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To Poland, globalisation’s other story

- The idea of outsourcing and Infosys help a communist-era textile belt back on its feet

Lodz (Poland), Dec. 23: Not long ago, the only way a young Pole like Piotr Wegielewski could find a job worthy of his two master’s degrees would have been hopping on one of the budget flights from the airport near here to go to Western Europe.

Instead, Wegielewski, 29, found a job close to home in an industry that has become one of the largest employers in Poland: outsourcing. He is a project leader in data and system analysis for Infosys, the Indian outsourcing giant with a big office here that serves clients in Amsterdam, London and New York, among other business capitals.

Infosys, based in Bangalore, has its largest site outside India here. About 2,000 people work in a new office building overlooking a traffic circle named for Solidarity, the trade union movement that led Poland out of communism.

“A lot of my colleagues left,” Wegielewski said in English. “I wanted to stay.”

In fact, Lodz, a former textile manufacturing centre with a population of about 740,000, is just one of several Polish cities that have become service hubs for an international corporate clientele that values Poland’s well-educated and often multilingual work force.

In midsize cities like Wroclaw and Gdansk, Poles are doing back-office work not only for Indian outsourcing companies like Infosys, Wipro and Tata Consultancy Services, but also for major corporations like IBM and banks including Citigroup and Bank of New York Mellon.

About 110,000 people work in what is broadly known as the business services industry in Poland. The category includes outsourcers like Infosys that take over such functions as finance or information technology for customers, as well as banks and other companies that set up in-house operations to do their own back-office work.

At current growth rates, it is conceivable that in a few years business services in Poland could overtake the auto industry, which employs about 140,000 people, as a leading source of private sector jobs.

Business services are part of the explanation for Poland’s steady economic growth in recent years, even amid stagnancy in the 17-nation euro zone, the country’s largest market. Part of Poland’s edge derives from the fact that it has yet to join the euro currency union. Its currency, the zloty, has been relatively stable against the world’s reserve currencies in the last year.

But Poland’s enviable perch is nonetheless precarious. It faces rising competition from other countries in Eastern Europe, like Bulgaria and Romania, and educated enclaves elsewhere, like Spain. That is why industry specialists say Poland must move into more sophisticated services, like research and development, to continue attracting investment and corporate clients.

Wegielewski may represent the sort of Pole more than ready to head higher. He has master’s degrees from the University of Lodz in management and in econometrics, a hybrid of economics and math. That makes him well suited to oversee a team that provides services to the retailing industry.

He is studying part time for a third degree, in philosophy, which could prove useful in tackling difficult intellectual problems but is “just a hobby,” he said.

In Poland, 39 per cent of people 25 to 34 years old have university degrees or the equivalent. This puts the country in second place behind Norway in that category among the nearly three dozen member countries of the Organisation for Economic Cooperation and Development.

Poland’s well-regarded universities have been willing to modify their curriculum to produce graduates with the skills sought by companies like Infosys.

“There is a strong correlation between education and the success of Poland,” said Anurag Srivastava, a New Delhi-based practice director at the Everest Group, which advises corporate clients on managing outsourcing and back-office operations.

Lodz, where unemployment is 13.7 per cent, is still recovering from the collapse of the textile industry after the fall of communism and seems caught between two eras. A complex of brick buildings that was once part of the fabric industry has been converted into a hip hotel and shopping mall filled with French and German retail-chain outlets. But much of the city still has the drab, crumbling ambience of Eastern Europe in communist times.

Labour costs in Poland for people with the skills needed for business services are about half those of Western Europe, though still roughly double those in India.

Martijn Geerling, a senior director in London for Hackett, said Poland’s main rivals were neighbours like Romania and Bulgaria, where wages are even lower but education levels are high. “Poland and any country needs to understand competition is mostly with Eastern European countries,” Geerling said.

Infosys assumes that the differences in wages worldwide will shrink over time, and attracting clients will require doing work for them that is not only cheaper but better. “We believe our value proposition in the long run is about the automation and transformation of the processes — not labour arbitrage,” said Krystian Bestry, head of business outsourcing in Europe for Infosys, who is based in Lodz.

The Infosys centre in Lodz was established by Philips, the Dutch electronics company, to handle mainly basic back-office work like processing invoices. Infosys bought it from Philips in 2007 and shifted to more advanced projects, such as helping companies reorganise functions like internal auditing and tax preparation.

In September, for example, AkzoNobel, a Dutch maker of paints and speciality chemicals, hired Infosys in Lodz to centralise its finance and accounting operations.

Not all the Infosys workers in Lodz are Polish, and the operation also serves clients outside Europe, including the US and Canada. IváLuna Aparicio Guadalupe is from Monterrey, Mexico, who started with Infosys in Mexico and transferred to Poland when his unit was moved there.

Besides Spanish, Aparicio Guadalupe, 29, who has a master’s degree in administration, is fluent in English, Italian and French. He was part of a team that, to serve a customer based in Quebec, was training in how to speak with a French Canadian accent.

“I love languages,” said Aparicio Guadalupe, who may illustrate how outsourcing has become highly globalised and mobile. The work, and increasingly the people, go wherever there are good broadband connections. Places like South Africa and Argentina have become major outsourcing centres, and Infosys is making big investments in China.

In Poland’s case, its business-services future still looks bright, despite the global competition.

But Peter Schumacher, chief executive of the Value Leadership Group, a management consultancy based in Frankfurt and New York, said the next goal for Poland should be a higher link on the value chain: for Poles to establish their own business service providers so that the country is less dependent on the whims of foreign investors.

“That,” he said, “is where the future lies.”