1 Shared Services, Technology and Outsourcing in Małopolska
3 1 Table of contents Introduction... 2 Małopolska s Key Strengths... 3 Shared Services and Outsourcing... 6 Key Facts... 6 Demographics... 6 Top 20 SSC/BPO companies by headcount... 9 Salaries...10 Trends and Forecasts...10 R&D and IT...12 Key Facts...12 Top 20 R&D/IT companies by headcount...12 Salaries...15 Trends and forecasts...15 Market Characteristics...16 Office Market...16 Communications...18 Cooperation with Universities Quality of Life Investment Support Special Economic Zone Grants & Incentives Investment Process Investment Process Support Foreign Languages Availability PROMOTING THE MODERN MAŁOPOLSKA... 40
4 Introduction The Shared Services and Outsourcing sector in Małopolska is located in the Kraków Metropolitan Area In recent years, the city has emerged as a world leader in outsourcing, ranked the top emerging city in the Tholons list of Top 100 Cities for Global Outsourcing in Over 65 centres are located in Kraków, including leading outsourcing companies such as IBM, Capgemini and HCL, technology companies such as Google and Motorola, and multinational companies operating shared service centres, such as Shell, Philip Morris International and HSBC. The Polish company Comarch, established in the mid- 90s, is the largest IT centre in Kraków. The largest foreign IT company is the travel technology company, Sabre Holdings. Since 2007, the industry has grown fourfold with the headcount now standing at over The largest growth is registered by existing centres, although in the period from 2011 into Q there have been significant new entrants into the market, including US technology giants, Akamai and Cisco, the UK s leading outsourcer Capita, as well as global brands establishing service centres, such as Heineken, Brown Brothers Harriman and Premier Farnell. The most popular processes carried out in Kraków are Finance and Accounting, HR and IT, though some centres also provide Customer Service, Contracts and Procurement and Sales. The trend is towards higher value processes once proof of concept has been established.
5 3 Małopolska s key strengths The key strength of the Małopolska region and Kraków in particular is the young, ambitious and well-qualified workforce. Over students graduate each year from universities in Małopolska. Additionally, the relative maturity of the shared services and outsourcing industry in the city has led to an increasingly large pool of experienced shared services and outsourcing professionals. The presence of a large number of centres in the city and the dynamic growth rate of the industry also make the city attractive to skilled workers from other parts of Poland and other European countries. The evolving ecosystem for shared services and outsourcing - students and universities increasingly attuned to the needs of the market, an increasing number of service providers with tested market solutions and professionally run organisations providing business support - serves to build capability, which in turn supports further growth. Key strengths at a glance Population: the Małopolska Region has a population approaching 3.3 million people (the fourth largest region in Poland). Population: Kraków, the region s capital, has residents (the second largest city in Poland, after Warszawa)
6 Student population: More than students (about 10% of the total number of students in Poland) study in 33 universities in Małopolska, employing more than academic staff. Universities produce over graduates per annum. Kraków has the second largest university population in Poland. Relevant skills: the most popular subjects at university level are Business & Administration ( students), Humanities ( students) and Engineering & Computer Science ( students) Languages: there is a very good availability of English speakers and strong availability of German, Russian, French, Italian and Spanish speakers among Kraków graduates. There are an increasing number of young foreign nationals from other parts of Europe, including Scandinavia. Soft skills: Małopolska is one of Poland s most popular tourism destinations with more than 8.5 million visitors to Kraków in Tourism supports the development of key language skills and soft skills. Macro-region: a strong labour market synergy exists between Małopolska and the neighbouring Silesia regions. There are students across both regions. Positive migration: Kraków is one of two Polish cities (Warszawa is the other) with positive migration. Sources: Małopolska Organizacja Turystyczna RUCH TURYSTYCZNY W KRAKOWIE W 2011 ROKU RAPORT KOŃCOWY ;CHARAKTERYSTYKA ZASOBÓW LUDZKICH DLA POWIATU KRAKOWSKIEGO I MIASTA KRAKOWA, Advisory Group TEST for Regional Labour Office in Krakow; Statistical Bulletin of the city of Kraków, 4th quarter 2011; Statistical data provided by Central Statistical Office; Offical website of City of Kraków; Offical website of The Office of Marshal of Małopolska Region; Official webpage of Małopolska Provincial Office in Krakow.
