Eastern Europe has emerged as a major player in the outsourcing industry, accounting for 20% of the global market. Countries like Hungary, Poland, Czech Republic, and Belarus offer competitive advantages such as skilled workforces, government support, and lower costs. New business models are emerging that divide complex problems into smaller work streams that can be completed remotely. This "divide-and-conquer" or DBBD approach allows leveraging talent globally through virtual teams and real-time collaboration tools. Eastern European countries are well positioned to capitalize on DBBD due to cultural similarities with Western clients, technical skills, and time zone advantages. DBBD companies aim to solve labor market mismatches by connecting small businesses and professionals

1. New dimensions to outsourcing
and its implications for Eastern
Europe Countries
The Drifter
Team leader: Giao Le
Vietnam

2. Eastern Europe is home 20% of world’s service centers, after India, and
prides itself for higher value services at affordable costs
Major ITO markets in EE present impressive GSLI Key competitiveness across major
growth prospects2 Rank3 markets, respectively
%
Hungary 33 31
▪ Well developed with business with large MNCs
▪ Focus on business process outsourcing
Poland 30 24 ▪ Famous for its highly skilled & bilingual IT workforce
▪ Strong government support
Czech Republic 20 35 ▪ Leveraged on low cost and proximity advantage
▪ Dominant in knowledge process outsourcing
Belarus 28 N/A ▪ Low cost resources with strong government support
▪ Large highly qualified talent pools & proximity
Bulgaria 50 17 ▪ Workforce strong in analytical & language skills
▪ Low tax rate and close to major clients
7 ▪ Leading player, accounting for 58% of world market
India 1
▪ Deep & strong talent pools and cost advantage
Total Cost Ownership of running 2-person software development team
across locations in Europe (EUR/month)4
10,686 10,694
9,977
Senior IT Salary 1 Tholon top 100 Outsourcing
Destinations 2012
4,900 4,680 4,795 4,224 2 Central & Eastern European ITO
Senior PM Salary 2011 Market Review
3 A.T. Kearney Global Services
Office cost Location Index 2011
4 CEE ITO Landscape Report 2011
UK DE DK HU PL CZ BY
SOURCE: Tholon, CEEOA, A.T. Kearney, IT Sourcing Europe Ltd. 1

3. As growing labor mismatch problems become global concerns, strong link
between education and work helps reduce vertical mismatch in certain EE
countries Under-qualified - Others
Average incidence of vertical mismatch among 25 – 64 year Over-qualified - Others
olds 2001 – 20111 Under-qualified - EE OLM Group
% of employees
Over-qualified - EE OLM Group
28
23
21
17 18 18 18
15 16
14 13 14
12 11
9 10
8 8
UK DE DK PL CZ SI LT EE HU
▪ Literature in sociology has distinguished between occupational country (OLM), where the education system sends strong
signal to the labor market, and internal labor country (ILM), where there is no correlation between education and job.
Within EE, Poland, Czech Republic and Slovenia are identified as OLM countries, who have an education system with a
strong vocational specificity, standardization and high level of education signaling
▪ Recent years, mismatch problems in the labor market have become pressing issues globally, with three forms:
– Vertical mismatch: under/over qualified
– Horizontal mismatch: field mismatch
– Skill mismatch: under/over skilled
▪ Though such problems are present across Europe and other parts of the world, research has shown that OLM countries in
EE have less severe vertical mismatch due to its strong link between education & work as well as preferences for Social
Sciences and Sciences2
1 Mismatch and Labor Mobility Conference
2 "Graduate Mismatch in Central and Eastern Europe"
SOURCE: CEPR, Universitat Pompeu Fabra, Barcelona 2

4. What are current trends in the outsourcing industry and can EE
outsourcing industries capitalize on them?
“Many of the large enterprises today are now looking at new ways of INNOVATION
finding further savings beyond utilizing low-cost labor
services. They are still driven by cost and efficiency, but also by
innovation, i.e. unique and creative methods to find new levels of
productivity and top-line growth” – Phil Fersht, CEO at HfS Research
SPECIALIZATION
“The trend in IT outsourcing go towards specialization and value-
adding service offerings” – Franco Dal Molin, Country Manager
Switzerland at Ciklum
“Advantages for EE include historical strong engineering tradition and
technical training, geographic proximity, relatively low turnover and TECHNICAL
very importantly, business culture is much closer to those
of America and Europe. Right now, clients demand from their EXCELLENCE
providers a high level of proactivity in development of the
client’s business and a lot of innovation. However, in Eastern Europe,
it’s possible to get a technical design of any complexity but not a
proposition on business strategy” – Boris Kontsevoi, COP, President BUSINESS
& CEO at Intetics Co.
PROACTIVITY
SOURCE: CEEOA 2010 3

5. What are other trends in the labor market that may have impacts on
business models in the future? Can EE countries be among the first to
jump the waves?
Here are the list of 10 ways our job may change in
the future, compiled by the Time magazine
1. High tech, High touch, High growth
2. Training Managers to behave
3. The Search for the next perk
4. We’re getting off the ladder
5. Why boomers can’t quit
6. Women will rule business
7. It will pay to save the planet
8. When Gen X runs the show
9. Yes, we’ll still make stuff
10. The last days of cubicle life
More importantly, work will become more of an
activity we enjoy in our daily lives than merely a
place!
SOURCE: Time magazine 4

