Onshore, Nearshore, Offshore: Unsure? A 2012 Polish Perspective

0 Onshore, Nearshore, Offshore: Unsure? A 2012 Polish Perspective

Onshore, Nearshore, Offshore: Unsure? October 2012 2 The Infrastructure Map of Direct international flights from the main Polish airports Airports Warsaw (2 airports) Kraków Gdańsk Wrocław Katowice Poznań Łódź Rzeszów Bydgoszcz Szczecin Lublin No. of direct connections: within Europe (no. of cities): outside Europe (no. of cities): 71 50 40 31 28 23 11 8 6 5 3 Germany (6) Cyprus (1) UK (9) Malta (1) UK (9) UK (7) UK (6) UK (5) UK (5) UK (5) UK (3) UK (3) Ireland (1) UK (6) Czech Rep.(1) Italy (7) Russia (1) Germany (7) Italy (5) Germany (5) Germany (4) Germany (2) Germany (1) Germany (1) Ireland (1) Norway (1) Italy (5) Denmark (1) Germany (6) Sweden (1) Norway (6) Germany (4) Italy (4) Italy (4) Denmark (1) Ireland (1) Ireland (1) Norway (1) UK (1) Ukraine (4) Estonia (1) Spain (5) Switzerland (1) Sweden (3) Ireland (3) Ireland (2) Spain (3) Ireland (1) Spain (1) Spain (1) France (3) Finland (1) Norway (3) Ukraine (1) Denmark (2) Spain (3) Norway (2) Ireland (2) Italy (1) Norway (3) Greece (1) Denmark (2) Ireland (2) Belgium (1) Spain (2) Bulgaria (1) Norway (1) Russia (3) Hungary (1) Ireland (2) Italy (2) Denmark (1) Sweden (2) Denmark (1) Sweden (3) Iceland (1) Netherlands (2) Netherlands (2) France (1) Bulgaria (1) Norway (1) Croatia (2) Latvia (1) Austria (1) Austria (1) Greece (1) Denmark (1) Slovakia (1) Bulgaria (2) Lithuania (1) Belgium (1) Croatia (1) Malta (1) France (1) Sweden (1) Ireland (2) Netherlands (1) Croatia (1) Finland (1) Netherlands (1) Netherlands (1) Spain (2) Portugal (1) Cyprus (1) France (1) Norway (1) Ukraine (1) Switzerland (2) Romania (1) Finland (1) Greece (1) Sweden (1) Armenia (1) Serbia (1) France (1) Slovakia (1) Ukraine (1) Austria (1) Slovakia (1) Greece (1) Spain (1) Belarus (1) Turkey (1) Hungary (1) Belgium (1) Lithuania (1) USA (2) Georgia (1) Canada (1) Israel (1) China (1) Lebanon (1) Egypt (1) Source: information based on flight schedules of the Polish airports (excluding charter and cargo flights) September 2012

Onshore, Nearshore, Offshore: Unsure? October 2012 3 : the leading outsourcing destination in Europe is undisputedly the leading outsourcing destination in Europe. It is recognised by the Everest Group as one of the world s five most mature outsourcing locations and by the Hackett Group as one of the world s most favourable places for outsourcing business. According to ABSL 1, there are 370 BPO/ITO, SSC and R&D centres with foreign capital active in employing more than 90,000 people. There is also a strong presence of local centres providing services to Polish corporates. Annual employment in this sector is growing at a steady rate of about 20% (between 2008 and 2011) and the share of Polish employment in relation to the entire CEE region is increasing, reaching 38% at the end of 2011. Executive Summary, the largest outsourcing destination in Europe and one of the world s most mature and favourable outsourcing destinations. The high level of newcomers and expansions and the introduction of more advanced processes, are among the factors confirming the sustainable character of BPO/ITO/SSC/R&D investments in. The Polish labour market is well equipped to meet the sector s requirements, with a large number of highly educated, skilled workers who have a wide knowledge of foreign languages. Salaries in are still approximately 50% lower than those in Western EU countries but are also competitive among the Eastern EU states. Additionally, social security contributions are among the lowest compared to CEE countries, which is a significant budgetary advantage when calculating total employment costs. State aid for BPO/SSC/R&D companies is available in the form of CIT exemptions and cash grants. The maximum level of support is between 30% and 50% of either the total investment costs or employment costs for two years. Modern, flexible and high spec office space is available from EUR 11-12/m²/month. There are experienced developers who understand the sector tenants and deliver turn-key solutions. The geographical location of in the same time zone as many other EU countries, and the fact as an EU member has adopted EU norms, is a significant advantage which attracts the BPO/SSC/R&D centres of European corporations. is well connected to many European cities, the USA and Asia by its 12 international airports. The road infrastructure is rapidly expanding, which increases the accessibility both between Polish cities and with s neighbouring countries., a sustainable destination A change in the shoring decision-making framework which has been seen over the last four years is a shift in emphasis from a focus on straight cost arbitrage to a more sophisticated analysis of the operational costs and benefits of location decisions for business functions. A longer term focus on productivity, operational efficiency and the future scalability of shoring locations is now driving decisionmaking, rather than straight cost-savings in the short term. The growing demand to future-proof the location decision to allow higher value functions is a trend which we notice in. The profile of the sector is changing, from simple transactional processes to more advanced processes which require detailed sector knowledge and expertise. 