8 Shared services and outsourcing Key facts people are employed across more than 65 shared services, outsourcing and IT development centres in Kraków. 1 This represents 1 out of every 8 employees working in the private sector in the city. 2 35% of the shared services and outsourcing industry in Poland is located in Małopolska. 3 Kraków is ranked first globally as an emerging location for global services outsourcing. 4 Kraków is ranked amongst the top 5 established locations globally for multilingual centres and finance and accounting centres. 5 The industry in Małopolska is growing at 25% per annum languages are served across Kraków centres. Demographics The success of shared services and outsourcing in Kraków is a story being written by young people. This is the demographic that speaks foreign languages. Well educated and ambitious, the young people working in Kraków centres have proven their ability to master and improve business processes, encouraging companies to migrate higher value processes to their Kraków centres. The average age of people working in shared services, technology and outsourcing in Kraków is 28 years old 1, 2, 3, 6, 7 Source: ASPIRE Research; 4 Source: Tholons, Top Cities for Global Outsourcing Source: Global Services Tholons, Top Cities for Global Outsourcing 2010
10 The gender mix is 70% female and 30% male in shared services and outsourcing but the reverse in technology. 100% of those employed are graduates (87%) or students (13%) 70% of employees are graduates of Kraków universities 10% of employees are foreign nationals Source: ASPIRE Research Top 20 SSC/BPO companies by headcount In 2011, Kraków confirmed its status as a key BPO/SSC location by welcoming several new entrants, including Heineken and Capita with projected headcounts of approximately 500 people. Existing centres continued to increase headcount. Tab. 1. Top 20 SSC/BPO companies by headcount Company Operations FTE Capgemini BPO F&A, Call centre, CPO Shell F&A, ITO, HRO, CPO IBM BTO F&A State Street Fund accounting Philip Morris SCE ITO, HRO, F&A 900 HSBC F&A, HR, ITO, Customer service 800 Electrolux F&A, ITO, Technical Writing 650 Capita Pension Fund accounting 500* EDF F&A, HRO, CP, ITO, Engineering 500 Heineken F&A, HRO, ITO 500* Aon Hewitt HRO 450 Alexander Mann Solutions RPO 450 International Paper Customer service 400 UBS Financial services 350 Accounting Plaza F&A, HRO, CP, ITO 300 Airline Accounting Center (Lufthansa) F&A, Sales 300 ACS Xerox F&A, HRO, ITO, Call centre 250 Amway European Business Centre F&A, IT, Marketing, HR 250 BNP Paribas F&A 200 CCA - Contact Center AZSoft Call centre 200 Source: ASPIRE Research US; 26% Other ; 9% Poland; 5% Other EU ; 60% Fig. 1. Centres by country/region of origin.** Source: ASPIRE Research * New investments. Projected size. ** By location of global headquarters.
