Romanian Outsourcing Summit 2015 - What's next?

In the context of a growing industry that set Romania among top outsourcing destinations worldwide, The Diplomat - Bucharest organised 'Romanian Outsourcing Summit 2015' to stress what is left for the local business services market to capitalise on further. By Alexandra Lopotaru and Magda Purice

2015-04-05 00:19:54 - From the Print Edition

49 Photos

Romania is starting to be no longer considered a low cost country, shifting its focus towards more sophisticated services. Players are struggling nowadays not to find the proper staff, but to manage to retain them and stimulate their engagement within the companies, while the new state-aid schemes that support regional development by creating jobs, although more flexible, will put a lot of pressure on Bucharest. These are the main conclusions of the first edition of the Romanian Outsourcing Summit 2015 organised in late March by The Diplomat - Bucharest.

The elite event was supported by The Diplomat strategic partners that include Outsourcing Advisers, ABSL (Association of Business Service Leaders in Romania), ANIS (Employers Association of the Software and Services Industry), by gold partners - Societe Generale European Business Services, Total Soft, Wipro Technologies and partners - Endava, Genpact, JLL, Noerr, PwC, SCC, UCMS Group, APDETIC (Association of Producers and Distributors for IT&C Equipments) and Cluj IT Cluster.

The conference was structured into two sessions. The first panel was moderated by Carmen Serbanoiu, senior trainer and coach at Outsourcing Advisors, and the second by Teodor Blidarus, the vice president of ANIS. The Diplomat - Bucharest presents next the main topics of the Romanian Outsourcing Summit 2015 that bring to attention the evolution of the local services sector and specific solutions to improve its development.

FIRST SESSION: ROMANIAN OUTSOURCING LANDSCAPE, OPPORTUNITIES AND CHALLENGES

Amalia Sterescu, senior business consultant, Outsourcing Advisors: Romania's outsourcing industry, from low cost to specialized services

According to the Top 100 Outsourcing Destinations report by Tholons released in December 2014, Romania ranks 39 with Bucharest, recognized for language skills, cultural proximity and still quite competitive prices, even if they saw increases over time. The Romanian industry picture comprises 50,000 employees, according to the Ministry of Communications and Information Society, and registered a steady growth of 20 per cent in recent years, the trend being expected to continue. According to Amalia Sterescu, senior business consultant and founder of Outsourcing Advisors, Romania should improve several aspects to attract more investors.

First, she said, Romania should have a governmental platform where foreign investors could access data of local industry, thus coping with competition in the region. Secondly, given that the ′low cost country' status begins to disappear, the local market should shift its focus more on specializing services. Last, but not least, Romania should place more emphasis on its educational system and have a pool of human resources aligned to the business environment in which companies will not invest more than they should.

"I want us to be able to build a country brand in which outsourcing is emblematic for Romania and to have a much stronger lobby through traditional channels," said Sterescu. "In addition, given that over 6,100 jobs will be created in the industry in the next two years due to state-aid schemes, it would be great if, each year, the human resources were already prepared and perfectly aligned to the needs of the business community. Thus, there will be no need to invest much money in training programmes to upgrade the language capabilities or other technical skills. It would be great if this strategic partnership with the Ministry of Education would be on the long term in order to have predictability and to know that we can rely on some well-prepared long-term resources for the industry."

GD no 797/2012, on the establishment of the state-aid scheme to support investments that promote regional development through the use of new technologies and creation of jobs, represents both an advantage and a threat, according to Sterescu. 18 companies have accessed funds of 170 million USD, most of which are allocated to IBM (25 million USD), Deutsche Bank (20 million USD) and Endava (12 million USD). Thus, 6,124 jobs have to be created in the next years, where more than 80 per cent will be created in Bucharest. This will put pressure on the city, especially on the recruitment departments.

"The law will create an explosion of jobs and will put a lot of pressure especially on Bucharest," said Sterescu. "Basically, the Romanian Government has granted funds to certain companies that have qualified and which should create 200 jobs which they must keep at least five years. Companies will create 5,000 new workplaces (82 per cent) only in Bucharest. Very few were oriented towards Brasov, Iasi and Sibiu. That means we will face a recruitment pressure in the coming years, especially in Bucharest."

In terms of market evolution, Sterescu went on to add that currently the market is more sophisticated in terms of services, the interest being spread to second- and third-tier cities also, not only in Bucharest. "The main question of 2015 is if we still are in the low cost area or we are repositioning ourselves and we have a different direction. However, I think the next stage of Romania is the specialization."

