My trip to Budapest in October was eye-opening on a number of levels, but one that I haven't had a chance to reflect on too much was the suprising level of service jobs being outsourced to Central Europe (and I suspect even further east as well). Alex and I visited Graphisoft Park with Gabor Bojar (sort of the Bill Gates of Hungary) and I was amazed to see how many technical centers were being re-located there - from Germany, Austria, Switzerland and other much higher cost locations. According to Bojar, wages for equally skilled English-speaking engineers in Hungary are significantly lower than Western Europe. Microsoft, Cannon and IBM were some of the companies setting up shop.
India has been the name in the services and business process outsourcing game, and that's sure to continue, but since services in many ways are even more globally mobile than manufacturing, it doesn't seem to be a sustainable lead in the long term. AP ran a piece in November about a similar tech services cluster popping up in Dalian, China. Next up: Accra? Cape Town? Buenos Aires?
Along with SAP, Hewlett-Packard Co., IBM Corp., Britain's BT Group PLC, Japan's Yokogawa Electric Corp. and some 230 other foreign companies have flocked to Dalian in the last decade. Now, a critical mass of development is coming. Ground broke this year for both a $2.5 billion Intel Corp. factory and a $6.5 billion nuclear power plant for the city. Cranes line the busy waterfront as office and apartment towers rise at a furious pace.
Companies say they are drawn to Dalian by a polyglot work force, local spending on communication and other infrastructure, help in hiring, tax breaks for high-tech investment and free rent in the city's brick and glass office park. Wages for a new college graduate in Dalian are about $250 per month, company officials said -- about the same as in India but lower than in Beijing or Shanghai.
The revenue of $1.9 billion generated last year in Dalian by operations such as writing and testing software, operating computer systems and accounting and finance is still dwarfed by outsourcing in Bangalore. The Indian city, Asia's leader in the industry, brought in $11.3 billion from such operations in 2006.
Technorati Tags: China, economic development, globalization, Hungary, India
Comments