Embracing the Transformation: THE OUTSOURCING INDUSTRY IN BULGARIA 016 This report was commissioned by the Bulgarian Outsourcing Association (BOA) and prepared by, a consultancy delivering company profiles, market reports and analysis for the emerging markets. The views and opinions expressed in this report are those of the author and do not necessarily represent the views of the Association, nor does the report anticipate decisions taken by the Association.
GLOBAL OUTSOURCING INDUSTRY TRENDS Moving from Traditional Outsourcing to Transformational Outsourcing with focus on value creation Tactical vs. Strategic Operational vs. Business Focus Focus on Value Capture vs. Focus on Creating Value Operational Focus vs. Manage Uncertainty
BULGARIAN OUTSOURCING INDUSTRY TRENDS OVERVIEW Stable growth forecasted for the outsourcing industry in Bulgaria The differentiation between ITO and BPO is gradually fading because of the growing complexity of the processes and overlapping of activities performed by the company. The sector is expected to contribute more and more to the national economy in the period 016-00 The outsourcing industry is becoming an increasingly important taxpayer.
OUTSOURCING COMPANIES Number of Companies in 015 Company Distribution by Number of Employees 100% ITO 153 BPO 11 HRO 76 Call centres 63 90% 80% 70% 60% 50% 8 31 30 36 41 5 5 60 55 6 75 66 85 74 97 40% FAO 14 Other BPO 58 30% 0% 9 19 199 177 15 The most perspective outsourcing subsectors are shared service centres and cloud services. 10% 0% 011 01 013 014 015 < 10 11-50 51-50 > 51
3,0 REVENUE BY SEGMENT,71,5,37,07,0 1,59 1,81 1,70 bln EUR 1,5 1,0 0,81 0,91 0,99 1,13 1,39 0,88 1,00 1,15 1,31 1,49 0,5 0,0 0,71 0,6 0,58 0,5 1,01 0,88 0,77 0,9 0,33 0,37 0,4 0,51 0,58 0,67 011 01 013 014 015 016 017 018 019 00 Total ITO Total BPO Total Outsourcing Total Outsourcing Forecast
INDUSTRY DEVELOPMENTS Outsourcing Industry Developments 3 000 70 000 500 60 000 mln EUR 000 1 500 1 000 500 0 4 149 1 388 618 011 01 013 014 015 016 017 018 019 00 50 000 40 000 30 000 0 000 10 000 0 Number of Employees 1.71% of all employees in Bulgaria have jobs in outsourcing companies Language proficiency and IT skills remain crucial and outsourcing companies may need to hire foreigners to cover the shortage on the local labour market. Employees Number of Employees Employment cost Wages and Salaries Wages Forecast Employment costs forecast Operating Revenue Forecast Operating Revenue Forecast in 000 EUR Operating Revenue in 000 EUR
OUTSOURCING SHARE 3,0 Operating Revenue,71 Share of GDP:,5.1% 3.41% 6.18%,0 bln EUR 1,5 1,39 011 015 00 1,0 1,13 0,81 0,5 0,0 011 01 013 014 015 016 017 018 019 00 Bulgarian outsourcing industry is expected to reach more than EUR.7 bln and contribute over 6.0% of the country's GDP by 00. Outsourcing - operating revenue Forecast
TAXES Taxes Paid by Outsourcing Industry Taxes Paid / Operating Revenue: 40 35 35, 1.16% 0.69% 0.4% 30 5 > > mln EUR 0 16,0 Outsourcing All Companies Top 100 15 10 5 8,6 13,9 Outsourcing companies paid 1.7% of all taxes in 015 0 011 01 013 014 015 016 017 018 019 00 Total Taxes Paid by Outsorcing Industry Forecast
SOCIAL SECURITY CONTRIBUTIONS 50 Social Security Contributions 17, Outsourcing industry share of total social security contributions in Bulgaria 00 00 015 150 mln EUR 100 8,9 8.74% 4.4% 50 63,8 011 38,4 0 011 01 013 014 015 016 017 018 019 00 Outsourcing social security contributions Forecast.57%
DISTRIBUTION OF COMPANIES BY INCORPORATION DATE 40 35 35 35 30 31 8 5 5 6 0 0 19 1 1 17 15 14 14 10 9 10 7 7 7 5 3 3 3 1 0 0 1989 1990 1991 199 1993 1994 1995 1996 1997 1998 1999 000 001 00 003 004 005 006 007 008 009 010 011 01 013 014 015 016 017 018
YOUNG TALENTS International Prizes in 015: Mathematics: 3 55 64 Informatics: 3 7 4 A total of 97.4% of the population aged 19-34 speak at least one foreign language. Nearly 40% speak two foreign languages and more than 0% speak three. The most popular languages besides English are German, Russian, French and Spanish. In 015 population aged 0-34 numbers more than 1,340,000, over half of which live in the six largest cities. Over 3,500 of the university students graduated in education fields that are suitable for the outsourcing industry. 165 Language Schools 143 High Schools of mathematics & science 51 Universities
TOP OUTSORCING DESTINATIONS 3 315 Sofia 37 6 Gabrovo 4 11 Veliko Tarnovo Ruse 1 7 Varna Plovdiv Stara Zagora Burgas Blagoevgrad As more companies enter the market, the need for qualified personnel will lead to a growing number of companies relocating the capital Sofia in search of talent elsewhere.
FOREIGN INVESTORS UK Netherlands USA Germany Cyprus Austria France Israel Belgium Switzerland Virgin Islands Ireland Italy Slovakia Costa Rica Gibraltar Greece Hungary Romania Turkey Other Foreign Investors in Outsourcing Companies 0 5 10 15 0 5 9 7 11 1 5 1 5 4 3 3 5 3 3 1 3 3 1 1 1 1 1 3 7 9 14 14 8 6 ITO BPO 44% of the outsourcing companies have foreign investors UK, the Netherlands, USA and Germany account for of all companies with foreign investors 51% Outsourcing companies invested more than BGN 38 mln in 015. UK's withdrawal from the EU may boost Bulgarian outsourcing industry, as companies operating in Britain come under increased cost-cutting pressure following the Brexit.