12 Salaries Various factors determine salary levels in SSC/BPO sector companies. Key factors are: complexity of activities conducted by a centre, experience of the employee and knowledge of foreign languages. Rare languages can considerably increase salary. We have analysed remuneration in IT and F&A centres. Average monthly salary for IT is about gross PLN. In financial centres the salaries are lower, averaging about PLN gross. Below, we present the remuneration for most popular roles in F&A service centres in Kraków. Salary values are accurate for July Figures given represent monthly total gross remuneration. Tab. 2. Salaries Work position Financial Analysis and Planning roles Salary range in PLN (monthly total cash) MIN MAX Finance Analyst Controlling roles Controlling Specialist Accounting roles Process Manager Accounting Team Leader Senior Accountant Accountant Junior Accountant Source: Salary Survey Advisory Group TEST Human Resources 2011 Trends & Forecasts Nicklas Blomqvist, Director, Finance Service Center, Philip Morris Service Center Europe Without any doubts the financial crisis has impacted the further growth of the SSC/outsourcing industry. At the same time we can observe that for many companies cost saving is no longer the only key decisive factor in running the SSC/BPO strategy. Many international corporations recognize that it is reachable for SSCs/BPOs to go beyond transactional work and move up in the value chain to achieve both quality and control improvements. Focus within productivity and efficiency remains and is concentrating towards technical and system improvements. Piotr Dziwok, General Manager, Shell Business Service Centre, Kraków It s been a very good year from the industry perspective. We ve seen a continuing development of SSC / outsourcing and offshoring centers across the globe, including Central & Eastern Europe. Apart from seeing a rise in the number of people they employ, we re witnessing a growing maturity level of offshore organizations resulting in higher value of services for onshore businesses. This means an improved quality of offered services as they become more complex, providing more sophisticated services and leading process improvements based. With its strategic advice capacity and knowledge of the Polish market, ASPIRE certainly is playing a key role in the industry in Poland. According to the 2012 forecasts, all signs are pointing to another good year for the industry and its associates. This trend will continue to build business of associated companies which will grow and continue to improve excellence together with the industry I also see ensuing improvement here, particularly in areas of quality and professionalism. Kraków s, with its geographical location, effective infrastructure will continue to be recognized as one of the key locations in Poland. Further, 2011 newcomers will consolidate their position in the area. I hope that 2012 will be a year of good cooperation with Universities in Kraków and Małopolska to ensure that the industry players ambitions are supported by new talented people joining the industry.
14 R&D & IT Key facts Engineering & Computer Science students are currently studying in Kraków universities, producing approximately graduates per annum. 1 Top 20 R&D/IT companies by headcount Tab. 3. Top 20 R&D/IT companies by headcount Company Operations FTE Comarch IT development, IT Integrator Sabre Holding IT development Motorola GSC IT development 900 The industry is served by the major technical universities - AGH University of Science & Technology and Kraków University of Technology. There are 8 universities in Kraków offering IT degrees. 2 Kraków has a plentiful group of highly skilled personnel in all modern sectors of the economy. 3 80% employees in the sector are male. The city enjoys a very active local IT-scene with several regular selforganised meeting dedicated to particular technologies (e.g. Ruby-on-Rails) and an annual TEDx conference. Capgemini ITO ITO 800 Cisco ITO 500* Delphi Technical Centre Automotive engineering 500 Nokia Siemens Hardware and Software Development (LTE) 350 HCL ITO 320 IBM SWG Lab Research and Development, Software development 300 Lurgi Engineering 300 Antenna IT development 200 Interia Portal 200 ABB Engineering 150 Lumesse IT applications 130 Akamai IT Tech Support, IT development, 100* Apriso IT development, IT Integrator 100 Dream Lab (Onet) IT 100 Google Research and Development 100 FQS (Fujitsu) IT development 50 Source: ASPIRE Research 1 AG Test Human Resources; 2 Kraków: Europe s Silicon Valley, Global Services Media 3 ASPIRE Research US; 44% Other ; 1% Other EU ; 11% Poland; 44% Source: ASPIRE Fig. 2. Centres by country/region of origin. * New investments. Projected size.