83% of companies surveyed by ABSL in 2011 had introduced more advanced, knowledge-based services (KPO) as additional processes. The wide variety of language skills available in is in that respect also a key asset. Increasing number of cities Service centres with foreign capital are present in almost 50 cities in, with more cities joining the list every year. More than a dozen Polish cities each employ more than 1,000 persons in this sector. No other country in Central and Eastern Europe is able to offer so many potential locations to service-oriented companies. Several new office locations have appeared on the map of the business services sector in. These locations, which will be described further in the report, are sought after, and not only by those already established outsourcing companies in which wish to expand their activities or are looking to diversify. However, there are also newcomers which opt to enter the market in a new location rather than an established one. Newcomers Newcomers largely follow the same trends as companies which are already established in and are expanding, i.e. offering an increasingly advanced and diversified scope of operations from one centre. We are also seeing more sophisticated business processes of a growing complexity. Increasing numbers of relatively smaller (fewer than 100 employees) knowledge-based centres are entering the market. More newcomers are coming from Germany and the Nordic countries, attracted by s proven outsourcing destination status. 1 ABSL: Association of Business Service Leaders

Onshore, Nearshore, Offshore: Unsure? October 2012 4 Economic Overview, a country of 38.5 million people, is the sixth largest economy in Europe and enjoys solid economic fundamentals. The situation has been steadily improving in for more than two decades, with the rate of improvement accelerated by EU accession in 2004. has coped with the effects of the global crisis much better than other EU countries. Even while other European economies stagnated or went into recession, growth in has continued: 4.3% 2011 and 2.7% in 2012 (est.). The country registered FDI of USD 15.1 billion 2 in 2011, up 71% on 2010. According to the European Attractivity survey by Ernst & Young, will be the second most attractive investment destination in Europe after Germany in the next three years. The strengths of are its large domestic market, well-qualified and productive workforce, stable macroeconomic situation, relatively low level of public debt compared to Western European countries, transparent tax and legal systems, and favourable conditions, both for services and manufacturing and investments. - Facts and Figures Population (a): 38,511,824 (6) Territory km² (a): 312,685 (6) GDP (c) 2.7% (1) GDP Volume (b): 320,961 (9) GDP Per Capita (b): 8,402 (65% of EU ave) Consumer price Index (c): 3.7% (2) Unemployment Rate (c) : 9.8% (12) Exchange Rate EUR/PLN (d): 4.19 Exchange Rate USD/PLN (d): 3.41 Source: (a) GUS National Census 2011, (b) Eurostat 2011, (c) Eurostat 2012e, (d) National bank July 2012, ( ) ranking EU-27 The infrastructure connectivity of improved significantly over the last few years. The rapidly expanding road network has improved accessibility both between Polish cities and s neighbouring countries. has 12 international airports offering direct connections to almost 100 cities in Europe and eight cities outside Europe including, amongst others, New York, Chicago, Toronto and, most recently, Beijing. Business Environment Companies which are considering launching operations in may expect support and assistance from institutions such as the Polish Information and Foreign Investment Agency (PAIiIZ), local governmental agencies focusing on particular parts of the country, and a number of international advisory companies. Moreover, as is an established BPO/SSC location, the Association of Business Service Leaders in was founded in 2009 to support the dynamic growth of the business services sector in the country. Setting-up a business In order to set up a new business in it is necessary to register the new entity in the National Court Register. The registration process usually takes three to six weeks; however corporate operations may be started immediately after the execution of the articles of association before a notary. Taxation in The Personal Income Tax, Corporate Income Tax and Value Added Tax Acts were all introduced in the early 1990s. The standard Corporate Income Tax (CIT) is set at 19%. An annual tax return must be filed and any tax due paid by the end of the third month of the following tax year. Monthly or quarterly advance payments are required in most cases; however, there is no monthly tax return filing obligation. In certain circumstances, a company may benefit from a simplified advance payment procedure. The standard withholding tax rate is 19% on dividends and 20% on interest and royalties. The rate may be reduced or a transaction may even be tax exempted, inter alia under a double tax treaty upon the presentation of a certificate of tax residence. There are four different Value Added Tax (VAT) rates: the standard rate of 23% and reduced rates of 8%, 5% and of 0%. The standard rate applies to all supplying of goods or services, unless a specific provision allows a reduced rate or exemption. Zero-rated supplies include exports of goods outside the European Union and intra-community supplying of goods. There are also selected supplies that are VAT-exempt (no right to deduct input VAT), e.g. supplying of financial, educational or healthcare services. 2 Source :UNCTAD July 2011