Radu Puchiu, Secretary of State, Government of Romania: Efforts are being made to create a governmental platform for outsourcing

Romania's outsourcing industry is an important issue for the Government's agenda, thus a governmental platform that contains data about the industry will be created in the future, according to Radu Puchiu, Secretary of State, Government of Romania. "A governmental platform containing information about the industry would be very useful," said Puchiu. "There are a lot of efforts in this regard and I hope they will materialize. In addition, important efforts are also being done to bring the lobby matter to the attention of the public and give it a correct form in terms of the business and authorities ratio. There are countless meetings on this topic and I encourage players to participate in this dialogue."

Puchiu went on to mention two measures taken by the Government that favour the industry: the CAS reduction by five percentage points for employers and the state-aid scheme that supports investments that promote regional development through the use of new technologies and creation of jobs. "CAS reduction does not influence [positively] only this sector, being important for everyone," said Puchiu. "In addition, the 2012 state-aid scheme is a measure taken by the Government to sustain the outsourcing sector. In the future, I think we can create a much better scheme if certain aspects need to be improved. Our role, both the [Prime Minister] Chancellery's, as well as mine, is to assist and facilitate an exchange of information and dialogue."

To facilitate the dialogue between authorities and outsourcing services industry, Puchiu proposes the establishment of a mechanism similar to the Coalition for Romania's Development [Coalitia pentru Dezvoltarea Romaniei], a private initiative that gathers the most representative organizations for the business environment in Romania and provides a cohesive basis for consultation with the Government and other public institutions on topics that impact the business and economic climate in Romania.

"A successful example in the area of business was the Coalition for Romania's Development," said Puchiu. "It is an initiative of the business community, which gathers the main associations of businessmen. There are monthly meetings with the Prime Minister and key ministers of the topics that are being discussed, where issues raised by the business community are being analysed. For the Government, it was a good mechanism. Maybe there should be a similar mechanism for outsourcing industry as well."

Varujan Pambuccian, member of the Commission for Information Technology and Communications of the Chamber of Deputies: The competition for limited human resources grows more and more

Every population has a limit for each job in hand, and Romania's outsourcing will start to feel the threshold in five to six years from now, says Varujan Pambuccian, member of the Commission for Information Technology and Communications of the Chamber of Deputies. The problem, however, is that there is an increasingly acute competition on the limited resources.

"In ten years, we are probably going to reach 100,000 people in the software industry, but we will not be able to grow higher much faster, because one cannot make a country only of programmers," said Pambuccian. "Romania was the fifth country in the world that has designed and built a computer from scratch, in 1957. Since then, we have had a continuous growth both in research and in the industries area, and not only in Bucharest. Because increasingly more companies want to use a work force that grows more slowly than the business in the field it is active in, the labour cost increases. At some point, it will reach a limit. The problem is that we can see a higher and higher competition on these limited resources."

If there were a real danger in terms of shifting outsourcing from Romania to a cheaper geographic area, Pambuccian pointed towards Latin America. "Labour force in Romania is not so cheap anymore, and it's not cheap in the context of a taxation that is increasingly favourable for business, with zero income tax," said Pambuccian. "As long as the criterion of a cheap country is a priority, the shift [towards Latin America] is possible."

Pambuccian also stressed that it is important companies continue to invest in training programmes for employees, so that they learn to adapt to a changing business environment. Thus, with the workforce development, the company will grow as well. "Companies should not want already-trained people from universities, because they must constantly adapt to the business environment," said Pambuccian. "If they have only one specialization, they can no longer adapt. In addition, I do not want to see the situation where companies use specialized employees for five years and then they replace them with younger and cheaper ones. If companies would take groups of people to help them grow, they will rise with them as well when the risk of a shift toward Latin America will disappear."

Crina Ilie, vice president, Human Resources, Genpact Europe: Romania, still immature for employability concept

Normally, employability is a concept that provides benefits to all involved parties: to the employees, who always receive information on trends of the industry they work in or on various options, challenges and things they do not have time to insist on; to the employers, who can prepare the business plan for the coming years proactively, by analysing the work forces and allocating investments in learning and development; and also to the business environment. However, Romania is not mature enough to think about what employability really means, according to Crina Ilie, vice president for Human Resources at Genpact Europe. "Poland has promoted the concept of employability for a long time now, both in universities and environment business," said Ilie. "Unfortunately, we are not mature enough to think about its real meaning."

