By Anna Rzhevkina
Poland has grown into one of Europe’s largest outsourcing centres, thanks to a well-educated and relatively cheap workforce, attractive location, and clear legal frameworks. But now the country wants to develop into higher-value services. As international firms increasingly move towards remote work and seek out more savings, post-pandemic trends could speed up this transition.
Companies increasingly see Poland as a location for more demanding jobs, rather than just the simple back-office functions that the country was entrusted with a decade ago.
Julia Maksymova says her branch of US financial services provider State Street Corporation in Gdańsk is gradually having more complex tasks delegated to it. “Poland takes more strategic functions. The aim is that the Polish office makes most decisions independently,” she says.
This trend has been clear for the last two to three years, Maksymova adds, with more straightforward jobs increasingly being given to offices in India. “The company invests in employees’ qualifications,” she says, and “offers education so that people don’t leave and go somewhere else”.
A boom in outsourcing to Poland began in 2010, when many companies started cutting costs after the financial crisis. The same was happening in the nearby Czech Republic, Hungary, and Romania, which had also joined the EU in the first decade of the century.
Previously, many outsourcing centres would be set up in Ireland or the UK, but these countries became too costly, says Andrzej Kubisiak, an analyst at the Polish Economic Institute (PIE). As well as the lower costs, firms are reassured by Poland’s low compliance risks, he adds.
A tale of three cities
The Tri-City area – made up of Gdańsk, Sopot and Gdynia – gives a clear illustration of how business services have developed in Poland. In recent years, Amazon and Thomson Reuters have moved parts of their operations to this area. Not by chance, their new offices are located right next to the University of Gdańsk’s main building.
Of Poland’s main business services locations, the Tri-City saw the largest percentage growth in employment, by 88.4%, or 14,100 people, between 2016 and 2021. High growth was also observed in Warsaw (85.6%) and Poznań (72.0%), according to the Association of Business Service Leaders (ABSL). Smaller cities, such as Rzeszów, are also gaining popularity among investors.
Poland attracts multinational companies with its location in the centre of Europe, cultural proximity to the firms outsourcing work and their clients, and workforce with a good command of foreign languages. Even though Poland cannot compete with global offshoring centres such as India on labour costs, workers in the country earn roughly a third of the average hourly wage in the Eurozone.
The Kraków office of US firm Alight Solutions, which specialises in HR outsourcing, is one example of a company that has helped western firms move entire services – rather than just parts of them – to Poland.
Maria Trybus, a former employee, recalls high requirements for the role: speaking several languages, extensive training, and regular assessment. While Poland’s domestic workforce could supply those, the issue for many businesses was that its customers in western Europe wanted to be able to visit a physical office.
“Many [customers] in London, in Paris, wanted to talk in person, and they were surprised that HR people were not available at their office,” says Trybus. But, amid the pandemic, people are becoming more accustomed to remote services.
Pandemic brings more investments
As the pandemic upended many business practices, it has accelerated Poland’s development as one of the key outsourcing centres in Europe.
For one, the country has proved its economic stability. In the second quarter of 2021, Poland recorded GDP growth of 10.9% year-on-year, according to preliminary data from Statistics Poland (GUS), the largest single increase since such records began in 1995.
Unlike in India, another outsourcing centre where last year’s lockdowns led to chaos and panic, Poland was fast to adapt to the new environment. Companies quickly moved to remote work and accelerated digital transformation. Digital solutions replaced simple tasks, and Poland is ready to offer higher-end competencies needed for more advanced and complex services.
Companies will be “looking to improve the resilience of their operations” and so will be “reshoring outsourced services closer to home”, predicts consultancy firm JLL. “Poland is expected to be one of the biggest beneficiaries of this trend,” according to JLL’s business location director, Rafał Szajewski. The firm forecasts a peak inflow in 2022-23, and then “continued growth over the next few years”.
