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Outsourcing locations: Romania, Cluj- Napoca

Outsourcing locations: Romania, Cluj- Napoca. 9 June 2009 Mihai Rada , KPMG Romania. Presentation Overview. Introduction CEE comparative analysis Romania: emerging destination Cluj-Napoca: emerging destination Conclusions. Introduction.

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Outsourcing locations: Romania, Cluj- Napoca

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  1. Outsourcing locations: Romania, Cluj- Napoca 9 June 2009 Mihai Rada, KPMG Romania

  2. Presentation Overview • Introduction • CEE comparative analysis • Romania: emerging destination • Cluj-Napoca: emerging destination • Conclusions

  3. Introduction • Global financial crisis drives companies to pursue rationalization measures over the longer run • Traditional outsourcing locations rapidly approach saturation point • A new rush for outsourcing services across the IT sector, with a number of new locations worldwide emerging as viable Business Process Outsourcing (BPO) hubs is developing • A study realized by KPMG identified 31 possible locations for the next outsourcing boom • Location selection criteria: needs, priorities, compromise, site visit, location specific data • Advantages offered by the emerging cities: • lower costs, • size of workforce, • quality of talent, • linguistic and cultural similarities, • government support and incentives • dedicated infrastructure for IT-BPO companies, • quality of life.

  4. Introduction (outsourcing locations)

  5. CEE comparative analysis Internet users per 1,000 inhabitants Source: CIA World Factbook, World Bank, Eurostat Historical FDI inflow (million EUR) (2003 – 2007) Source: UNCTAD – World Investment Report 2008

  6. Romania: emerging destination • Foreign direct investment (FDI): Romania amounted large FDI inflows in the last years • GDP growth: the Romanian economy has been expanding and real GDP grew by 7.1 percent in 2008 • Inflation: with a value of 6.3 percent in 2008 and expected to decline to 4.5 percent in 2009 • IT-BPO Scenario: the IT outsourcing industry comprises around 600 companies and is concentrated in and around Bucharest. Second tier cities such as Cluj-Napoca have emerged as new outsourcing locations • Government incentives: the maximum amount of grants offered amounts to USD 28 million (EUR 22.5 million) in the Bucharest-Ilfov region and USD 35.5 million (EUR 28.1 million) in the rest of the country • Membership of the European Union • Distance to Western Europe countries is smaller as compared to traditional outsourcing locations (e.g. Asia).

  7. Cluj-Napoca: emerging destination • Development of the current IT-BPO industry: • an alternative outsourcing location to Bucharest, due to increasing competition • In 1999, ISDC opened its own development and testing centre in Cluj-Napoca • in 2006, Wirtek acquired Code Wizards • in 2007, Genpact opened its second BPO center • in 2008, Evalueserve opened its first European research center at Cluj-Napoca • Industry Profile- Size and Specifics: • 245 IT companies operating in the Cluj County including over 100 software companies in the city of Cluj-Napoca • the services offered out of Cluj-Napoca include research and data analysis, order management, finance and accounting, engineering services, software development and IT services

  8. Cluj-Napoca: emerging destination (cont’d) • IT-BPO key drivers: • important financial and university center; • benefits from a pool of qualified personnel; • the talent pool is suited to provide multi-lingual services; • the talent pool is suited to offer research and development services; • the city has both, an established manufacturing and a services industry; • the city is developing as a tier II alternative for companies with centers in Bucharest; • the time-zone advantage; • cost advantage over the West and East European cities;

  9. Cluj-Napoca: emerging destination (cont’d) • Human Resources: • important academic center with about 62,600 students in 2007 • employers benefit from the foreign languages skills of Romanian workforce • Infrastructure: • office space (IT parks): in 2007, the area of office space available in Cluj-Napoca was 20,150 sq. meters. The 2008 real estate projects are likely to add 84,000 sq. meters of available space; • telecom infrastructure: a network of 64,000 km of optical fiber is currently being developed; • national and international connectivity: the city has a well developed rail, road (the city is crossed by the European Road E60) and flight (Cluj-Napoca International Airport is the third largest airport in Romania) network; • upcoming projects: the city is to be linked with Bucharest and the Hungarian border by Romanian Motorway A3; • several real estate projects are being developed

  10. Conclusions • Alternatives to traditional outsourcing locations arose • A wide range of outsourcing locations are available for companies • Cluj-Napoca is an important emerging location offering talent pool, lower costs, developed infrastructure

  11. Questions?

  12. Contact details • Mihai Rada • Senior Manager, IT Advisory, KPMG Romania • Mobil: +40 744655832 • Fax: +40 744 800 700 • Email: mihairada@kpmg.com

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