Genpact, with 2,500 employees in Romania, hired on the local market hundreds of people every year, 60 per cent of them being at their first job. In the last two to three years, the company started to make the educational training programmes transparent, both with student associations and certain universities through ABSL (Association of Business Service Leaders in Romania). "From the beginning, our strategy was to build skills and talents," said Ilie. "We want employees who put more emphasis on the profession and less on the job and occupation. At the moment, at the size we have in Romania, we hire around 700 to 900 new colleagues every year. We are a company in which there is a certain attrition because, probably, other companies decided to buy the talents further. This is not necessarily something with which I disagree, because we all need to increase the quality of the industry. We differentiate ourselves through a very good school which allows us to support this business model."

To demonstrate the intention to invest in training, Genpact has launched the Gateway programme, addressing new graduates who normally would not be hired by the company for various reasons. Through this four to six week programme, 200 graduates pass each year and finally 95 per cent remain in the company. "They are among the most productive and loyal employees, because they feel that they have been granted a chance and through our help they succeed to enter the industry, many of them being at their first job in a multinational company," concluded Ilie.

Mihaela Apostoleanu, director EMEA Premier Support Business Operations, Oracle: Cultural differences affect employee engagement in company

In the context of new trends and accelerated growth in outsourcing, the most important element in the outsourcing industry remains the human factor, for which there is a continuous battle in the market. However, the greatest challenge is not finding human resources, but their retention and their stimulation to have a greater employee engagement in the company. A recent study shows that only 13 per cent of the company employees are truly engaged and feel like they are part of the company. One of the reasons underlying the lack of involvement is the cultural difference that can cause lack of motivation and performance within the team, according to Mihaela Apostoleanu, director of EMEA Premier Support Business Operations at Oracle.

"The attrition in Romania's outsourcing exceeds 18 per cent," said Apostoleanu. "Given the fact that the cost of replacing an employee per year is around 50,000 USD, I think it is important to take care that our workforce is motivated and involved. Cultural differences may affect the employee engagement in the company and in this industry the teams are mostly multicultural. There are totally different ways of communication between cultures and I think a simple course in cultural awareness can raise people′s attention on a few things that normally get out of their sight."

According to Apostoleanu, in the outsourcing industry is very important to have equality and common rights for employees, in order to feel that they are part of the same team and that they are not treated differently. Employees should have a unique system of performance evaluation, should have access to the same information channels and equal promotion and development rights. "When, at the group level, there are differences between centres, between Romania's location and another country's office, for instance, it generates a lack of motivation," she added.

Boosting performance is another important aspect, and recent studies have shown that money is not decisive on the long term. Moreover, such financial rewards can lead to decreased performance, said Apostoleanu. "To identify how to motivate performance, we need to look at the profile of the employees working in outsourcing," she added. "Most of them are young and motivated. They want to have a flexible schedule and they look for recognition and feedback. They want things to happen quickly and to be fun. As long as the market grows rapidly, development and promotion opportunities exist for them within a centre."

Valentina Craciun, financial advisor, auditor, Noerr Finance & Tax: State-aid schemes and comparison between old and new

The first edition of state-aid schemes was completed in mid-2014. The assets scheme for investments over 100 million Euro and 500 employees had a 19 per cent absorption rate, while the second assets scheme, addressed to companies that have invested more than five million Euro and at least 50 employees, had a 50 per cent absorption rate. Regarding GD no 797/2012 for job creation, the scheme was a success, with an absorption rate of 100 per cent. It was accessed by large companies such as Deutsche Bank, Endava, Vodafone, Microsoft and IBM.

Regarding the new state-aid schemes, they came into force in the second half of 2014. According to Valentina Craciun, financial advisor and auditor at Noerr Finance & Tax, the allocated budget for the new schemes is 600 million Euro, meaning 100 million Euro per year. Financing agreements will be issued until 31 December 2020 and the repayment of state aid can be achieved by 2025. There are a number of differences between the old and new state-aid schemes and Craciun analysed them.
If the old state-aid scheme for assets was addressed to companies investing more than five million Euro, the new one is for those who invest at least ten million Euro. Regarding the 797/2012 scheme, it had a threshold of 200 new jobs and targeted investments in IT&C and R&D. Currently, however, the new 332/2014 scheme to support investments that promote regional development by creating jobs requires just ten new work places. Basically, it addresses all categories of companies, large, small and medium, Romanian entrepreneurs with fewer employees also being able to access the state-aid schemes, said Craciun.

