Eastern European IT outsourcers take aim at EU

The plummeting US dollar has meant that eastern European outsourcing companies are now touting for business in the EU.

Steve Keil, chief executive at software outsourcing consultancy Sciant, told vnunet.com that the weaker US dollar is shrinking margins for eastern European companies to the point that it is no longer economic to do business there.

Although the US has been a traditional source of custom for eastern Europe, this has been because they were considered a cut-price option.

Americans like to concentrate on keeping business costs down in their IT outsourcing deals and will not pay more just for the convenience of doing business with Europeans, according to Keil.

"Faced with this and the escalating costs of keeping their IT experts, eastern European IT outsourcing companies will have to move their operations up-market, work closer with EU customers, or die," he said.

Although unable to compete in terms of cost against the Far East, according to Keil, the Eastern European workforce is highly skilled and still considerably cheaper than their counterparts in the UK, Germany and France.

He added that, with eastern European suppliers being only a two-hour flight away and one or two time zones apart, it is quite easy to clarify and resolve issues with their western European customers.

"In terms of culture, eastern European suppliers are closer than most other geographic options, including India and China. This makes life easier for building a good business relationship," Keil said.

He predicts that the US shift to the East will also start to affect Indian companies. "With Indian outsourcing costs also rising, if the dollar continues to slide, US customers will look farther offshore to Vietnam, China and Indonesia," said Keil.

"Already some of the smaller Indian outsourcing companies are trying to form business partnerships with eastern European companies as a way of breaking into the EU."