17 15 Salaries In comparison to Western Europe and the UK, Kraków has a high number of students studying Computer Science. There is also an increasing level of industryuniversity cooperation. Together, this ensures a steady supply of technology graduates on the market, which is reflected in a relatively low salary inflation. A growing number of small and start-up technology companies in Kraków support skills development in the sector, but also adds to competition fo talent. This is reflected in higher salaries in the IT sector than in SSC/BPO. Trends & Forecasts Ramoń Tancino, Director, Stategy & Business Development, CEE, Cisco Systems The evolution of the Kraków high tech scene was one of steady growth over the last 5 years, but the last year has seen a veritable explosion of activity, especially with regards activity with Silicon Valley in California. Kraków had its first start-up firm, TopicMarks acquired by a Silicon Valley social networking firm Tagger just last year, which is a tremendous step in acknowledging not only world-class talent but also ideas coming from Małopolska. Tab. 4. Salaries Work position General roles Salary range in PLN (monthly total cash) MIN MAX IT Director IT Manager Administrative roles Network Administrator Servers systems administrator (Windows) Infrastructure Specialist Software Developing IT Project Manager Software Developer/Programmer.net Software Developer/Programmer C/ C Software Developer/Programmer Java Software Designer Quality & Performance Tester Implementation Implementation Specialist In keeping with that trend, numerous multinationals companies, including Cisco and Akamai have announced new Centres in Kraków and Oracle just landed in Kraków via its acquisition of Taleo. The high tech media is following this emerging story diligently, as TechCrunch featured Kraków s emergence in a recent video and Tej Panesar penned a fascinating essay on the overall Kraków tech scene. According to information gathered from the Kraków: Europe s Silicon Valley website, Kraków has recently broken the ceiling of 300 IT firms. This growth is only likely to accelerate given the proliferation of many industry events was a banner year for the tech scene in Kraków and Małopolska and the foundations have been laid for an exciting future. Support roles IT Support Manager IT Support Team Leader IT Support Specialist Source: Salary Survey Advisory Group TEST Human Resources 2011
18 Market Characteristics Office market Kraków is the biggest regional office space market in Poland. It has seen a tremendous growth in the last decade, increasing five fold between 2000 and 2010 (from m 2 in 2000 to almost m 2 in 2010). Kraków has the largest proportion of office space taken up by shared services and outsourcing centres of any city in Central and Eastern Europe. It also had one of the largest planned capacities compared to the existing stock. At the end of the 2011 the vacancy rate stood at around 8.0% At the end of 2011, asking rents varied from EUR 12/m 2 /per month to EUR 14.50/m 2 /per month. The Kraków office market is forecasted to remain stable during the first half of Rents will remain stable at a level similar to H This is due to a pipeline of office development projects prompted by the dynamic growth of the shared services and outsourcing industry. Source: Fisheye Properties Establishment Tab. 5. Office Rent comparison in main Polish cities City Min (EUR / m 2 ) Max (EUR / m 2 ) Warszawa: centre Poznań Wrocław Warszawa: suburb TriCity Kraków Katowice Łódź Source: Colliers International/ASPIRE Kraków Office Market Review, H2 201
19 17 Fig. 3. Kraków office districts Source: Fisheye Properties Establishment Fig. 4. Main residential areas Source: Fisheye Properties Establishment
20 Tab. 6. Selected office buildings in the pipeline Building Enterprise Park phase I Developer Planned date of completion Avestus Q Quattro phase III BUMA Q Bonarka 4 Business phase I Green Office Building C TriGranit Q BUMA Q Fronton Fronton Q Mix Biura - Jasnogórska AVIA Orange Office Park phase I Mix Biura Q GD&K Group /EUROPOLIS East West Office Development Communications Under construction/ planned Under construction Under construction Under construction Under construction Under construction Under construction Total area of the building m m m m m m 2 Q Planned m 2 Q Planned m 2 Source: Fisheye Properties Establishment Communications are one of Małopolska s key attributes, supporting the high level of international business travel in the shared services, outsourcing and technology sector. Kraków-Balice International Airport is the second largest international airport in Poland with over 60 direct European flights daily. The city is wellconnected to Warszawa through an Intercity rail connection and the A4 motorway connects Kraków to Western Europe. Kraków is a compact city with well-developed municipal tram system operating on a spoke model. Most areas of the city are within a minute tram or bus ride from the town centre. Over 60 direct European flights (including daily flights to Frankfurt, Munich and Dusseldorf hubs). Convenient location at the crossroad of important transportation roads, located on the A4 motorway going East-West across Poland and provides direct link to Berlin (6h drive). Intercity rail connection to Warszawa hours. Car drive from the city centre to the airport takes up about half an hour; dedicated shuttle train takes 15 minutes. 7th place in Forbes ranking of Top 10 City Commutes 2010.
21 19 Fig. 5. Destinations from Kraków Airport.