"It is important to know that these jobs must be directly created by an investment project and must not, under any circumstances, be created before receiving the grant agreement and no later than three years after the completion of the investment," said Craciun. "The company is obliged to keep these jobs three years in case of SMEs, from the employment of the first job, and five years for large companies." The novelty of the 332/2014 scheme compared with the old one is that the intensity has changed, added Craciun. If before it was 40 per cent in Bucharest and 50 per cent in the rest of the country, currently Bucharest has a ten to 15 per cent intensity, the west - 35 per cent and investments made in the rest of the country - 50 per cent.

Teodor Blidarus, vice president ANIS and managing partner Softelligence: High-End Outsourcing is needed to develop further

The Romania′s Employers Association of the Software and Services Industry (ANIS) aims to support all software companies operating in Romania, whether they operate in outsourcing, integration services or intellectual property development. In Romania, 93,000 people work in IT&C and 65,000 employees work in the software industry, mainly in outsourcing, according to ANIS and INS data. The biggest problem that strikes Romania nowadays, especially in the software industry, is represented by the business model that involves a direct relationship between the company growth in terms of turnover and the number of human resources, according to Teodor Blidarus, vice president ANIS and managing partner at Softelligence. One solution to this issue is the migration towards high-end outsourcing.

"The software industry in Romania could easily register double-digit growth," said Blidarus. "It could record an over 20 to 30 per cent increase, but the main inhibitor of growth is the available labour force. If there is no way to increase the turnover by increasing resources, we can obviously increase the turnover by increasing the amount of services we sell. In this context, the concept of high-end outsourcing comes to bridge the gap between what it is called intellectual property development and software outsourcing development."

Moreover, Blidarus believes that in reality a business model is not 100 per cent product or 100 per cent outsourcing, but there is an ecosystem in which companies for hardware, outsourcing, consulting and product development work and influence each other. "From this perspective, if we want to get out of the mouse race that we cannot win with 5,000 graduates a year, the secret is to no longer look dichotomously at the two businesses, product and outsourcing," said Blidarus. "There are a lot of global trends through which companies offer a mix between outsourcing services and products. Why? Because what the customer buys the end of the day is a time to market. This is a model of high-end outsourcing and this is the explanation why Softelligence, and other companies, grow by 50 per cent every year."

Roxana Tesiu, Europe HR head at Wipro Technologies: Main trends and challenges of the market

According to Deloitte's "2015 Global Shared Services Survey", only ten per cent of the SSCs worldwide are located in CEE, comparing to17 per cent in APAC and 16 per cent in LATAM. However, 27 per cent of companies interviewed in the report considered outsourcing their operations this year or creating a SSC, which represents an opportunity for both the region and Romania, according to Roxana Tesiu, Europe HR head at Wipro Technologies.

"We have to recoup a gap compared to other areas, which, at the moment, are perceived as more attractive than the CEE in terms of outsourcing," said Tesiu. "An important fact is, however, that for 2015, one company out of three aims to outsource or build its own service centre. This is an opportunity both for the region and Romania. Nevertheless, note that according to the report, two states are coming up from behind: Bulgaria and Latvia."

Tesiu went on to add that she has noticed a significant increase of the number of companies which decided to relocate their service centres or centres of excellence from Western European countries to Romania. Almost every month new SSCs or GSCs appear in Bucharest, Cluj or Timisoara. Another direction she pointed out was the shift from the traditional single-function centre to multifunctional centre or Global Business Centres (GBS). In addition, there is tendency of migration towards a hybrid model of delivery. However, the third trend she saw is represented by the labour arbitrage, which does not represent anymore a direct competitive advantage.

"The third trend is that we are no longer a low-cost destination, so the direct competitive advantage that came from the cheap labour force is no longer an argument," she said. "Customers want the added-value behind the numbers and records."

Analysing the market challenges, Tesiu identified the technology impact that triggers the shift from employees executing transactions to Digital Talent, the "Lift and Shift" approach that is gradually replaced by delivery models capable to generate added value for the customers, RPA (Robotics Process Automation) and the limited capabilities for certain foreign languages especially when combined with HRO and ITO skillsets. "Another challenge for the back office operations is crowdsourcing," said Wipro's Tesiu. "We are at the beginning, but, according to field research, probably in five years crowdsourcing will become an increased competitive trend for back office operations."