Onshore, Nearshore, Offshore: Unsure? October 2012 5 Incentives available for BPO and SSC Incentives remain critical to the business case for location selection decisions. Investors in the offshoring / outsourcing industry can benefit in from different types of state aid including inter alia: corporate income tax (CIT) exemptions in Special Economic Zones (SEZ); and government cash grants from the Multi-Annual Support Programme (MASP). The maximum levels of support differ from region to region (as illustrated in the following regional aid intensity map 3 ) and is expressed as a percentage of the higher amount stemming from eligible investment costs or the two-year employment costs of newly-created jobs. Maximum support level (of either investment s costs or twoyear employment costs) SEZ permits specify the conditions the permit holders must meet, in particular the amount of eligible expenses to be incurred, the number of new jobs to be created as a result of the investment, deadlines for fulfilling all the obligations mentioned, as well as a list of the activities in relation to which the CIT exemption is available. In order to receive an SEZ permit, an investor may either enter an existing SEZ (i.e. plan their investment on land already covered by SEZ status) or apply for a SEZ extension (i.e. request new land gains SEZ status) and apply for the SEZ permit afterwards. The SEZ permits are valid until the end of 2020: according to the currently binding regulations that is the date when the SEZs will cease to exist. At present, however, there are legislative works underway to extend the existence of SEZs beyond this date, i.e. until at least 2026. MASP Warsaw Maximum support level: 50 % 40 % 30 % State aid within the Multi-Annual Support Programme is granted to and designated for large investments which are considered crucial to the Polish economy, including investments in the priority sectors, one of which is modern services (i.e. BPO/SSC, ITO, etc.). Support is granted in the form of a cash grant based on a bilateral agreement between the Minister of Economy and the investor and may be based on eligible investment costs or the two-year employment costs of newly created jobs. The maximum values can be taken through different public aid mixes that may be available in a given location. CIT exemption Special Economic Zones (SEZ) are selected parts of where companies can run their business on preferential terms and conditions, the main incentive being a Corporate Income Tax exemption. CIT exemptions are available to investors operating within SEZs, based on a permit to run business issued by the SEZ authorities. The value of forgiven tax can amount to the limit of the aid pool available for a given investment project. Support based on employment costs: Criteria: eligible investment costs of at least PLN 2 million (approximately EUR 476,000) and creating at least 250 new jobs. The value of the investment projects should be at least twice as much as the value of support. Grants: range from PLN 3,200 to PLN 15,600 (approximately EUR 762 to 3,714) per each job, depending on specific set of criteria. Support based on eligible investment costs : Criteria: eligible investment costs of at least PLN 160 million (approximately EUR 38 million) and creating at least 50 new jobs. Grants: amounts up to 7.5% depending on specific set of criteria (possible increase by additional 3pp depending on the innovativeness and location of the project). 3 The aid intensity levels are increased by 20% in the case of small enterprises and by 10% in the case of medium-sized enterprises.

Onshore, Nearshore, Offshore: Unsure? October 2012 6 Labour Market has significant investment potential for SSC/BPO organisations, taking into consideration the large number of highly educated, skilled workers with knowledge of foreign languages. Especially when considering Knowledge Process Outsourcing (KPO) processes, the number of available experts cannot be underestimated. Moreover, costs of employment are crucial, being one of the main investment costs. Currently in there are nine mature SSC/BPO markets which attract talent from all over the world. The quality of life in these cities is constantly improving. What particularly distinguishes the Polish talent pool is its strong work ethic and loyalty to the employer. In this growing economy, traditionally employees often used to work for one company for generations. Taking into consideration cultural aspects, the attrition rate is significantly lower, than those of other popular BPO/SSC markets. Standard employment turnover within centres does not exceed 15%. Some organisations, particularly Shared Service Centres, with more advanced processes have attrition rates around 3-5%. It is worth mentioning that in times of economic slowdown and market uncertainty, the turnover of employees traditionally decreases. Salaries in Business Services Sector (*) Gross monthly salaries in EUR Min Max F&A, CS Processes (AP/AR CC) Junior Associate 550 800 Associate 700 950 Team Leader 1,100 2,000 F&A Processes GL Junior Accountant 750 950 Accountant 850 1,200 Team Leader 1,800 2,450 IT Processes Junior IT Specialist 750 1,050 IT Specialist 950 1,550 Team Leader 1,950 2,900 Managerial level Process Manager 2,200 3,600 SSC / BPO Director 6,000 10,000 Source: Hays Specialist Recruitment 2012; Exchange rate: 1 EUR = 4.12 PLN Note: (*) Salary levels are only applicable to EU popular language skills. It should be pointed out that within the knowledge-based services sector, average remuneration might vary depending on the talent pool available on the given market. Key factors influencing the salary level: necessary professional skills, as well as sector experience; knowledge of foreign languages: fluency as well as popularity of the particular language; availability of specific skills in the local market; attractiveness of the market and quality of life; employer brand and recognition. Salaries in are still approximately 50% lower than those in Western EU countries but, are also competitive among the Eastern EU states. Additionally, social security contributions are among the lowest in CEE countries (such as Slovakia, Hungary and the Czech Republic), which is a significant budgetary advantage when calculating total employment costs. Contribution rates required by law are shown in the table below. Social Security Contributions on Employers s side Social Security System Employer s Contribution for salary up to PLN 100 770 (approx.eur 26,886) exceeding PLN 100 770 (approx. EUR 26,886) Pension 9.76% - Annuity 6.5% - Sickness - - Injury 0.67% - 3.33% 0.67% - 3.33% Unemployment 2.45% 2.45% Employee Guaranteed Fund 0.10% 0.10% Health - - TOTAL 19.48% - 22.14%* 3.22 5.88% Source: Hays Specialist Recruitment 2012

