European reunion - Timestwo Outsourcing

India is currently the jewel in the outsourcing and offshoring crown, but it is facing challenges from many regions, particularly central Europe. It is 12 years since the "velvet revolution" in Czechoslovakia, which prompted the fall of the Berlin wall and iron curtain.

And now the Czech Republic is embracing the opportunities that come with a more open market.

Martin Jahn, the Czech Republic's former deputy Prime Minister, says the country is well positioned to take advantage of insurance companies looking to outsource their operations.

"The Czech Republic, as an all round service centre, is one of real growth. We can serve not only central Europe but also western Europe, particularly the UK, because English is taught in our schools and universities."

It is the emphasis on language skills that Jahn says sets the Czech Republic apart from the sub continent. "We have special language skills that they do not have in south east Asia. We also have closer proximity to the customer - many customers prefer to stay in Europe. As it is not good to have all your eggs in one basket when outsourcing, not everyone will end up in south east Asia."

One for the Czech Republic's success has been the Czech government's extremely proactive approach, promoting the country as an offshore/outsourced jurisdiction.

"We have given incentives to companies to invest in service centres in the Czech Republic," says Jahn. "But it is about the quality of skills and people we offer, not just tax advantages. Education and more graduates, with the focus on training in the right skills, are key to the development of the Czech Republic as a service centre."

But don't just take Jahn's word for it. He does after all have a vested interest in saying this. But these very factors have encouraged many to take the plunge and move to the Czech Republic to set up service centres.

One such example is Accenture, which has employed 600 staff since 2004, covering a whole range of services and is looking to employ 1,500 by 2008.

Hugh Kirby, an Accenture partner, says: "The Prague centre has been a huge success thanks to the skills of the local staff and the quality of the facility."

Another is Stephen McGuckin global CIO of DHL. He says: "We ultimately chose the Czech Republic for its availability of a skilled and flexible labour force, well established and reliable telecommunication networks, good air links as well as the optimum incentives offered by the Czech government."

Thomas Hruda, chief executive of Czech Invest, the company responsible for encouraging outsourced companies to the Czech Republic, reinforces Jahn's arguments.

"We have very professional and communications skills; a good strategic location in 'new' Europe; high end technologies and a number of quality locations. It is not just Prague, but also Brno, Pilsen, Ostrava and Olomouc. As well as a transparent procedure and targeted use of state aid and structural funds."

But the Czech Republic is not the only country looking to outsourcing as a good way to boost the national economy's coffers. The rest of central Europe is getting in on the act. In Poland, labour costs are four to six times lower than the western European average.

But for Michael Dembinkski, head of policy at the British Policy Chamber of Commerce, this is only part of the story.

"Poland has a young population and a very high skill base, it has a bigger population and larger GDP than all the other EU accession states combined."

Lithuania's director of International Trade Development at the Lithuanian Development Agency, Lina Vaitkeviciene, says Lithuanians are "eager Europeans" and "entrepreneurial".

"Lithuania is a very safe place to do business," she says. "We have protection of ownership and investment with laws harmonised with those in the EU and a good credit rating from Standard & Poor's (rated A-), Moodys (A3) and Fitch (A-). We have been cited by the World Bank as the best of the new EU states for ease of doing business.

"We have a high tech industry, an excellent infrastructure, connecting eastern and western markets a modern banking and financial systems and a highly qualified, motivated and hard working population."

Slovenia also puts a great deal of emphasis on education. Matej Kova from Invest Slovenia, a body set up to promote investment in Slovenia, says: "Slovenia has a highly educated workforce. Fifteen per cent have university degrees, 60% have been to secondary school and know at least one other foreign language. Italian for example is widely spoken."

It also has a range of urban centres to serve various nationalities. "Nova Gorica and Koper are excellent centres for serving Italian customers, Maribor is a great location for the Austrian or German market, and the capital Ljubljana and Kranj are great multilingual centres," says Kova.

Hungary sells itself on similar themes. Csaba Kilian director of the Hungarian Investment Trade Development Agency says: "Hungary is a bridge binding west with east, and north with south in Europe. We have cost effectiveness, vast human resources, investment incentives, excellent telecommunications and IT infrastructure, excellent transport and security as well as a high quality of living."

All this adds up to eastern Europe possibly becoming the new India. IT