ITO & BPO Outsourcing as Kosovo’s ‘sweet spot’ for Economic Breakthrough

Kosovo – A Strategic Outsourcing Destination for BPO & ITO Services

IT & BPO Outsourcing is a key factor identified in helping the economies of the countries that are underdeveloped or in development. Global companies outsource their non-core (peripheral) business processes to these low-profile human capital markets with the main aim to reduce costs. Billions of dollars are constantly poured into these markets such creating new workplaces and helping the development of local economies. Just for the illustration, each outsourced job in India can generate work for more than 20 other people as the money flows around the national economy, usually at a far faster rate than in countries like the US. The Age of information has given the wherewithal to all the world countries to compete in a global level. By participating with just a small fraction in this global market, our country’s economy could shift to a totally different level making it a major economic player in the region and wider.

The digital economy has been named as a critical sector for Kosovo’s economic development. A national strategy for directing the investment and educational projects towards IT&BPO outsourcing will boost the national economy and set the stage for Europe’s next Silicon Valley. The National IT strategy approved by the government in 2015 envisions the “IT to become the main driver for economic growth, employment and innovation until the year 2020 by increasing the international competitiveness of the IT industry based on digital excellence.” According to a survey by STIKK (2016), core competitive advantages of the IT outsourcing companies are: price, quality and technical know-how.
But, why should we focus on outsourcing as a country?

Two decades on the wrong path
Agriculture, industry and ICT are identified as top three sectors for the country’s economic development. But, endeavors of almost two decades in investing into agriculture and industry have given slight results and a slow economic growth in return. The huge direct investments from the international donors (in billions of dollars since the end of war with Serbia in 1999) were translated into an average of 4% raise on the total GDP of the country, which in total is around 5.5 billion USD. This economic growth is far from satisfying and the trade in-balance is enormous with a little export to the neighboring countries.

Access to a global market
Outsourcing provides access to a global market with an industry worth at 548.5 billion USD according to a report by Plunkett Research, Ltd. (2016). This market is for BPM, KPO, HR and IT. Geographic location in the heart of Europe enables nearshoring for a market of 508 million people (in European Union) and offshoring for a market of 324 million people (USA mainly). For the illustration, just in 2013, US employed more than 14 million workers overseas affiliates (BEA, 2013). This market is growing and is expected to reach unprecedented levels never seen before.

Low barriers to entry
Local companies can compete on global levels by designing a sound digital marketing strategy and making the proper business connections. 95% of the companies outsource based on the RFPs and this is the most popular method in comparison to other means (Deloitte, 2016) with only 19% leveraging existing providers. This leaves space to new entrants to bid and compete with price and quality of services. A large diaspora serves as a solid platform for initiating preliminary contacts with different companies and executives abroad as well as providing direct investments into startups. These networks also offer possibilities for mergers or acquisitions between local and European based companies.

Improved climate for doing business
Improved climate for ‘Doing business’ is reflected in the report of World Bank where our country ranks in the 66th place in global level. No taxes on profit for exported goods and services. Legal and tax facilitating environment with the lowest taxes in Europe at roughly 10% in corporate profits and 5% in compulsory pension contributions, highly skilled professional workforce, low wages at average 416 EUR, cheap facilities and offices for rent together with effective but cheap public services contribute to this remarkable climate. The country has attracted more than 2 billion euros of foreign direct investment from EU countries, led by Germany with 426 million euros (KIESA). 11% of these investments are in transport and telecommunication. Success stories are the Acquisition of IPKO from Telekom Slovenije in 2006 as the largest one made.

New workforce in the making

With 53% of the population under 25 years (70% under 35 years old), it represents the youngest population of Europe and one of the youngest in the world. There are 8.000 graduates coming out the universities every year securing a stream of qualified professionals. Currently, there are 300.000 job seekers of all profiles so offering a fantastic talent pool. The six public universities along with many private universities and other institutions have around 50.000 registered students. Apart from the formal education, Kosovo is overpopulated by institutions that offer international professional training and certifications. Nowadays, getting an international certification can easily become a reality through a persistent soul, some little money and a laptop. Preparation of this workforce for the production is associated by low cost initial and operational investment. Easiness to scale up is the most important factor of the outsourcing world.