Romania has risen to 10th place in Europe and 30th globally in the ranking of the most attractive locations for offshore services, showing a slight improvement compared to the 2021 study, according to a report by the global consulting firm Kearney. 

Romania remains relatively attractive in terms of finances (low labor costs), workforce availability, and digital skills, but it is losing ground to neighboring countries concerning digitalization and the business environment, the report says, cited by Economedia.ro.

"To maintain and even increase its attractiveness as an offshore services location, Romania needs to focus on three main directions: (1) increasing IT and digital competencies, (2) adapting the workforce, especially to new technologies, and (3) talent retention. Low labor costs are no longer the primary reason for a foreign company to offshore its services in Romania," said Florian Teleabă, principal and managing director of Kearney's office in Bucharest.

"In the Romanian business environment, across almost all sectors, there is pressure on salaries, finding good employees, and motivating and retaining them. Additionally, a large number of young people still choose to leave Romania. To be competitive, we must continuously improve what we do and the value we deliver. For that, we need to invest in people and their skills, and in processes and technology to increase the scalability of the services we offer – and this allows us to demand more for what we offer, moving away from the trap of 'staying cheap to stay competitive'," he added.

To compile the ranking, Kearney analyzed 78 countries worldwide using 52 indicators that cover four dimensions: financial attractiveness, workforce skills and availability, business environment, and level of digitalization. 

As IT, business, and engineering services can now be provided from anywhere in the world, companies eager to reduce costs are increasingly looking to offshore their activities. According to the report, the top 10 most attractive offshore locations in Europe are the UK, Poland, Portugal, Estonia, Germany, Hungary, Latvia, Georgia, Bulgaria, and Romania.

The global services market grew from USD 624 billion in 2022 to USD 681 billion in 2023, indicating continued significant demand for such services. Regarding Eastern Europe, Poland, Hungary, the Czech Republic, and Romania show improvements in the rankings, while Bulgaria, although experiencing a slight decline in its score, remains in the European Top 10, positioning itself ahead of Romania. 

In most Eastern European countries, including Romania, a slight increase in attractiveness was observed due to business environment development and digitalization level, as well as a significant influx of talent migrating from Ukraine to neighboring countries due to the war. 

Poland continues to attract massive foreign investments. The business environment and level of digitalization in the country favor startup openings, and the education system has rapidly adapted to produce graduates familiar with new technologies. Consequently, Poland has become the second most attractive country in Europe, after the United Kingdom, for offshoring services. 

The United Kingdom leads the ranking in Europe, occupying the fifth place globally and being the only European country in the global Top 10 due to its capabilities in science and technology. The UK registered the highest number of patents in new technologies such as artificial intelligence, machine learning, blockchain, and robotics. 

The Kearney study also shows that the United States, China, the United Kingdom, India, Germany, Canada, and Singapore are the countries best prepared to protect their workforce in the future and adapt to technological innovations. 

"The adaptation of talents to the new market requirements will have a major impact in the future as the industrial revolution 4.0 redefines the demand for skills and occupations. This adaptability has kept countries like India, China, and Malaysia at the top list of the most attractive countries. Building a talent base that easily adopts new technologies should be a strategic objective of any country that aims to be at the forefront," said Arjun Sethi, partner and co-author of the Kearney study. 

The top 10 most attractive global offshore locations are India, China, Malaysia, Brazil, the UK, Indonesia, Vietnam, the US, Thailand, and Mexico. 

The 78 countries in the 2023 Global Services Location Index were selected based on data from companies active in the sector, current offshore services activities, and government initiatives promoting the sector. They were evaluated according to 52 indicators from four major categories: financial attractiveness, workforce skills and availability, business environment, and level of digitalization. This year, Kearney analyzed the level of digitalization, regeneration capabilities, and talent availability in more detail.

radu@romania-insider.com

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