BUSINESS DEVELOPMENT
49
T
he economics of establishing exposed several negatives, the greatest “Recognise that there is a commitment of
an offshore development being that the cost of labour was not as time and effort required to make the
centre (ODC) often take attractive as initially believed. Labour project successful. The overhead of
precedent over other factors. But costs have been on the increase due to the communication is estimated to increase
economics should not solely drive the large number of foreign companies with the total project hours by 10 per cent”.
decision. They are important certainly, but IT ODCs in India as well as internal Central and Eastern Europe offer
they’re only part of the decision making growth of the IT industry. cultural compatibility to western
formula for success. Cultural CIMAC turned its ODC site search to countries. Off-shoring software operations
compatibility will enable teams to Eastern Europe where labour costs are to culturally familiar programming teams
collaborate and communicate effectively. more competitive. Dresden, Germany, was avoids a lot of problems with the complex
The strength of the talent pool, especially considered because of incentives offered communication demands of software
in maths and science, can help ensure by the government. However, labour costs projects. This is particularly true since
product excellence. A multi-lingual are ‘high’ and labour laws can be Bulgarian salaries are comparable to
workforce with a low employee turnover challenging for employers. Ukraine was those of other offshore location targets
rate will smooth the transition period as also considered primarily because of comtemplated, like India.
the new centre emerges and help retain internal CIMAC knowledge of the use of
established product quality as new resources from this area in regards to Talent pool
projects get under way. And a friendly semiconductor related MES testing.
business atmosphere, with an open However, language and cultural USA Bulgaria India
regulatory framework and strong IP differences were though to be too
protection, can help bring the project to challenging to ensure the required result. Professionals
completion quickly enough to take Finally, CIMAC considered Sophia, per 10,000
advantage of competitive situations and Bulgaria for an ODC site, again based on inhabitants: 8.2 5.8 0.9
keep competitive advantages intact. All internal CIMAC knowledge of the area.
these factors and others figured into the This location was selected for the ODC IT professional
mix as CIMAC searched for and settled not so much because of its ranking with services cost: 1.07 0.22 0.25
on Bulgaria for it’s new computer other potential locations, but because of
integrated manufacturing software numerous ‘stand alone’ reasons that make Since the end of the Cold War, countries
development centre. Bulgaria very attractive for an ODC. such as Bulgaria have been reaching out
The table shown below is a summary to Western markets and companies.
Locations considered for of the ODC locations considered and their Expansion of the EU into Bulgaria has
the CIMAC associated advantages and disadvantages. accelerated this trend across most
CIMAC considered a number of locations business sectors, but especially in
for the ODC based primarily on internal Cultural compatibility software development which is due in part
knowledge and perceptions of potential Cultural compatibility was an important to the talent pool.
locations. The initial locations considered factor in the selection of Bulgaria for the Between 2004 and 2009, the IT sector
were three regions (cities) in India. ODC. Culture differences and the will generate almost 7,900 new jobs and
CIMAC hired an IT consulting firm with additional communication those $42 million in new tax revenues. More
familiarity and previous experience with differences necessitate need to be factored than 42% of all IT employees in Bulgaria
Indian IT ODCs to evaluate these in to project schedules, especially for are engaged in creating, distributing, or
potential locations. This evaluation highly technical and complex projects. servicing software, for external customers
Location Employee Bureaucracy Cost of labour Labour laws Cultural Incentives
retention (ODC set up) compatibility
India
1
poor 8 to 10 months high attractive low No
East Europe
Germany excellent 6 to 8 months high unattractive high yes
2
Ukraine good 6 to 8 months moderate attractive moderate no
Bulgaria excellent
3
3 to 4 months low attractive high no
1-Chennai, Bangalore and Hyderabad, 2- Initial free rent, 3- Traditionally low personnel turnover rate (10-15% per annum)
November 2008
www.euroasiasemiconductor.com
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