At the end of June, Sofia Municipality was awarded the Partnership and Provision of Best Conditions for Growth in the Technological Sector in Bulgaria by the Bulgarian Outsourcing Association (BAA) and the Bulgarian Association of Software Companies (BASSCOM). At an official ceremony of the second edition of the Innovations, Technology & Sourcing Awards, BAA and BASSCOM recognized the efforts and achievements of Bulgarian companies in the sector of outsourced services and IT, as well as of investors and local authorities.
It is clear to everyone in the sector that Bulgaria continues to be a country that offers very favourable conditions for the development of the outsourcing and the IT industries. This is directly related to the quality labour pool and the long-term vision of local and foreign investors in the country.
Shared services in figures
According to Stanimir Nikolov, Chairman of BAA, the outsourcing industry is creating a sizable percentage of the country’s GDP. For 2016 growth is over 4.5% and the positive trend continues. The association predicts that growth will double by 2020, and the number of people employed in the sector will exceed 60 000 with 45 000 at hand at the moment.
The salaries in both process outsourcing and technology outsourcing are currently approximately four times higher than the national average, according to BASSCOM’s annual report on the state of the software sector in Bulgaria, 2016. The salaries in the sector are expected to continue to grow by 5-10% per year.
According to Cushman&Wakefield Forton, the outsourcing industry generates more than 70% of the demand for office space in the country, followed by pharmaceutical companies and companies in the financial sector. The interested generated is for Sofia, as well as for the other big cities, where many companies are opening a second office.
Bulgaria as an Outsourcing Destination
In 2015 Bulgaria received two awards for best outsourcing destination. In October the country was awarded with European Outsourcing Association Award (which distinguishes the best outsourcers in Europe) and a month later, the National Outsourcing Association of the United Kingdom. Then Kerry Halard, the Head of EOA and CEO of NOA shared in an interview with economy.bg that the awards were given as a recognition for the extremely rapid growth and are a proof of the impressive progress the country is making in building an increasingly stable image of a promising destination for outsourcing. Among the positive trends that foreign investors report are the stable currency, the low inflation, the 10% flat corporate tax, the well-trained technical personnel, the EU membership and the general business climate.
What are the challenges?
As in many other sectors, the main challenge here is the labour shortage. BAA and BASSCOM continue their efforts in initiatives aimed at improving the labour market with the introduction of technology related classes in the secondary schools and cooperation with local authorities being some examples .
Further changes in the blue cards requirements are also expected to help attract more employees to the country.
One positive trend is that Sofia and Bulgaria are no longer regarded simply as destinations for cheap labor, but as destinations with qualified specialists and good price-to-quality ratio.
Another challenge is to increase the volume of the outsourcing services offered. In addition to Sofia as an established leader, there are other major Bulgarian cities such as Plovdiv, Varna which also have the resources to develop outsourcing services as they have the necessary infrastructure, office space and qualified staff from the respective specialties in their local universities. Days before the Innovations, Technology & Sourcing Awards, the BAA President Stanimir Nikolov called these cities a “second wave” and said that it was no coincidence that Burgas was chosen to host the 2017 award ceremony as last time the city gave a strong request to become the next big center of outsourcing services in Bulgaria. For the second consecutive year, Burgas won the prize for “Technological City of the Year” and was named “Most dynamically developing technological city of the year”.
A third important challenge is rethinking the mechanisms by which the national and local authorities can support the growth in the sector. The infrastructure in the country should be able to respond to the increased demand, the favorable tax policy and a stable business environment should also be preserved. It is necessary to promote Bulgaria as a good outsourcing destination in other countries and internally – to work in cooperation with the industry and the educational institutions. The state can raise awareness among young people of the importance of the sector for the Bulgarian economy and the variety of opportunities for well-paid work. Joint actions between the state and the business can provide opportunities for internships and trainings which synchronize the number and quality of the training of professionals with the needs of the business. The state can cooperate with publicly stated support for the importance of the country’s industry and to support at local level the entry of companies both in the capital and in other Bulgarian cities.