SECOND SESSION: ROMANIA, AN OUTSOURCING ATTRACTION FOR INTERNATIONAL COMPANIES AND ROMANIAN ENTREPRENEURS

Francesca Postolache, partner, Audit Services, PwC Romania: The competitive advantages of Romania as an BPO/SSC destination are language skills, soft and technical skills and lower costs with taxes

The Romanian SSC BPO market is mature, offering a high range of capabilities and a large pool of skilled employees. Romania SSC/BPO market started to develop in the early 2000s, covering the traditional functions for IT, F&A and call centres. Bucharest and Timisoara, benefitting from large university centres and strategic locations, were the first preferred options for SSC/ BPO. After 2006, other locations started to be targeted as well, to leverage the first-mover advantage and lower labour costs. The SSC-BPO market employs between 20-30,000 staff and is expected to grow with 20-30 per cent over the next three years, shifting from transactional processes to value-added activities (e.g. R&D, talent management, engineering).

According to Francesca Postolache, partner, Audit Services at PwC, Romania is the second largest talent pool in the CEE, with over 120,000 graduates per year, main university centres of the country being the SSC/ BPO hubs, providing a qualified labour pool. "Romania has over 100 universities with more than 450,000 students mainly in the IT and Engineering (approx.140,000 students) and Economic fields (approx. 90,000 students)," said Postolache. "All university graduates are required to master at least one foreign language. For business degrees two languages are needed. The Romanian workforce is highly receptive to typical Western corporate values and possesses a high degree of cultural understanding. Current salary levels and future salary trends are highly competitive compared to neighbouring countries."

The language skills available on the Romanian market have been one of the first attraction points for investments in SSC-BPO. Around 90 per cent of educated Romanians speak at least one foreign language, 25 per cent of Romanians speak at least two foreign languages and four per cent of Romanians speak more than three foreign languages. "Romanians are internationally known for their high aptitude in speaking European languages: primarily English, followed by French, Italian, Spanish and German English is now spoken by eight million Romanians; French by 4.5 million; German, Italian and Spanish, 1.5-2.5 million," said Postolache. "In the eastern part of Romania there is a high density of Russian speakers, but there is also significant availability of Russian in Bucharest, through the Moldavian students coming for studies here. However, there is limited availability of more exotic languages, like Czech, Slovak and Nordic languages, which can be found only in small areas in the western part of the country, and usually not at business proficiency levels," she added.

Regarding taxes, besides the VAT return, which is sometimes a difficult objective to achieve due to the higher than 45-day interval of reimbursement, another fiscal law specifies that the salaries generated from activities of software development and sales are exempt from taxes, up to the level of 10,000 USD. "Another significant cost within the P&L indicator are the costs with the rents, which, for the companies in the BOP and SSC fields represent a large share due to the large spaces these companies are renting," said Postolache. "Also, the Government introduced a new state-aid scheme starting 1 July 2014, which could bring a significant financial incentive for setting up the SSC in Romania. The new state-aid scheme provides for co-financing of salary costs incurred by the employer for the new jobs created if certain conditions are met. The application should be supported by a business plan which will also demonstrate the incentive effect of the state aid, an investment plan, a hiring plan and a number of administrative documents (the qualitative and quantitative indicators required for qualification)," Postolache concluded.

Daniel Hernandez, Societe Generale European Business Services, head of HR Shared Service Centre: Enhancing a continuous specialization

Societe Generale European Business Services (SG EBS) is a subsidiary of the Societe Generale Group in Romania and operates as a shared service centre, providing services in finance, accounting and human resources for Societe Generale entities located throughout Europe. Created in 2011, SG EBS is a company that grew rapidly aiming to gradually increase its scope to other activities, in both the finance and HR fields.

"Societe Generale European Business Services comprises 150 agents, an HR and BPO expertise mix and 70 per cent French speakers," said Daniel Hernandez, head of HR Shared Service Centre at SG EBS. "The activities refer mainly to contact centre and HR operations, HR IS and reporting, transition and quality." In finance, the company operates three major lines of business: retail banking & financial service, management of assets & service, and corporate & investment banking. In HR, Societe Generale Bucharest operates three major processes: data management, training, and recruitment. "For us, as a process organization starting this year, what is most important is to position the quality team and the value creation at the core of our organization," said Hernandez. "It is also most significant to integrate the operations with the management, the transition and continuous improvement and HR IS Reporting," he added.

