BPO: Ukraine’s hidden potential
Gartner defines Business Process Outsourcing (BPO) as the delegation of one or more IT-intensive business processes to an external provider that owns, administrates and manages the selected processes based on defined and measurable performance metrics.
Classic BPO services are grouped in two major categories: horizontal services (those that can be implemented across specific industries) and vertical-specific services (those that demand specific industry vertical process knowledge).
The industries that use the services of BPO providers the most are: banking, insurance, securities and investment services, process manufacturing, retail, wholesale, professional services, consumer and recreational services, healthcare providers, transportation, communications, media, utilities, construction, resource industries, state and local government, and education.
The global BPO market is comparable with the IT outsourcing market. Statista.com, an industry statistics portal, reports that total contract value of the global BPO market worldwide amounted to $28.5 billion in 2014. According to the recent KPMG report “Global IT-BPO Outsourcing Deals Analysis. 2Q15 Analysis: April to June,” 72 BPO contracts worth $7.5 billion were signed worldwide within this period.
Ukraine, a key player of tomorrow
BPO is only taking its first steps in Ukraine, and there is no practical way of estimating the potential market size either in terms of financials or number of companies providing BPO services. What can be said is that the BPO offer in Ukraine is still underdeveloped. The primary reason for this situation is a lack of clarity in terms – how to differentiate BPO from IT outsourcing. Some companies that actually provide BPO services may not define themselves as such.
Yet Ukraine’s IT outsourcing companies may well play an important role in tomorrow’s global BPO service market, where competition has not been very intense thus far. In pure IT, both outsourcing and outstaffing models as well as programmers and engineers became very valuable assets – which is in line with the basic economic assumption that the more limited a resource is, the higher its price. And BPO can become a blue ocean for companies that would like to grow in the outsourcing/nearshoring/offshoring industry.
Ukraine’s potential breakthrough on the global BPO market could be helped by both the country’s economically active population – large, skilled, educated and living on the border of the EU – as well as by the relatively high national rate of “informatization” and Internet penetration, which allows Ukraine to offer virtually any kind of remote services.
What’s more, for several years Ukraine has had the lowest average salary wage in the region – a price advantage that has increased as a result of the recent decline of the national currency relative to the US dollar.
Another factor is that, until recently, monsters of BPO such as Accenture and Capgemini preferred to put their offices in Russia – covering the entire former Soviet Union area – with no, or no significant presence in Ukraine. Now that Russia and Ukraine have cut their links, it is not ruled out anymore that these giants come to Ukraine.
In these circumstances, Ukraine has every chance to assert itself on the global BPO market. The question is not whether it will happen, but which players will emerge in front.
Several players may be mentioned to illustrate the above, each with its own background and specific identity as a BPO service provider.
- A major European BPO company with activities in Ukraine: Runway BPO is an international company which opened its first office in Ukraine in 2013. Having weathered the country’s most turbulent times, this player now provides nearshore BPO services to Norway, Finland, Sweden and Denmark from six facilities across Ukraine, including one in Kyiv with over 100 employees. The company also has facilities in the Baltic states and Spain.
- Locally established BPO companies shifting to global markets: WinTRADE BPO is a Ukrainian company that started out as a local BPO provider. The company operates in English, German and other EU languages as required. Four major locations with over 600 call center agents cover the project for both the local markets and for customers from the USA and DACH countries.
- Ambitious BPO fast-starters: BPO Nextdoor and Pure BPO are very flexible and promising companies. They are active in traditional BPO services and focus exclusively on the international markets.
- An example of niche BPO players: SupportYourApp focuses on outsourcing of business processes and routines that run in the background of the launch of any application.
- A cross-industry giant: PrivatBank, a leading banking institution in Ukraine that provides banking services to many B2B customers, has introduced a BPO service branch with a set of typical services that businesses use in everyday routines. Though oriented towards the domestic market, this service is also coming into the banking service offer, and could potentially change the Ukrainian BPO landscape completely.
Kostyantyn Yakovchuk-Besarab is founder at uSupport and Director of New Markets at WinTRADE BPO. This article is an excerpt from “IT Ukraine From A to Z,” a research study on the Ukrainian IT outsourcing and software R&D industries published by Ukraine Digital News.