Onshore, Nearshore, Offshore: Unsure? October 2012 7 Human Capital Potential One of the factors influencing such rapid growth of the business services sector in is the large number of finance, IT and engineering graduates entering the job market every year. In 2011 alone, almost half a million of young people graduated from Higher Education Institutions. 120,000 of them had a degree in Finance & Business field, 15,000 in computer science and 28,000 in engineering. In particular, the number of engineering students has been growing at a very fast pace in the last few years. Moreover, foreign language education in is at a very high level. Public and private institutions offer a wide range of foreign philologies (more than 35 languages) and courses. According to a survey conducted by the Polish Agency for Enterprise Development, more than 90.2% of Polish students speak English, 43.0% German, 13.7% Russian and 9.6% French. Business - University co-operation As service centres are intensively recruiting graduates, close B2U co-operation assures their further development and success in. There are many examples of good practices and co-operations between single organisations and selected Tertiary Education Institutions, as well as sector campaigns influencing educational changes in order to adapt the systems to the particular requirements of BPO/SSC. A recent example is the ABSL: Competency Model, a project prepared in co-operation with the organisation s HR strategic partner, Hays. Associated ABSL members identified the Key Transferable Skills crucial from the sector perspective and officially stated such. Currently, ABSL is running a campaign to help implement the recommendations in the Educational Programmes. Employment contracts The Labour Code distinguishes the following types of employment contracts: for a trial period such contract may precede any other contract but it cannot be for a period exceeding three months; for a definite term, fixed term contract made a specific period; for the duration of a specific job; for an indefinite term. Lionbridge so far has two locations within Central and Eastern Europe: Warsaw and Zilina (Slovakia). Especially Warsaw has gone through substantial growth over the last few years. has indeed turned out to be the right place to provide advanced business process outsourcing services related to products life cycle, software and games testing, global marketing operations, multimedia and many others. is striking mainly because of our staff s adaptability and quick learning. It s also worth stressing the work ethic, which is especially important if you provide services around zero errors level products, such as in life sciences or aviation industries. We will probably also be evaluating other locations in the future, but in the immediate future, Warsaw will remain the key pillar of our Global Delivery Center in Europe. Jacek Stryczyński Lionbridge Country Manager & Slovakia WNS Global Services, an NYSE-listed leading Global BPO & Professional Services Provider, has chosen the Tri-City area of as its first base in the country due to its investor friendly-environment, availability of educated multi-lingual talent pool and high standards of office and general infrastructure along with good connectivity via air with major European travel hubs. The cultural proximity to North-West Europe, especially Germany and the Scandinavian regions has also been among the key contributing factors. WNS has enjoyed excellent professional assistance through the due diligence and decision planning period from both the National and the Regional Foreign Investment Agencies, which have provided crucial support in assessing local capabilities, understanding the regulatory environment and administrative procedures. The spirit of partnership exhibited by the City Government of Gdynia establishes a good platform for creating high value employment opportunities and thus attracting and retaining educated talent in the city and the wider region. Akos Csernus Managing Director, Eastern Europe, WNS Number of students and population in different Polish cities Source: National Statistical Office 2011 Capital City Established Regional Office Markets New Office Locations Warsaw Katowice Agglomeration Kraków Tri-City Łódź Wrocław Poznań Szczecin Lublin Bydgoszcz/ Toruń Białystok Radom Kielce Olsztyn Rzeszów Opole Population 1,700,600 2,000,000 757,600 748,100 728,900 630,100 554,700 410,100 349,100 568,900 294,000 221,300 202,200 174,600 179,400 122,600 Number of students in city subregion 258,900 130,000 184,500 95,800 95,400 137,400 131,300 52,300 80,800 74,900 43,300 13,800 41,300 38,100 54,000 34,000