22 Cooperation with universities Cooperation between Kraków universities and the shared services, technology and outsourcing sectors is perceived as a crucial focus area to sustain current success. Examples: US company Delphi, which operates a technical service centre in Kraków has signed formal cooperation agreements with AGH Univeristy of Science and Technology and Kraków Univeristy of Technology. Cooperation with AGH assumes working in partnership on both research and educational projects that use technological assets provided by Delphi and research capabilities of the university. Main points of cooperation with CUT are R&D projects, internships for students, practical support in writing Masters Theses and sharing access to laboratories. Cross-university efforts are stimulated by business organisations and assocations that can acts as a bridge between larger group of companies and the wider network of Kraków Universities. Examples of such initiatives include the ASPIRE Language Surveys that identifies the language needs of the industry. Results of the Languages Survey are presented to the universities at a Languages Forum hosted by the Rector of the Jagiellonian University and the Małopolska Voivode. Sources: Materials of AGH Univeristy of Science and Technology, Kraków Univeristy of Technology, Kraków Univeristy of Economics and Jagiellonian University.t Kraków University of Economics supports several corporate academies - training programmes run jointly with partner corporations. Academies typically consist of lectures, workshops, presentations and practical case studies. Going through a formal recruitment process is required from students. Examples of partner organisations include Shell, Google, PwC and the American Chamber of Commerce. There are examples of very close cooperation by IT centres in university educational programmes for example, experts from Motorola are directly involved in running courses at the Faculty of Mathematics and Computer Science of the Jagiellonian University and experts from the Comarch Innovation Lab act as tutors and promotors of formal University dissertations.
24 Quality of life Kraków s unique atmosphere comes from the blend of beauty of historical architecture, lively art and culture programmes and the abundance of restaurants and cafes. More than 25% of the Polish national artworks are currently located in Kraków. Eight of the thirteen Polish sites placed by UNESCO on the List of World Heritage are located in Małopolska. International education is provided in Kraków by the European College (International Primary School, the European Private Secondary School offering IB Programme and the European Private Middle School). Additionally, two international schools, the International School of Kraków and the British International School of Kraków cater for the children of expatriates. Many public secondary schools offer two-language programmes. The Western Carpathian Mountains lie in the southern part of Małopolska. National parks, landscape parks and preserved areas cover almost 60% of the region. There are numerous spa resorts in the region and two closed salt mines in the near vicinity of Kraków (in Bochnia and Wieliczka). Annually, Kraków hosts over 40 art festivals and about music, theatre and dance performances. Kraków is home to many international cultural institutes among them the Cervantes Instititute, the Goethe Institute, the Austrian Institute, the Italian Cultural Institute, the British Council, the French Institute and the Manggha Centre of Japanese Art and Technology. The historic Kraków Old Town and Main Market Square are largely pedestrianised areas. The Market Square is the largest Medieval Square in Europe. Sources: Małopolska Organizacja Turystyczna RUCH TURYSTYCZNY W KRAKOWIE W 2011 ROKU RAPORT KOŃCOWY ; CHARAKTERYSTYKA ZASOBÓW LUDZKICH DLA POWIATU KRAKOWSKIEGO I MIASTA KRAKOWA, Advisory Group TEST for Regional Labour Office in Kraków; Statistical Bulletin of the city of Kraków, 4th quarter 2011; Statistical data provided by Central Statistical Office; Offical website of City of Kraków; Offical website of The Office of Marshal of Małopolska Region; Official webpage of Małopolska Provincial Office in Kraków.
