WHY NOT OUTSOURCE TO BULGARIA

Benefits for the outsourcing company
In the last few years, Bulgaria has become one of the most attractive destinations for outsourcing of business activities, due to a number of strengths and opportunities that the Bulgarian market offers to foreign companies. Famous international companies like Hewlett Packard, Reuters, Boeing, Siemens, IBM, Ericsson, SAP and Ford Motor Co have already chosen Bulgaria for some of their outsourcing activities.

Outsourcing is often seen as an integrated part of the ongoing globalisation. Experts often characterise globalisation as a process, which has changed the challenges, both companies and individuals, are facing. Geographical distances have reduced their importance due to the Internet, improving infrastructure and modern technology. Hence, the focus is now on establishing international production lines in several countries, so the company is able to offer its products at the best price and quality.

Outsourcing can in general offer your company a number of various benefits such as:

• Reduction of operation costs: One of the main arguments for outsourcing a business is the opportunity for the outsourcing company to lower its operation costs. The transfer of a business function to a third party in a foreign country is related to significant reduction of costs due to the fact that same activities are paid several times less in countries where business is outsourced;

• Focus on the core of business: Outsourcing gives companies the opportunity to focus on their core competences, thus being more efficient in their business operations;

• Quality improvement: Outsourcing is a process of delegating operations or jobs to an external entity that specializes in that operation, and thus offers a high quality of implementation;

• Better location to new markets: outsourcing gives the opportunity to approach new clients faster and more efficiently. Very often it saves time for distribution and increases the competitive advantages.

Market indicators

Competitive advantages of Bulgaria as an outsourcing destination
Bulgaria is an attractive market for Danish companies that are interested in outsourcing their production.

According to the annual ranking of the American consultancy company A.T. Kearney, for 2007, Bulgaria is the ninth most attractive destination in the world for outsourcing a business. Bulgaria is evaluated to be the best place for outsourcing among the European countries.

Global Services Location Index 

“Business environment” is a category that evaluates the business climate in each of the ranked countries in terms of political and economical situation, legislation, and infrastructure.

Note: the weight distribution for the three categories is 40:30:30. The financial structure is rated on a scale of 0 to 4, and the categories for people and skills availability and business environment are on a scale of 0 to 3.

SWOT-analysis of the conditions for outsourcing a business in Bulgaria

Strengths:
• The main advantage that the Bulgarian market offers to Danish companies, considering outsourcing of business activity to Bulgaria, is the low labor cost (salaries in Bulgaria are six times lower than in USA and Great Britain and three times lower than in the Czech Republic);

• Bulgaria is an attractive destination for outsourcing, also because of low operating costs;

• A strong competitive advantage in terms of outsourcing in Bulgaria is that despite of low labor cost, the Bulgarian market in general offers a well-educated and professionally trained work force that could provide high quality work implementation;

• Bulgaria is a good choice for Danish outsourcing companies in terms of its geographic location - the relatively short distance between the two markets significantly lowers transportation costs;

• The small time difference between the two countries (+1 hour), as well as the similar working hours is also advantages of the Bulgarian market;

• The Bulgarian market is characterized by a stable business environment;

• Legal framework is soon to be fully harmonized with the EU legislation;

• The EU membership is guaranteeing an improvement in the business environment;

• The professional level and management skills have sufficiently improved in recent years.

Opportunities:

• Further promotion of foreign investments.

• Attractive taxation (the corporate tax was reduced to from 19.5% to 10%).

• Improvement of the infrastructure in the country.

Weaknesses
• A disadvantage of the Bulgarian market is its limited size, which leads to limited domestic demand. Thus, foreign companies should not focus on domestic sale but rather on the possibility for outsourcing their production, which can later on be distributed and exported.

• The management practice in most of the Bulgarian companies requires further development, because the need for up-to-date management expertise is becoming more and more important.

Threats
The EU-membership leads to an increase in prices and salaries. However, the salaries still are competitive to those in the other Central and East European countries

Market trends

Sectors with great potential for successful outsourcing

Defining those sectors is mainly due to one of Bulgaria’s strengths – the uncommonly well-developed educational system specializing in electronics, engineering, and computer sciences. The universities in the country are more than 47, located in 26 different towns. At any one time, there are more than 10,000 Bulgarian students majoring in computer science, electrical engineering, mathematics, physics, and biotechnology.