Onshore, Nearshore, Offshore: Unsure? October 2012 8 Real Estate offers approximately 6.1 million m 2 of modern office space and is considered to be an established BPO/SSC office location in the CEE region. It is estimated that the outsourcing sector will occupy approximately 1 million m 2 in the major cities in by the end of 2012 (including companies with foreign capital only). More than 40% of total occupied office stock in Kraków and Łódź; and 35% in Wrocław is taken by BPO/SSC companies. This shows that many companies already successfully operate in and the real estate market is well prepared to attract new companies and to provide convenient locations and extensions options. New office locations emerge In addition to the major office locations such as Warsaw, Kraków, Wrocław, the Tri-City, Poznań, Katowice, Łódź, Szczecin and Lublin, offers a wide choice of smaller office destinations all across the country (Bydgoszcz, Toruń, Białystok, Opole, Olsztyn and Kielce, to name just a few). This differentiates from other CEE countries, which offer a limited number of cities prepared to meet the needs of the BPO/SSC sector both in terms of labour and infrastructure. Experienced players on the market Both international and, increasingly, domestic developers in are now well aware of the specific space requirements of BPO/SSC occupiers. This is demonstrated by a pro-active approach and flexibility from developers who are open for a dialogue with tenants at the late business planning / early building construction phase. High quality office space Most new office buildings are developed to A-Class standards (multiple power supplies, energy efficient air conditioning and heating systems, minimum of two telecom operators, etc) and have flexible layouts and effective floor plans suitable for BPOs/SSCs. In line with the requirements of tenants, premises are usually delivered turn-key or a fit-out contribution can be negotiated. Real Estate Transparency According to the latest Global Jones Lang LaSalle Real Estate Transparency Index, is considered to be a transparent market and ranked 19th globally. This indicates that has transparency levels comparable to Western Europe and offers a business friendly environment. Office development adjusted to the needs of BPO/SSC occupiers Technical & Functional Possibility to increase office space density to even 6 m 2 / employee. More efficient air exchange system, as well as efficient airconditioning. Power supply secured by two independent switching stations. Availability and full functionality (e.g. in terms of full operational air-conditioning system) of the building 24 hours a day and 7 days a week. Source: Jones Lang LaSalle September 2012 Comprehensive market practice Dedicated place for power generators. Increased lifts capacity to serve higher than typical number of employees in the building. Flexibility in increasing number of toilets to fulfil the needs of companies employing mainly woman. Tilt windows. Separate lifts serving underground car park and upper office floors. Market practice differs between the three core groups of markets (Non-Central Warsaw, the established regional markets and the new office locations); however, the difference between Warsaw and established regional cities in has started to blur recently as the markets are maturing. Market practice in the new office locations is more difficult to define: the number of lease transactions in the BPO/SSC sector is limited; however, with those markets expanding, we expect market practice to mature and standardise. The key drivers behind opening an office in Opole were the availability of German speakers at competitive labor costs as well as proximity to existing centers. Our Opole office is treated as a satellite location for our outsourcing hub in Krakow and Katowice, and we plan to serve our German-speaking clients from there. We decided to expand our long-lasting BPO and ITO presence in Krakow and Katowice as part of our strategy was to build a strong regional hub, which could serve multiple clients and be a reference point for a world-class service quality. We had a critical mass and a portfolio of happy customers there, so it was easier to build on these assets. And both cities are good places to be, with their rich talent pool, good infrastructure, available space options and good air connections. If it comes to office rent in particular, we usually look for large space alternatives, for example in 2010 we signed a 10,000 m² deal in Krakow, and those options were available there as well. Marek Grodziński Vice President, BPO Centre Director, Capgemini

Onshore, Nearshore, Offshore: Unsure? October 2012 9 Market conditions in 2012 & 2013 Due to the number of office locations across, there is no common picture for all markets. Rents are stabilising Headline rents vary depending upon the size of the given office market and the availability of space. They range between EUR 11-13 / m 2 / month in Łódź to as much as EUR 13-15 / m² / month in the other established regional markets. Headline rents in new office locations are lower, ranging between EUR 8-11 / m 2 / month. In our opinion, headline rents in will remain stable in the short-term perspective. Large number of lease options for occupiers There is a wide choice of pipeline and immediately available office space in many cities all across the country. The number of both immediately available and pipeline leasing options of over 1,000 m² varies between the Polish cities with a variety of options in Non-Central Warsaw, Wrocław, Kraków, the Tri-City, Poznań, Katowice, Łódź, Szczecin and Lublin. However, in some cases, especially for larger office space requirements, the availability of office space of hand may be limited. offers such wide number of lease options due to high levels of construction activity. More than 1 million m 2 of modern office space is at the construction stage because developers believe in the strength of the rental markets in the country. The majority of new developments have been started on a speculative basis without securing pre-let agreements. Availability of office space (above 1,000 m 2, including both existing office blocks and those due for completion by the end of H1 2013) and rents in Source Jones Lang LaSalle Q2 2012 Market practice Non-Central Warsaw Established Regional Markets: Kraków, Wrocław, New Locations: Rzeszów, Kielce, Białystok, Opole, Poznań, Katowice, Tri-City, Łódź, Lublin, Szczecin Toruń, Olsztyn, Bydgoszcz, Radom Headline rents EUR 