26 Investment support Special Economic Zone The Kraków Special Economic Zone (SEZ) is located in Małopolskie and Podkarpackie administrative regions, where public aid from the title of investing within special economic zones is highest in Poland. In total the SEZ covers an area of 558 ha (extended in 2011 from 529 ha). It consists of 22 subzones situated in 20 municipalities, where investors are welcome to make use of green field areas as well as office space for rent. The SEZ is designed for all businesses from the traditional industry sector (excluding products that require licensing by the state). Permits to operate in the SEZ are also available for certain firms from the services sector (including ICT, R & D, natural sciences, engineering sciences, book-keeping and control/audit of books, accounting (with the exclusion of tax declarations), technical research and analysis, and telephone customer care centres). A permit to operate in the SEZ may be acquired by any firm, irrespective of size or country of origin. Small and medium-size enterprises (SMEs) receive a higher level of public aid. The SEZ is managed by Kraków Technology Park (KTP). To date, 101 permits to operate in the SEZ have been issued, including 10 permits in 2010 and 12 permits in Approximately new jobs have been created by companies operating in the SEZ and the total investment outlay is approaching PLN 1.7 billion. Grants & Incentives Since Poland joined the European Union, entrepreneurs have gained the possibility to obtain incentives for their investment projects in the area of production and services. Incentives are distributed in order to improve local economic conditions. Incentives are not automatic. Strict procedures before and after getting incentives are applied. To obtain incentives an investor needs to submit an application to the appropriate institution. Incentives come from the following sources: EU Funds: Structural and Cohesion Funds. National funding: central and regional. Main obligations when applying for incentives: No relocation of business activity from other EU member countries is allowed (no significant reduction of jobs in other EU countries where the company operates). To be eligible to obtain co-financing from EU Funds, the project can be started only after submitting an application to the appropriate institution (project s start = hiring employees, incurring capital expenditures). Source: Krakow Technology Park - Special Economic Zone
28 Each of the jobs created through the investment must be maintained within the region concerned for a period of 5 years after completion of the project. The company shall conduct business activity (maintain the project) and own purchased assets for at least 5 years after project completion. The investor needs to secure sources of financing and prove them before signing the agreement for co-financing (co-financing is paid as reimbursement of costs). Realization of the project according to the business plan presented to the authorities all changes in the project need to be notified to the authorities, and many of them require official approval of the authority. Strict rules on reporting and settlement of the project apply. Source: PwC Report State aid and incentives in Poland, March 2012 Maximum level of regional aid = aid intensity level eligible expenses Fig. 6. State Aid Intensity Levels by Region Source: PwC Report State aid and incentives in Poland, March 2012
29 27 How much an investor can potentially get for an investment project State aid intensity level determines the maximum level of aid that can be given to the project from various sources. This is at the level of 30-50% of eligible costs (regional aid rules apply). The level of support depends on the location chosen for the investment and for large enterprises may reach up to 50% of the investment value (+10% for medium-sized enterprises, +20% for small enterprises). Tab. 7. How much an investor can potentially get for a NEW investment project Co-financing of new tangible / intangible assets purchase or Co-financing of new job creation. Calculation of state aid: aid calculated on the basis of investment costs (capex). aid calculated on the basis of two-year wage costs arising from job creation as a result of an investment project % of eligible costs (regional aid rules apply). Two ways to determine the level of possible support: investment outlays or labour costs. The amount of state aid depends on your Project. Tab. 8. How much an investor can potentially get for an R&D project Co-financing for a new investment. Co-financing for setting up an R&D Centre % of eligible costs (regional aid rules apply) % of eligible costs (regional aid rules apply). Tab. 9. Maximum level of regional aid = aid intensity level eligible expenses Co-financing for an R&D activity % of eligible costs.
30 Investment Process Several national and regional institutions support the investment process, including the Polish Foreign Investment and Information Agency (PAIiIZ) and Business in Małopolska, both of whom cooperate closely with the local shared services, technology and outsourcing industry association, ASPIRE. Potential investors and advising consultants can expect support in the area of location visits, including introduction to the region and vailable incentives from the Kraków Technology Park, real estate and labour market presentations and site visits to existing investors, the latter organised through ASPIRE. Other than in exceptional circumstances a company is required to establish a Polish legal entity. This process takes from two weeks but can take an extended period for companies requiring additional regulatory permits (e.g. financial servces companies). Negotiating and signing a lease for office space takes up to two months. Fit-out of office space normally takes one to two months. Companies should allow a minimum three months for recruitment as this is the normal notice period. Companies applying for incentives need to be aware that economic activity cannot be commenced until an incentives application has been submitted.
32 Investment Process Support The Marshal Office of the Małopolska Region Business in Małopolska Center Kraków and Małopolska The Voivode Office of the Małopolska Region The City of Kraków Regional Labour Office in Kraków Małopolska Regional Development Agency Krakow Technology Park Special Economic Zone Aspire - Association of IT & Business Process Services Companies in Poland Regional institutions in Kraków The Kraków Chamber of Commerce and Industry British-Polish Chamber of Commerce American Chamber of Commerce NordicHouse Polish Information and Foreign Investment Agency Polish Agency for Enterprise Development National Ministries Polish Chamber of Commerce Central Statistical Office General Directorate for National Roads and Motorways Ministry of Regional Development Ministry of the Economy