considered suitable for business, proven by the number of firms basing their operations out of these areas. Lublin is home to 60 operation centres that employ up to 7,000 highly skilled people, while Deloitte has based its European Operation Centre in Rzeszów. Opole is host to Capgemini and PwC, while Bydgoszcz is home to the huge ATOS business centre, and firms like Tieto, Mobica and Genpact have set up in Szczecin.

These cities, especially from a cost perspective, are a lot more attractive than the Tier 1 or 2 locations, but have their own individual challenges. Modern office space is a particular concern, as office space is usually built by local developers instead of international real estate companies. In fact, Szczecin is the only place listed above where international developers have a presence. This is a challenge, but not a bad situation: it gives local developers a wealth of opportunities. In Lublin, local developers are currently building more than 100,000 sqm of modern office space and in Opole over 26,000 sqm of space is planned or under construction. New investments are on the way to Bydgoszcz and Rzeszów and it mayeven be that, sooner or later, international developers will make their way to Tier 3 locations as well.

Is this the end of the list? Not at all. Depending on their needs, business service operators can also consider smaller, satellite locations such as Kielce, Częstochowa, Olsztyn or Radom, which have a high potential. Their first BSS projects are, in fact, already in place.

 

The city of Szczecin (pop. 406,000) melds old-world charm with modern amenities for businesses from all over the world.

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Written by: Wiktor Doktor

Wiktor Doktór is CEO of Pro Progressio Foundation. The Foundation focuses on analysis and growth, development and education of outsourcing and modern business services sector in Poland. The ProProgressio Group also manages outsourcing media in Poland, such as the OutsourcingPortal and Outsourcing&More Magazine, as well as investor support web platform Best2Invest.org