The quality approach of the company focuses on continuously improving the processes in order to meet the customer needs and maintain strong risk management, besides streamlining their operation, according to the manager. "Mainly, the process consists of addressing risks in proactive manner and increasing transparency, following the pattern from knowledge management to incident framework. Also, another approach of the company targets innovation, by empowering the SG EBS employees towards this approach," Hernandez added.

Marius Scuta, national director, head of Office Department and Tenant Representation, JLL: Expanding the outsourcing horizon

The real estate market has changed significantly in the last four years, since the last boom. The trends have adjusted and the investments in outsourcing centres also had a say in the changing trends. "A new market trend is the decreasing rents in the large cities, from an average of 12-14 Euro/sqm/month in the past four years, to the current level of 9-12 Euro/sqm/month," said Marius Scuta, national director, head of Office Department and Tenant Representation at JLL. "Also, another trend comes from landlords who, so far, showed a low flexibility in the booming years while now the market dictates a space phasing possibility and easier expansion. Also, one the business services associated with the outsourcing field are developing; Bucharest is now competing with other target cities in the country, such as Cluj-Napoca, Iasi, Brasov, Timisoara, Targu-Mures, Sibiu or Sfantu-Gheorghe," he added.

The real estate consultancy company Jones Lang LaSalle (JLL) works with many global companies that are deciding to open operational offices in Romania or the ones that are already present locally and decide on also bringing support centres, for instance Deutsche Bank and Societe Generale, for which JLL assisted in such transactions. "As understood, the real estate operations stand for the infrastructure-support as part of a company's business case when deciding on tackling a new market or city," said JLL's manager. "Usually, the aspects related to real estate used to represent the last criteria in the mathematics of a business case or process and this may have functioned so far but is starts to bring more and more pressure with the process since the outsourcing business is one of the fastest developing sectors in Romania. In the following three years, a pool of more than 3,000 to 5,000 people are to be hired within this field and the pressure comes from the need of space to accommodate them."

The current statistics offered by JLL report 200,000 new sqm of offices to be open and this, corroborated with "the 14-15 per cent vacancy rate do not stand for enough reasons to sharply conclude that they are ready to cope with the growth of the outsourcing sector," said Scuta. According to the JLL's manager, not every office space is ready to open for an outsourcing operation. There are many variables to be taken into account, coming from two main directions: the market, defined by demand and supply and the tenant (the corporate real estate department), asking for specific features. Also, the global economy is changing and it brings its own changes in the mindset of corporations.

"For instance, in the past three to four years a company's standards specified a 10-12 sqm for one work station," said Scuta. "Now, due to the decreasing costs-general purpose, the average space density shrank to six-ten sqm. So there are cases at now where buildings previously projected to accommodate a certain number of people have to deal with the increasing employee pool of the tenant (leading to decreasing personal space, changed work conditions such as lower natural light, air conditioning, etc) and this was mirrored in the quality of work. The current trend comes for international companies and investors which are demanding or building office spaces adjusted to the new market conditions and growth expectations and this also includes the increasing attention paid to green office spaces."

Also, once the business services associated with the outsourcing field are developing, Bucharest is now competing with other target cities in the country, such as Cluj-Napoca, Iasi, Brasov, Timisoara, Targu-Mures, Sibiu or Sfantu-Gheorghe. "Bucharest still remains the first choice for companies operating these services but, in spite of some downturns (work force, flexibility), in the last months, increased consideration in tackling other business centres apart from Bucharest is shown," said Scuta. "Still, there are ups and downs brought by the Tier 2 and 3 cities, such as the lower force flexibility of young professionals to travel for work outside the cities (where the support-centres or other outsourcing services are operated) or the inexistence of proper office buildings to accommodate such businesses."

At a market level, JLL recently conducted a global survey (545 respondents, most companies involved in outsourcing) on the impact of Corporate Real Estate (CRE) teams on their businesses and found out that, CRE outsourcing is increasingly seen as a strategic imperative, bringing enhanced, improved and changed productivity, quality, flexibility, sustainability in strategic terms and decreasing direct real estate costs and run costs, among others.