15-15,50 / m 2 / month Established EUR 11-16 Regional / m 2 / month Markets: Kraków, Wrocław, New EUR Locations: 8-11 / m 2 Rzeszów, / month settled Kielce, in PLN Białystok, Opole, Non-Central Warsaw Poznań, Toruń, Olsztyn, Bydgoszcz, Radom Service charges approx. EUR 4-5 / m 2 / month; typically settled in PLN Katowice, Tri-City, Łódź, approx. EUR 3.5-4 / m 2 Lublin, Szczecin / month; typically settled in PLN approx. EUR 2-3 / m 2 / month; settled in PLN Headline rents EUR 15-15,50/ m paid monthly in / month EUR 11-16/m advance with rents denominated in EUR but / month EUR 8-11/m 2 / month settled in PLN Rental basis paid monthly in advance with a balance between EUR-denominated rents and PLN-denominated rents Service charges approx. paid in EUR PLN; 4-5/ full mrent 2 / month; is typically typically payable settled for in common PLN areas approx. EUR 3.5-4/ m 2 / month; typically settled in PLN approx. EUR 2-3/ m 2 / month; settled in PLN typically short leases or signed for undefined period of time Lease length paid monthly in advance typically with rents five-year denominated leases, three-year in but Rental basis rare and usually paid not monthly available in advance for new buildings with a balance between EUR-denominated (in some cases rents lease and length PLN-denominated practice is similar rents to that in paid in PLN; full rent is typically payable for common areas established regional markets) Lease Security length of the lease typically 5-year bank leases, guarantee 3-year or rare cash and deposit usually equivalent not applicable of 3 months in new rent, buildings service charges, and car parking typically fees, short all increased leases or by signed VAT for undefined period of time Security of the lease Rental increase bank guarantee or cash deposit equivalent of 3 months rent, service charges, and car parking fees, all increased by VAT annually according to Consumer Price Index (CPI) European for EUR-denominated leases or GUS for PLN-denominated leases Rental increase annually according to Consumer Price Index (CPI) European for EUR-denominated leases or GUS for PLN-denominated leases Repairs internal, tenant; external/structural and common areas, landlord, although recovered through service charge Repairs internal (tenant); external/structural and common areas (landlord) although recovered through service charge Insurance landlord covers costs of building insurance (recovered through service charge), tenant covers insurance of own premises, contents and civil liability Insurance landlord covers costs of building insurance (recovered through service charge), tenant covers insurance of own premises, contents and civil liability Reinstatement Reinstatement not common practice not common practice Other incentives Other incentives rent-free period depending upon the size of the leased area and lease length, additional fit-out contribution rent-free period depending upon the size of the leased area and lease length, additional fit-out contribution limited incentives (rather fit-out than rent-free periods), no limited common incentives practice (rather on the fit-out markets than rent-free periods), no common practice on the markets Market practice

Onshore, Nearshore, Offshore: Unsure? October 2012 10 Selected BPO/ITO, SSC and R&D centres in (companies with foreign capital) Białystok Intrum Justitia Bielsko-Biała Avio Centrum Finansowo-Księgowe Żywiec Cooper Standard European Shared Services Fiat Services Bydgoszcz / Toruń Alcatel-Lucent Allegro Astaro Atos Itella Information JP Morgan Chase Teleplan International Katowice Agglomeration ArcelorMittal Capgemini CYCLAD DisplayLink Ericsson Future Processing Gallup General Motors Goyello Grupa Żywiec ING Services ista Kroll Ontrack Mentor Graphics Neubloc NorthgateArinso Orange Pregis PWC Proximetry Rockwell Automation Ruch Steria TAURON Tenneco Wipro Saint-Gobain Poznań arvato services Bridgestone Carlsberg Ciber Dalkia Services Duni Franklin Templeton GlaxoSmithKline Services Grace Grant Thornton HolidayCheck Ikea Itelligence Jerónimo Martins Kennametal Lorenz Snack-World MAN McKinsey Mentor Graphics Open Text Roche Samsung Sii Telcordia Unilever Wikia Olsztyn Transcom Citigroup Lublin Asseco Business Solutions Genpact Orange Opole Capgemini Future Processing Opta-Data PZU Centrum Operacji Kraków Affiliated Computer Services (Xerox) Airline Accounting Centre Akamai Alexander Mann Solutions Amer Sports Amway Antenna Software Aon Hewitt Genpact Apriso Asea Brown Boveri (ABB) BNP Paribas Brown Brothers Harriman (BBH) Capgemini Capita CBB Call Center Cisco CH2M Hill Clifford Thames Delphi Deltavista Deutsche Bank DreamLab Onet.pl ECOLAB EDF Polska Electrolux Element14 Elettric 80 Energy Micro EPAM Systems euroscript Polska Evolving Outsourcing FMC Technologies FQS Google Hays HCL Heineken Hitachi Data Systems HSBC IBM BTO IBM Software Lab iloop Mobile International Paper Kenexa lastminute.com Lumesse Luxoft Mota-Engil Central Europe (MESP Central Europe) Motorola Solutions - Centrum Oprogramowania Motorola Solutions Finance Operation Service Center Nokia Siemens Networks Parasoft Philip Morris International R.R. Donnelley Robobat Rolls-Royce Sabre Serco Shell Shared Service Centre Kraków Sii State Street Services UBS UPM Szczecin arvato services BLStream Coloplast GaveKal Analytics METRO SERVICES Sonion Stream Global Services Tieto UniCredit Rzeszów ACP Pharma Carlson Wagonlit ContactPoint Hamilton Sundstrand Pratt & Whitney PZU Centrum Operacji Radom Europe Calling Iron Mountain Szczecin Tri-City Acxiom ADVA Optical Networking Arla Foods Atos Bank BPH Bayer Compuware Fineos First Data Corporation Geoban Goyello Hempel IBM Intel Jeppesen Kainos Lufthansa Systems Metsä Group Ncomputing OIE Support Playsoft PPG PZU Centrum Operacji Sony Pictures