As much as 91% of companies operating on the Polish market are planning new investments in the coming years, according to a study by Antal, an HR agency, along with Vastint and Cushman & Wakefield.
ABSL estimates the number of people working in the business service sector in Poland at over 355,000, making it the biggest such location in Central and Eastern Europe. It expects the figure to almost double in the next ten years.
But by that time, Poland will not be a cost-competitive location for business, ABSL’s Paweł Luty told Notes from Poland. “The industry in Poland will keep on changing and continue the journey towards the middle office and, for some leading centres, towards the front office,” he added.
There are already signs of this as a growing number of companies ramp up investments in upskilling its local workforce. For example, in September, accounting firm PwC announced plans to create 5,000 new jobs in Poland and to invest $100 million by 2026 in new technologies, services, and training.
Moving into higher-skilled jobs
For Poland to benefit from its role as an outsourcing hub, it should look to continue increasing the value of its services. “If companies keep outsourcing only basic service issues, it would not be good for our country, because lots of well-educated people can generate higher value than in these companies,” argues Kubisiak from PIE.
Nowadays, Poland has different outsourcing models: from the most basic to more sophisticated services, like R&D and IT product development. “If we go in the direction of a model with more sophisticated outsourcing, it will be an advantage for our economy,” says Kubisiak.
Poland has transformed from an inexpensive location to the best-priced location with a highly qualified workforce, in particular in IT, notes ABSL. Multinational tech corporations have already been tapping into the Polish IT market. About two thirds of the country’s IT experts work for foreign organisations, according to a new report by Ideamotive.
IT also accounts for one-third of all Polish services exported to the USA, and cost-saving is only one of the reasons. Outsourcing provides access to advanced skills not available locally. This, however, has also contributed to a shortfall of specialists for Poland’s domestic market, as many choose to work for a foreign company with a higher salary.
Another area of expansion has been finance, with jobs related to accounting, know your customer (KYC), and anti-money laundering. Recently, Poland also attracted the attention of pharmaceutical and medical equipment companies, which see the potential to hire highly qualified employees in the clinical trials sector and accompanying services, like regulatory, compliance, and admin.
Bayer, for example, has launched a digital hub in Warsaw, where it plans to hire up to 400 IT experts by the end of 2022. The hub is focused on developing innovative digital solutions of global scope for Bayer’s Crop Science, Pharmaceuticals and Consumer Health divisions.
How to seize the moment
But looking ahead, Poland’s shrinking and ageing population could become an issue for recruiters facing the challenge of attracting talents as they seek to prevent top specialists from leaving the country for better-paid roles and to encourage foreign experts to come.
“One of the key reasons why those companies invest in Poland is the human capital. But it becomes a huge problem in the long-term perspective as the demographic situation worsens,” says Kubisiak of PIE.
He also highlights the need for innovation, noting that Poland’s R&D investment is among the lowest in the European Union. In 2019, it spent the equivalent of 1.32% of GDP on R&D, while for Germany the figure stood at 3.17%, according to Eurostat. Without companies setting aside money for innovation, new products or services with higher added value will be scarcer.
ABSL adds that to maintain a competitive position, Poland still needs to improve the education system, not only at the university level but also in high schools, with more emphasis on digital solutions, problem-solving, emotional intelligence, and managerial skills. “It is crucial to unleash the innovative potential of people, which should begin in schools,” Luty told Notes from Poland.
Finally, offices in Poland need to be assertive when dealing with their parent companies. ABSL warns against managers becoming too comfortable in the second league: “A dangerous trend can be observed in some centres, which is the lack of an innovative approach, and treatment of Poland as a place offering low costs as the main asset.”
Thanks to its resilient economy and good value for money, Poland has seized the opportunity to grow and develop as an outsourcing location. However, the country must now become an attractive place for top specialists, who, with the development of remote work, have more freedom to choose where to do their job. It also needs to convince global firms of its capability to take on bigger roles.
Main image credit: Mateusz Skwarczek / Agencja Gazeta