Bulgaria's advanced education is right up with the top countries in the world, ranking fifth amongst all countries in sciences and eleventh in mathematics, according to The World Bank and The Economist. Bulgaria ranks second in the world in IQ tests (MENSA International) and - second in the world in SAT scores. Last but not least Bulgaria ranked 8^th at global level in certified IT professionals, according to the Brainbench Global IT IQ Report.

Call centers
Most major businesses use call centers to interact with their customers.
Bulgarian companies offer the operating of both incoming calls (product support or information inquiries from consumers), as well as outgoing calls (telemarketing, clientele, and debt collection).

The Main advantage of the Bulgarian market in terms of operating a call centre is the availability of educated labor force with very good language skills not only in English, but also in other European languages.

Companies that are already operating call centers in Bulgaria are Moneygram (with BTK as their Bulgarian partner), the Belgium company IMPRO, the American C3i.

Data processing
Every organization generates huge amount of data. There are numerous qualified companies in Bulgaria that can deliver data processing to Danish companies. That includes: gathering and extracting information, data analysis, developing and operating data base, informational assistance, etc.

The main advantages of the Bulgarian market in terms of outsourcing data processing are low costs, as well as qualified labor force.

Among the clients of Bulgarian companies that deliver data processing are Reuters, Factiva (Reuters & Dow Jones’ joint venture), and the British Eurocash.

Software production
More than 200 Bulgarian companies produce software although 20 companies are dominating the market. Among them are SAP – Bulgaria, Tumbleweed, Sciant, Nemetschek - Bulgaria, Musala Soft, Еasisoft, etc.

As a whole, the Bulgarian companies have specialized in the development of complex informational systems in different areas, including CAD/CAM, GIS, ERP, CRM, firmware, E-business and B2B solutions.
Among the numerous clients of Bulgarian software companies are Boeing, Lockheed Martin, Siemens and Ford.

Apart from the low cost of labor, the most important advantage of Bulgarian market in regards to software production is the availability of educated and qualified program experts (According to data from Brainbench, Bulgaria is ranged as the tenth country in terms of number of available certified IT specialists.)

IT operations
The technology giant Hewlett-Packard openED a global IT delivery service center in the Bulgarian capital – Sofia. The service center provides remote infrastructure management assistance to its clientele in Europe, the Middle East and Africa.

HP made their choice after a thorough analysis of 14 countries and potential partners for the project. Bulgaria beat out stiff competition from predominantly Eastern European nations, including Russia, Ukraine and Romania. Hewlett-Packard announced that it has chosen Bulgaria as the most attractive destination for outsourcing because of the stable and predictable economic and political environment, availability of well educated and trained specialists in the IT sector, as well as governmental support for the project on behalf of the Invest Bulgarian Agency (IBA). Apart from those advantages, the Bulgarian office of HP already has gained a very good reputation, because of its performance and successful completion of several projects during the last years.

Others
It is the overall opinion of the Embassy that the Bulgarian market has the potential to offer outsourcing opportunities to Danish companies also in other sectors such as:

Research processing

Engineering design

Shipping and transportation

Market evaluation

The Bulgarian outsourcing market is expected to develop both in short-term and long-term perspective. Apart from the above-mentioned sectors that have already demonstrated their great potential, other sectors of the Bulgarian economy might become attractive for foreign companies, considering outsourcing as an alternative solution for their business. At present, the potential of the market is concentrated in Sofia, as the capital and largest city in Bulgaria. However, the potential of other big cities is growing because of an increase in the number of educated and qualified labor force in these cities.

The growing international awareness of the Bulgarian market and the foreign investors that are already present in Bulgaria logically are expected to attract more business to the country.

Finally, the latest developments in the recent years have proved the important role and position of Bulgaria as an outsourcing destination. Therefore, there is no doubt that Bulgaria is an appealing place for outsourcing of your business activities.

The Commercial department of the Royal Danish Embassy can assist you in a tailor-made evaluation of the possibilities for your company in Bulgaria. Please, feel free to contact us if you would like to receive more information.