Entertainment Synopsys Thomson Reuters Transcom TURAZ UTC Fire & Security (General Electric Security) Willis WNS Global Services Łódź Accenture Affiliated Computer Services (Xerox) AMG.net Asea Brown Boveri (ABB) Atos BMS Bankruptcy Management Solutions BSH Cardif Services CERI Citigroup CWS boco Dalkia Services DHL Express Dimar Fujitsu Services General Electric Power Controls HP Indesit Infosys mbank Mellon Mobica Nordea Bank Philips Polkomtel Polska Telefonia Cyfrowa PZU Centrum Operacji Rule Financial Sii SouthWestern BPS Takeda SCE Tate & Lyle TeleAtlas Teleca UniCredit Białogard Zielona Góra Wrocław Piła Poznań Opole Tri-City Konin Tczew Bydgoszcz Toruń Rawa Mazowiecka Łódź Katowice Agglomeration Bielsko-Biała Elbląg Częstochowa Warsaw 7N Accenture Acxiom ADP Polska Annik ARPI & Partners Arteria arvato services Atos Avon EMEA Finance Service Centre Baker Tilly Bosch Call Center CBRE Corporate Outsourcing Citigroup Coca Cola Colgate Palmolive Services Comarch ContactPoint Contract Administration CYCLAD Dynamic Generation Ericsson Esselte FPA Group General Electric Groupe Laser Gtech Guest-Tek IBM Software Lab Itella Information Jones Lang LaSalle Global Services Linea Directa Communications Lionbridge Mellon Mobica Océ Opera Software Oracle Orange OSG Records Management Outsource Center PANDORA PayrollCenter Procter & Gamble PZU Centrum Operacji RBS Global Hub Europe Roche Roedl Outsourcing Samsung SAS Institute Schneider Electric Sii Sitel SR Polska Symantec TAURON Tchibo Technicolor Telcordia Teleperformance Wipro Xerox Business Services WARSAW Grójec Kraków Olsztyn Mława Ciechanów Kielce Dębica Radzymin Radom Białystok Siedlce Góra Kalwaria Garwolin Sandomierz Rzeszów Krosno Lublin Wrocław American Communication Network (ACN) Atos Becton Dickinson BLStream Capgemini Cinterion Wireless Modules Credit Suisse CSS Corporation Diehl Controls Dolby EPAM Systems Ernst & Young Eto Magnetic Fagor Mastercook Geoban Google Hamilton Sundstrand HP (Global e-business Operations) IBM Global Services Delivery Centre IBS Polska Irevna KPIT Cummins Luxoft McKinsey Microsoft Minetronics MphasiS Nokia Siemens Networks Online Technology (OTP) Opera Software PNC Global Services QAD QNH Ruukki S3 (Silicon & Software Systems) Siemens Sii The Bank of New York Mellon Tieto Transcom UPS Volvo Wabco Whirlpool Wipro Białogard Valassis Ciechanów Częstochowa TRW Automotive Dębica Goodyear Elbląg Alstom Garwolin Avon Góra Kalwaria Call Center Grójec Faurecia Kielce Konin arvato services Krosno Mława LG Electronics Piła Philips PZU Centrum Operacji Radzymin Cederroth Rawa Mazowiecka Sandomierz Pilkington Siedlce Teleperformance Tczew Eaton Zielona Góra Advanced Digital Broadcast (ADB) Source: ABSL September 2012

Onshore, Nearshore, Offshore: Unsure? October 2012 11 Summary The 2012 Onshore, Nearshore, Offshore: Unsure? report provides the latest trends in the BPO/SSC/R&D sector in and presents the facts and figures needed to make an informed decision regarding a shoring location. We have therefore provided insights into the business environment, labour and real estate market, along with details of grants available in for the sector, an overview on headcount cost and information on the costs of real estate infrastructure. has become a sustainable outsourcing destination, showing continuing growth. According to the ABSL survey, the vast majority of service centres in expect increases in the number of employees in the next few years. A substantial part of that growth will occur in services based on knowledge and those delivering more added value. This will include advanced financial and analytical services. The basis for this is the view of investors that is a stable and secure place to do business and has a high quality labour force that is particularly strong in languages, which can satisfy the requirements of the sector. Other critical success factors with regard to attracting new BPO/SSC/R&D sector companies include the cultural and geographical proximity to Western Europe and the fact that, as an EU member has adopted EU norms. In addition, the country offers a competitive cost structure in terms of labour market, real estate and incentives. And, finally, the improving connectivity of and the expanding number of quality office locations are further elements for its sustainable growth. I am very proud that the new Bayer Shared Service Center will be located in Gdańsk. With more than 200 new jobs, Bayer will be an even more important employer in. Our goal is to make Bayer accounting more flexible, more efficient and to enhance international competitiveness. I am convinced that we will be successful. What makes me optimistic is the fact that the choice of Gdańsk, and more broadly the Tri-city, has been based on the availability of language skills, the quality of graduates and professionals as well as the modern office buildings in Pomerania. The support we ve received from regional and local institutions such as Invest in Pomerania, InvestGDA, the City of Gdansk and Pomeranian Voivodship Office gives me additional comfort for the future. Remigiusz Wojciechowski Head of Bayer Service Center Gdańsk In Toruń dozens of specialists offer finance and accounting services for international customers, support at the global service desk, in e-services and finance and accounting application management, and in F&A technical customer implementation. The results clearly support the investment decision: Toruń, which is one of the emerging office locations in, offers excellent investment opportunities that are comparable to locations already established in our segment. We have skilled professionals committed to delivering valuable services to our customers in an innovative business set-up. Furthermore, the rental cost of office space is