AmCham Macedonia Fall 2015 (Issue 47) | Page 7

ANALYSIS concerns and enhanced data protection laws (particularly within the EU), may put pressure on outsourcing activities there. Countries with educated workforces, stable governance, solid currencies and good technological infrastructure are also projected to see growth. The Deloitte survey found that corporate clients cared more about outsourcing partner performance than their cost. A full 72% of respondents said offshore supplier performance was their main outsourcing-related consideration. Cost advantage was the second major factor, at 44%. Customer perception and time zone considerations were rated equally important, at 28%, while social beliefs came in at 17%. Particularly interesting for Macedonia – which has played up heavily government incentives and assistance in its promotional campaigns – was the finding that government incentives were seen as the least important factor in corporate outsourcing decision-making (11%). Globally, Finance and Accounting outsourcing is expected to increase in coming years, especially in ‘non-traditional locations.’ In Legal Services, meanwhile, E-Discovery, Billing and Research and Analysis are the sub-sectors most likely to become more outsourced. Meanwhile, traditional HR sub-sectors such as Call Centers (something from which Macedonia has particularly benefited) should also increase, with Administration and other HR sub-sectors expected to increase even more, with between 20-40% of global respondents anticipating to step up their outsourcing ventures in separate Administrative sectors. Tier 1 Customer Service is expected to grow at an even higher rate, according to Deloitte. The IT Sector – traditionally, one of the Macedonian economy’s strongest beneficiaries of outsourcing – is also expected to rise. IT is “typically the single largest administrative cost for companies,” notes Deloitte, and labor costs have always been a main consideration for foreign companies outsourcing software development and other IT services to developing economies like Macedonia. However, increased demand for Macedonian “computer programming, consultancy and related activities” already caused a 47% increase in the average monthly net wage per employee between 2010-14. This would suggest that the country’s labor cost advantage is under serious pressure. This is a real cause for concern, given the extremely small size of the local industry. According to the Macedonian ICT Chamber of Commerce, in 2013 there were just 539 active companies here with a total of 2,586 employees. Today, there are less than 15 outsourcing providers located in Macedonia advertising their services online. They appear to have teams of 10-40 employees and largely focus on IT services, though at least a few are also offering business process outsourcing services. However, the small size of local companies can actually work to Macedonia’s advantage. In fact, the current trend of large corporations moving away from “megadeals” towards a more “portfolio-driven” approach reflects the more sophisticated and variegated nature of the IT field today. To make up for a lack of large organizational capacity, small startups can concentrate on very specific products and services to find their niche in the larger sectoral ecosystem. In the absence of any national statistics on local usage of outsourcing services, AmCham Macedonia gathered feedback from 16 of its members – which are larger and more competitive than average companies – about their use of outsourcing. The survey found that the majority of respondents (62.5%) have long-term outsourcing contracts with local suppliers, whereas the other 37.5% reported that they occasionally outsource work locally. Increased demand for Macedonian “computer programming, consultancy and related activities” already caused a 47% increase in the average monthly net wage per employee between 2010-14. Continued on page 23 Fall 2015 Issue 47  7