European BPO Forum SPEAKER INTERVIEW: Mihaela Apostoleanu, Director EMEA Premier Support Business Operations, Oracle

1. Nearshoring vs. Reshoring vs. Offshoring, what is the next way to go in Europe? What about globally?

Over the past 20 years, Globalization opened the door to unlimited resources, markets and business opportunities. One of them, offshoring, has been seen as a way to reduce costs and increase the profitability margin, allowing companies to access labor force for lower wedges. For all the Multinational Companies today, access on Global Markets and the Offshoring business model were the main factors of achieving world-wide success, faster adoption and innovation, especially in the manufacturing and services area.

But now we have reached the point when labor arbitrage is no longer that high, some companies decided their customers are really important and deserve a higher service level. The go to market times have decreased so much that companies can no longer wait for shipments from far-east. In other words, we are at the cross-roads of the offshoring industry, and the approach is different and aligned to the company's strategic directions.

Reshoring, although not an extended trend seems to be a solution in certain case in the IT or manufacturing. Lead times, shipping costs and quality control can play a role in why companies may choose to Reshore. However this is not going to turn into a major trend, because the main focus will be to automate admin work rather than moving it back home.

Nearshoring is nowadays the answer for some companies (Customers) in Europe (and not only). Lower freight and inventory costs and increased speed to market, similar cultural characteristics and improved services, higher skills level are the main reasons why customers decided to move their business near. This is mainly the case for activities where the language skills are required, customer interacting and support activities, partially IT.

Offshoring is still leading the way. Companies are exploring new destinations now, like Sub-Saharan, Latin America or other far east destinations, depending on the skills and business function they need to cover.

2. How do you predict the BPO dynamics in Europe for the next ten years? What are the tendencies?

Oh, that will be very hard to say, given that it has become very hard to predict even what will happen next year. It all stays with the evolution of the EU market, changes of the current regulations and taxation policies, but mostly the technology progress. In general, I see the BPO/Outsourcing business evolving towards a geographical specialization, where locations will be preferred because customers/ BPO companies can find there the skills which can fulfill internal or external requirements. I also strongly believe that the race for the lowest cost location on earth will be over in 5 years, with an indisputable winner: the technological progress. Activities which are subject of cost reduction will slowly be replaced by machines. This should actually raise a big question over educational system and how are we growing today the next generation of experts for tomorrow.

Another important trend might be consolidation for growth. Once the cost&price are no longer the main triggers of outsourcing, we won't see major destination changes every 2 years (like before in the wild west). Customers will focus on a completely different strategy: consolidate and leverage existing know-how, innovation & business partnership.

3. How do you comment the rise of Eastern Europe regarding business outsourcing? How does this impact Western Europe and the customer experience?

I think the discovery of Easter Europe was a blessing for European companies looking for a outsourcing destination. Just think of the following successful combination: you can find highly educated workforce (in many cases even in western countries), speaking your local language with an accent, motivated to work for a foreign company, for less than 30% of the labor cost from home. Another advantage for EE is the local infrastructure: better, new and, most important, stable compared with traditional offshoring locations like India or China. Again, far-cheaper than at home. Political stability and fiscal facilities are another important factor.

Who would say no? In my opinion the EE countries are the new paradise of outsourcing.

4. Name 2 important current, challenges/obstacles and opportunities for the business process outsourcing industry?

Opportunities: technological progress and new market direction will open the door for new opportunities. Just think about the Social media explosion. 6 years ago we haven't even had a name for it. Now we have special agencies and outsourcing companies 100% specialized on it. I would bet my money on Google Glasses as the next opportunity segment ;-)

Challenges/Obstacles: BPO providers will need to focus on delivering business value, not just cost reduction. The role of technology will become increasingly important as services are enacted directly in technology platforms and technology becomes a source of operational improvements and business innovation. But the most important challenge for the BPO industry will be people - recruiting, motivating, recognizing, rewarding, and developing talent will be the overriding challenge for the BPO industry. People are the only sustainable, long-term source of competitive advantage - for providers as well as customers. The BPO industry as a whole will be challenged to change the mindset that people are a commodity that can be arbitraged. We need to invest to build their industry knowledge and expertise in order to meet the unique needs of constantly changing vertical markets.