very attractive and we see a need for and potential in additional real estate investments in the city. By choosing Toruń, where no other outsourcing companies are currently present, we offer to young, highly educated people the opportunity to grow and develop in an international environment in their own region. Itella's Toruń Centre became operational in 2011 and currently employs more than 130 specialists. Miikka Savolainen Managing Director of Itella Information For Business Service Centres operational excellence, reliability and delivery as promised are the key priorities. Shell Business Service Centres have been expanding in the Shell Group in terms of numbers, size, scope and complexity of work as well as importance and are set to grow further. Kraków Centre has been operating since 2006 and is one of the six global Shell Business Centres. Our people in Kraków are our best asset for moving the Centre from a transactional model to a Strategic Business Enablement within Shell s network. It has played a key role in the Shell Finance Functional Plan by providing standardised, high quality and efficient services, advice and expertise to more than 100 Shell entities based in 42 countries. We employ highly educated staff (95% have a university degree) with 17 different languages spoken. The Shell Business Service Centre in Kraków supports mainly Shell businesses in Europe, Latin America and in the Middle East with Finance Operations, HR Services, Contracting & Procurement, Customer Services, and, since 2012, Supply & Distribution. The centre now employs more than 1,800 people. Piotr Dziwok Country Chairman, Shell Companies in

Jones Lang LaSalle John Duckworth Managing Director CEE Jones Lang LaSalle +48 22 318 0000 John.Duckworth@eu.jll.com www.joneslanglasalle.pl Patricia Lannoije Associate Director Head of Research Jones Lang LaSalle +48 22 318 0000 Patricia.Lannoije@eu.jll.com www.joneslanglasalle.pl Julita Spychalska National Director Tenant Representation Jones Lang LaSalle +48 22 318 0000 Julita.Spychalska@eu.jll.com www.joneslanglasalle.pl Jakub Sylwestrowicz Associate Director Tenant Representation Jones Lang LaSalle +48 22 318 0000 Jakub.Sylwestrowicz@eu.jll.com www.joneslanglasalle.pl Content providers Paweł Panczyj Managing Director Association of Business Service Leaders in +48 508 094 362 absl@absl.pl www.absl.pl Polish Information and Foreign Investment Agency +48 22 334 98 75 post@paiz.gov.pl invest@paiz.gov.pl www.paiz.gov.pl Paweł Tynel Executive Director Tax / Grants and Incentives Advisory Services Ernst & Young +48 22 557 7000 Pawel.Tynel@pl.ey.com www.ey.pl Małgorzata Jasińska CEE Corporate Accounts Director Hays Specialist Recruitment +48 502 584 625 jasinska@hays.pl www.hays.pl Jones Lang LaSalle (NYSE: JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 195 million square meter worldwide. LaSalle Investment Management, the company s investment management business, is one of the world s largest and most diverse in real estate with $ 47 billion of assets under management. For further information, please visit www.joneslanglasalle.com. Association of Business Service Leaders (ABSL) was established in May 2009 to represent the interests of the expanding business process outsourcing sector in. The mission of ABSL is to enable the sector to anchor and expand in through industry collaboration and by engaging authorities and interest groups in shaping key operational and development aspects. Polish Information and Foreign Investment Agency (PAIiIZ), the governmental agency responsible for promotion of as a business partner abroad, assists foreign companies considering direct investment in, firms trading with and Polish exporters. We guide investors through all the essential administrative and legal procedures at every stage of the investment process; we also support firms that are already active in. We provide quick access to complex information relating to legal and business matters regarding the business activity in as well as assistance in the preparation of optimal investment incentive packages within Multi-Annual Support Programme. The Agency helps in finding the appropriate partners and suppliers or new locations. On the website www.paiz.gov.pl an investor can find all the necessary information concerning key facts about, the Polish economy, legal regulations in and all detailed information which could be useful for any company wanting to set up a business in. Contact us to learn more about how your company can profit from the unique business potential of. Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information please visit www.ey.com/pl Hays Specialist Recruitment is the world s leading company in recruiting qualified, professional and skilled work. Today, with more than 40 years of recruitment experience, the Group operates out over 245 offices in 33 countries, employing around 7800 staff worldwide across 20 specialisms. We offer tailor-made recruitment services on permanent, contract and temporary basis along with Executive Search, Recruitment Process Outsourcing (RPO) and Employer Branding Solutions. Our role is a straight forward but very important one: we power the world of work by helping our clients find the best people they need to develop their businesses and helping our candidates find the best new role for themselves. Our customers benefit from the specialist sector knowledge, extensive office network, industry contacts and consultants experienced in recruiting staff for various SSC/BPO centres across the CEE region. To find out more about Hays please visit www.hays.com. October 2012 www.joneslanglasalle.pl COPYRIGHT JONES LANG LASALLE IP, INC. 2012. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. 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