Sofia and Bucharest are the most significant knowledge economy centers and together concentrate more than 44% of all outsourced operations in South Eastern Europe (SEE). Data is from the latest SEE Sourcing Industry 2022 report by the Association for Innovation, Business Services and Technology – AIBEST. A total of 598 companies operate with headquarter offices in Sofia (as of 2020), and another 42 sourcing vendors use the city as a secondary location. The outsourcing market in our country is close to 3.44 billion euros and the sector generates 5.6% of GDP= The number of people employed continues to grow and is now close to 79,000. The top foreign investor in outsourcing in our country is the United Kingdom.
Sofia, along with Bucharest, is the home to the major sourcing cities in terms of employees and suitable talent pool. The two capitals are undoubtedly recognized as the two most developed locations for technology and business services in the region. Due to their advanced stage of market development, Romania and Bulgaria are already seeing growth outside their capitals. In our country, cities with more and more companies in the outsourced services sector are Plovdiv and Varna. Sofia is also mentioned in the report as the location with competitive prices for Class A offices and the most favorable tax environment.
The annual survey covers a total of 2,015 companies from all 11 countries in the region. Outsourced service providers contributed a total of 137 million euros in corporate taxes to their countries’ budgets. The operating revenue in 2020 is EUR 10.7 billion, which is an increase of 4.9% on an annual basis. The ITO segment has a larger annual turnover – 5.7 billion euros, while BPO registered operating revenues of 5.0 billion euros. With the fastest growth rate of 6.8% in SEE is the ITO segment.
According to the overall findings, the leading segment is ITO with 1,182 companies across the region, while BPO consists of 833 companies. Shared service centers are the fastest growing sub-segment, accounting for one in four providers that have launched operations in the region since 2018. In SEE, the industry employs 250,000 people.
Nearly a third of all active sourcing providers were set up in the most dynamic period 2012-2016 alone. The trend continued afterward with 92 newly created sourcing companies since 2019. More than two-thirds of them are either Bulgarian or Romanian.
The largest number of investors that are stakeholders in outsourcing companies in SEE are from the Netherlands, Germany, the United Kingdom and the United States. Entrepreneurs from these four countries account for approximately 43% of all foreign owners. Almost 60% of the companies they have invested in operate in the ITO segment.
According to the data from this year’s report, Slovenia, Serbia and Bulgaria are the SEE countries most active in investing within the region – 12 of the sourcing vendors in SEE have a Bulgarian majority owner. While Slovenian and Serbian owners are concentrated on BPO, Bulgarian companies are strongly in favour of ITO, when it comes to establishing subsidiaries in the region.
Intra-regional investment activity also continues to grow, with more than 80 companies based in SEE countries expanding beyond their national markets and reaching regional coverage. Slovenia is the most active investor abroad, followed by Serbia and Bulgaria.
According to the report, a trend that will define the development of the industry in Southeast Europe in the coming years is the transition to more complex business services with higher added value, investment by global companies not only in shared service centers but also in centers of excellence, focused on innovation. Bulgaria and Romania are the first in the region to already have an established position as regional hubs for high-tech businesses and world-class research and development activities. The document also notes that in an effort to advance Bulgaria and the entire SEE region further on the global innovation scene, the Institute for Computer Science, Artificial Intelligence and Technology (INSAIT) was launched in Sofia earlier in 2022, as the first institution of its kind in Central and Eastern Europe.
The study states that Bulgaria and Romania should take the leadership role among other countries in the region and establish the supply industry in Southeast Europe as a common market that facilitates the exchange of know-how between companies and educational institutions at an international level. More data on the outsourced services sector can be found in the full SEE Sourcing Industry 2022 document, available for download from the AIBEST website here.