Silviu Cretean, TotalSoft Services Division director, TotalSoft and Alexandra Predeanu, country manager, ICAP Romania: Outsourcing means more than a commercial relationship

The software development and outsourcing trends paint the premises of Total Soft's businesses which started more than 20 years ago. Part of their operations, besides the crowdsourcing operations especially for payroll services and capital management, the company lately migrated towards high-end outsourcing services, following their exposure from the very beginning to international clients that wanted more than manpower outsourcing services and especially wished for custom-made solutions. "The company focuses on three major principles to support the client's growth, stay innovative and make an impression," as Silviu Cretean, the TotalSoft Services' director stated within The Diplomat - Bucharest's event on Romanian Outsourcing Summit 2015.

"Following its dynamic expansion strategy, ICAP Group, the largest business services group in Greece opened in 2008 subsidiaries in Romania, Bulgaria and Serbia, therefore looking for an IT provider able to support the new offices' activity from the technology and applications point of view," said Alexandra Predeanu, country manager, ICAP Romania. "In 2009, ICAP started the collaboration with TotalSoft, as the latter has been selected as the vendor from many candidates due to the company's excellent position and proven track record for such applications' development," she added. Also, TotalSoft has a presence in countries where ICAP operates, thus offering local support. This ongoing collaboration consists of three major services: software development, maintenance and daily operational support. On the development side, TotalSoft undertook new projects or major expansions of existing projects, and successfully completed them within time, cost and quality restrictions. The solutions delivered by TotalSoft optimize the daily activity of ICAP subsidiaries, leading to an increase in productivity of up to 50 per cent by means of automatic updates of the database and rating calculations. Also, with the technological support of TotalSoft, the group developed dedicated services for the financial groups with large-volume needs of data feeds, according to data provided by the managers of TotalSoft Services and ICAP Romania.

Alexandru Tulai, president Cluj IT Cluster: The two-faced coin of capital buildup in outsourcing

Cluj-Napoca posts the largest IT services outsourcing market in Romania, for almost 25 years. "It delivers an excellent delivery work force in IT services in the context of an almost inexistent domestic industry. In the lack of a domestic need, the market became mainly a support services-platform, without generating added value, feasible and self-managed," said Alexandru Tulai, president of Cluj IT Cluster, within The Diplomat - Bucharest's event on Romanian Outsourcing Summit 2015. That is why, according to Tulai, "it is a natural move to use the work force and talents for foreign projects. So, several major inputs can be identified in the benefit of Cluj, so that it has become a true IT Cluster in Romania: an important mass of IT specialists with very good technical skills; the severe decrease of the local business needs in late '90s; a significant number of Romanian IT specialists/students working abroad; and the explosion of communications and Internet connectivity. Also, a fact to be mentioned is that professionals that have worked abroad and became successful returned here and invested locally."

However, the IT outsourcing services are much less represented at a corporate level in Cluj, as the IT services in the city are delivered by local work force capital. "Cluj benefits from many small companies up to 70 people, but with a significant business life cycle," said Tulai. "Hence, the main benefits of IT outsourcing cluster are: the capital buildup, which, as the president of Cluj IT Cluster states, is a two-faced coin: some companies gained capital and reinvested while others used it in other directions or deposited it. The second major benefit of a cluster is that it enhances the competences improvement, and last but not least it is represented by the exposure to different cultures and organizational models," he explained.

Aurelian Deaconu, executive director, AROBS Transilvania Software: Overspecialization, the local benefit in moving ahead on the added value chain

"The business life goal is to find a balance between products and services," said Aurelian Deaconu, executive director at AROBS Transilvania Software. "The added value for an honest business is not to bill the customer for the worked hours, but to deliver concrete solutions to clients," the manager explained. AROBS is a company specialized in providing IT solutions, established in Cluj-Napoca in 1998. Currently the company has over 350 employees, four local offices (Cluj, Bucharest, Iasi, Oradea, Suceava, Targu-Mures and Chisinau. Specialized in the development of software products and services, with a portfolio of customers in 14 countries on three continents (Europe, America and Asia), AROBS provides efficient solutions for industries such as tourism, transport, sales force automation, location fleet, GPS navigation, financial services, healthcare, automotive, retail. AROBS currently has a turnover of over eight million Euro and over 350 employees.

Within the multitude of projects, the company is defined by two special competencies, in the area of travel and automotive software developments. "For instance, AROBS is also responsible for the software development for the German brand Volkswagen Passat's switch from analogue board to digital board. Also, in the area of special projects, AROBS provided both hardware and software solutions for the travel ticketing automate in Iasi, and this may be the sole project as such in Romania," Deaconu said. Also, in automotive and travel fields, Deaconu stated that AROBS developed the fleet management Track GPS application also in Indonesia and over 1,000 tracked trucks on the Asian market. He looks at expansion in this area, also.