6. A sector that will emerge in EE, based on its strong capabilities in highly-
skilled outsourcing sector: DBBD (Doing-Better-By-Dividing)
IT, Business Process Outsourcing, R&D Where will Western companies outsource
Traditional Cloud sourcing, Knowledge-based in the next 12-24 months?1
outsourcing outsourcing from large MNCs to %
model concentrated service centers in low- 60
cost locations
▪ Leverage technology to: 40 Near-shore
New – Segregate work streams from more Off-shore
complex problems, for example 20
dimensions knowledge or R&D requests
– Provide flexibility in terms of location
of work (yes, get rid of service center!) 0
Netherlands
Switzerland
– Enhance accuracy and efficiency of
Germany
Sweden
job-matching tasks by using new
Norway
Austria
search solutions such as graph
UK
search
– Enhance working experience &
collaboration through visual and real-
time interactions between Why EE?
employees across locations ▪ Closer in geography (near-shore
– Get rid of language barriers through outsourcing) to Western Europe and
real-time accurate translation (tools
closer in business culture to Western
like Google Translate is improving!)
– Create new business opportunities Europe and America, where major and
through social network via crowd complex business and technology
sourcing problems are to be solved
1. "The European IT Outsourcing Market 2012: A race to maturity?"
SOURCE: CIKLUM 2012, The drifter 5

7. The new business models of DBBD companies
Key Partners Key Activities Key Resources Customer Relationship
▪ We will work with ▪ Dispatcher will work with ▪ Powerful IT architecture ▪ We actively converse with
social/virtual networks of clients to scope problems with sufficient bandwidth to potential clients to identify
professionals which provide and define/refine work accommodate heavy traffic of new areas of work that can
instant contacts with streams cross communications be done via divide-and-
contractors, outside of our ▪ Dispatcher will ▪ Language solutions that conquer
normal workforce, who can communicate & coordinate provide seamless translation ▪ Dispatcher also plays the
provide services in their with relevant professionals to instantly so as to better solve role of customer relation
areas of expertise as and get the pieces done and the problem of management
when needed pierce them together if skills/qualification mismatch
necessary across locations speaking
▪ Professionals work on their different languages
assignments from different
locations, using one single
virtual platform with real-
Cost & Revenue Structure time interactions and Channels Target Segment
communicate via video
▪ Fixed cost: investment in conferences ▪ Direct channels: work ▪ Established SMEs in the
IT architecture and software ▪ Clients upon receiving directly with growth stage
solutions deliverables can instantly clients/professionals ▪ Potential areas in which we
▪ Variable cost: labor. Yes, give feedback and further through virtual/social network can add value to SMEs are
a common trend now is to work with professionals to and associations those that assist their
make labor become a refine results ▪ Indirect channels: work business decision making
variable cost by engaging ▪ Productivity is measured with governments and process. With our services,
labor as and when need through turnaround time, competitors (yes, SMEs can now leverage on a
▪ Revenue stream: we depth and complex of competitors) to build vast network of knowledge
charge by deliverables by problems/answers comprehensive database of that they can’t previously
number of hours committed + job required across locations afford
maintenance fee
SOURCE: The drifter 6

8. The world – before and after the birth of DBBD
▪ SMEs able to draw the
▪ Business decisions not right resources at
well-informed due to lack
affordable fees at the
of access to data,
right time and share
analyses and experts
investment cost in IT
▪ Hard to attract the right SMEs in
with other SMEs
talent with the right cost at various parts
the right place of the world
DBBD
companies
▪ Youth increasingly choose
areas of study based on ▪ In a way, we are helping
personal interests Professionals to solve the pressing
resulting in more people with various labor mismatch
failing to find expertise problems, which are
employment in their foreseen to cause youth
immediate regions that unemployment in the
matches their near future
qualifications/skills
SOURCE: The Drifter 7

9. Piercing them all together!
The unique value propositions of DBBD
▪ Small team, allowing for quick turnaround time
▪ Efficiency achieved through specialization
Why DBBD? ▪ More new opportunities created in new geographies
thanks to advances in language solutions
▪ Flexible working environment, suitable of new trend in
work place evolution, i.e. working at home and when you
feel comfortable
▪ Geographical &
▪ EE as a region is cultural proximity
known for its highly to advanced
skilled & tech- economies
Why EE? savvy population ▪ Time zone
▪ Unlike in Asia, advantage: can
people in EE prefer work well with both
to work in small- Western and
sized teams, which Further East
is the DBBD model countries
SOURCE: The Drifter 8

10. DISPATCHER TEAM is core to make this happen. And women, thanks to
their inherent psychological nature, suit this role very well
TYPICAL PROFILE
▪ Working woman in their mid-careers, with
high qualification and extensive experience in
their areas of expertise, who now wants to
enjoy time with family while working flexibly
▪ Great inter-personal, problem-solving skills to
ensure smooth and productive
communication across the value chain
▪ Short but intensive concentration span –
women now can use these so-called vices as
their virtues as this job only requires intensive
concentration during a specific period of time
pre-committed instead of an 8 hour-working
day
Image courtesy of Pixmac.com
SOURCE: The Drifter 9