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COMPUTERWORLD | Articles | Market Analysis
05 Mar

Bulgarian outsourcing sector puts on rose-colored glasses for 2012, 2013


The Bulgarian outsourcing industry remains optimistic about its development in 2012 and 2013, shows a study of the national outsourcing market carried out by business intelligence consultancy and news agency SeeNews.

The respondents in the poll identified 2008 as the worst year in the sector in terms of performance and business conditions, followed by two years of steady growth. 2011 also proved to be challenging in terms of the market conditions in the services sector, but this did not dampen the optimism of sector representatives.

Currently, the major challenge faced by the industry appears to be the recruitment of qualified staff, the study shows. Respondents in the survey appear to be preoccupied also with growth and diversification of services and customer base, which are respectively the second and third most important challenges.

Meanwhile, sector specialists keep a stiff upper lip in the face of the raging financial crisis. Optimism has been prompted by the fact that the key customers of the Bulgarian outsourcing industry are from Western Europe and the USA, whose economies have bottomed out.

The SeeNews study draws upon a questionnaire sent to over 200 firms based in Bulgaria and involved in the outsourcing business. The questions in the survey cover a wide range of issues, such as analysis of the customer base and sales, HR management, identification of challenges and assessment of the market conditions.

The study covers all market segments of outsourcing in Bulgaria -- Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO) and IT Outsourcing (ITO). BPO includes the outsourcing of front-office and back-office operations, including customer relationship management, HR management, finance, accounting, credit management. ITO consists of web hosting, data centers and network management, application outsourcing, development of software products, system, hardware and network integration. KPO, for its part, involves database management, market, business and investment studies.

The results from the study show that BPO has a 55% share of the national outsourcing sector; ITO has a 25% share, whereas KPO accounts for 10%. Most sector companies are involved in more than one type of outsourcing.

In terms of revenue, BPO accounted for 61.13% of total revenue in the sector in 2010, ITO had a 27.5% share and KPO generated 14.8% of total sales. Sector companies earned 32.73% of their revenue from activities unrelated to outsourcing.

As customer profiles show, the sector has a strong international focus. According to the study, Bulgarian outsourcing companies work mainly for foreign customers and Bulgarian clients rank within the top five of outsourcing customers. The UK, the USA and Germany top the ranking of foreign clients. France, Macedonia, Russia, Israel, Poland, Spain and Sweden are also important countries for the Bulgarian outsourcing sector.

The sectors which most often resort to outsourcing services are the finance industry, including banks, insurers and pension funds; telecommunications; software development; wholesale and retail. The financial and telecoms sectors account for nearly 20% each of the sales in the outsourcing industry. The public sector currently has a 6% share of the outsourcing industry, but shows considerable growth potential, analysts point out.

For three out of four outsourcing specialists, five or under five clients account for over 80% of annual sales. Barely 11% of Bulgarian outsourcing firms rely on 6 to 10 customers to generate the predominant part of their revenue; a further 11% say that more than 11 customers represent a substantial part of their revenue mix.

According to the respondents in the survey, the competitiveness of the sector depends strongly on employees' knowledge and expertise, the access to qualified workforce, the availability of IT resources and infrastructure, cost prices, innovation, access to funding and the government's policy.

Many of BPO and ITO companies have between 200 and 300 staff, which creates specific difficulties relating to HR management. The survey shows that each middle-level and top-level manager supervises directly about 10 employees on average. Less than 2% of managers in the Bulgarian outsourcing sector are foreign nationals.

In 2009, the sector's revenue per employee stood at BGN 101,589, down from BGN 114,606 a year earlier. This 11% drop was attributed mostly to the increase in the industry's workforce, rather than the decline in the operating income. The share capital of the outsourcing companies grew by 30% in 2009, compared to the year-earlier levels. This was explained by the cautiousness of investors and managers and the higher rate of retained earnings. 

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