Regarding the resources, including the work force resources, the AROBS manager reported that the company posts a 20 per cent growth each year for the last three years. As stated by the manager, only following the current confirmed contracts, the company may register a ten per cent increase in Q1 this year. That is why the resources chapter is a sensible topic and not only for AROBS but for many companies in the area of IT services. As particular experience regarding the cities, Deaconu mentioned that awesome surprises are the offices opened by the company in Targu-Mures, Suceava and Chisinau.

On the other side, the manager says that Bucharest is a too resource-expensive market for AROBS. Also, Budapest turned not to be the best choice for the company's expansion outside the country limits. "However, the IT services and outsourcing fields in Romania are more than viable regarding the creation of jobs in the area. Romania most lacks the creation of resources and alternative learning and training programs. Better capitalizing on the technological and business knowledge that we have accumulated all these years should stay in everyone's focus," Deaconu added.

Dan Zaharia, senior leasing consultant, EXTIND Management: Outsourcing in the successful regional cities of Romania

Once with the opening of its Iasi-based IT Informal School and the new office of RoGBC opened in Republic of Moldova, EXTIND Management aligns the green building offer in the region to the needs of international corporate clients, by adopting the Polish model that also includes the state aid component, lacking in Romania in previous years. "A fact is that in spite of the general opinion that Iasi and the northern part of Romania is poorly developed at the European level, the region holds significant resources for business development and investments," said Dan Zaharia, senior leasing consultant at EXTIND Management. "The competition is not formed within the country; Cluj or Timisoara are not competition for Iasi, as each has different competences. Instead, the stakeholders' focus should be targeting markets such as Morocco, Guatemala, Vietnam. Bucharest is a saturated market in terms of business development and many companies present in the capital are opening subsidiaries in other cities in Romania, in order to resist the salary spiral," he added.

"There is certain subjectivity in terms of choosing a city for opening a business or expanding it, besides the concrete metric regarding people salaries, rents, and technical skills," as Zaharia explained. Starting in 2007, Dan Zaharia, as "business ambassador" of Iasi, manages rental transactions for businesses in Iasi, also expanding the lobby endeavours to Cluj and Chisinau. "For instance, Iasi alone delivers around 1,000 specialists pipeline, each coming from four relevant specialized faculties in Iasi, including the Faculty of Informatics," said Zaharia. "Both Cluj-Napoca and Iasi delivers proper conditions to IT and outsourcing investments, due to their strong academic environment, with over 70,000 students, the advanced telecom infrastructure and a continuous flux of IT specialists," he concluded.

Catalin Iorgulescu, Board member of ABSL and managing director, WNS Romania: Investments in education, a guarantee for the long-term growth

Statistically proven, Romania has more than an 80 per cent chance to experience lower GDP growth in the next 40 years compared to other countries. Also, because 80 per cent of the world is ahead of the local market at OECD test results according to statistics of 2012. "The latest Baccalaureate results registered in Romania, of 37 per cent graduation rate in 2014 can be easily compared to the graduation rate in US, that post 74 per cent proficiency rate in math and 62 per cent rate in English reading (as they also have a very different testing system)," said Catalin Iorgulescu, Board member of ABSL and managing director at WNS Romania. "The figures still speak by themselves, and loudly so, as the fact that the percentage of jobs requiring at least a college level is increasing, from 28 per cent in 1973, to 42 per cent achieved in 2007 and an expectancy of 45 per cent in 2018." It takes one generation to significantly upgrade an educational system and see results. "There were few significant initiatives in the last 25 years in Romania and it is estimated that only five to ten years more are left to fix this major issue in the competition race with the other markets," Iorgulescu concluded.

Next event: Romanian Outsourcing Awards for Excellence 2015

The first edition of the Romanian Outsourcing Summit 2015, which aimed to emphasize both local development of outsourcing services and concrete solutions to boost the market in Romania, plans to become a tradition. Furthermore, as a natural consequence of the Summit, The Diplomat-Bucharest will hold on May 26, 2015 the first gala of excellence in outsourcing dubbed ′Romanian Outsourcing Awards for Excellence 2015′, an elite event and a platform to recognize, reward and celebrate the success of the most important managers and Outsourcing companies operating in Romania.