Business services industry

Business services industry


Executive summary


Services in scope

Employee information

Financial performance

Business environment

3

6

10

20

35

38

CONTENT

Glossary of termsABSL

SSC

BPO

ITO

KPO

R&D

IT

C1, C2, … Cn

ERP

The Association of Business Service Leaders in Romania

Shared Service Centre

Business Process Outsourcing

IT Outsourcing

Knowledge process outsourcing

Research & Development

Information Technolog

Generic name granted for confidentiality reasons to participants to the survey

Enterprise Resource Planning


EXECUTIVEsummary

Industry report/ 4 Executive summary

The Association of Business Service Leaders in Romania (ABSL) requested KPMG’s assistance in preparing and conducting a survey of general and specific data about the outsourcing industry in Romania. The survey questionnaire was prepared by ABSL with KPMG support, based on the previous year’s questionnaire (when a similar initiative was carried out), and was submitted to participants by ABSL representatives. For reasons of confidentiality, data was collected and analysed by KPMG.

The participants in the survey are twenty companies operating in the outsourcing market in Romania, organized either as SSCs, BPOs, ITOs or a combination of these three categories. The companies are located in major Romanian cities, some of them running operations in up to three locations around the country.

Foreign capital was the main source of investment used for setting up the surveyed companies, investors from the USA, France and Germany being the most common.

All the surveyed companies have development plans for the next one or two years, either through expanding their customer database, through enlarging their portfolio of activities or both.

The services provided by the surveyed companies are diverse, ranging from customer support, finance & accounting, application and software development to print & mail, call center, banking services and other. Most of the companies surveyed provide more than one, with a maximum of eleven different services, the most frequently encountered being customer support, finance & accounting and IT related services.The services are provided mainly to clients located in Europe, North America and Romania and, compared to last year, more than a half the respondents increased their portfolio of services.The services are provided to clients operating in a large number of industries. The most frequent clients are from Technology & Telecom, Automotive, Consumer Services and Goods. Other clients are part of the Banking, Insurance and Financial Services, Industrial Goods and Energy, Utilities and Basic Materials sectors.

IT technology is a key factor in provision of services, supporting increasing of automation and thus generating cost reduction. The complexity of IT applications has increased over the past few years and irrespective of whether they cover a wide range of activities, or are specialized in certain specific ones, they are all meant to support delivery of timely and high-quality services.

Language proficiency varies according to the company profile and the geographical spread of its clients, services being delivered mainly in English and other important European languages.To measure their performance, companies calculate and track various indicators, the most preferred being time and volume related ones. Furthermore, benchmarking of activities is a common practice amongst the companies participating in the survey.

Outsourcing companies are committed to acting as a true partner for their clients, consequently

General information


Services in scope

Highlights

Industry report/ 5 Executive summary

Most of the companies surveyed generated increased or at least constant turnover over the analysed period.

The amount of taxes paid to the state budget in the last year exceeded EUR 500 thousand for ten respondents and was ranged between EUR 200 and EUR 500 thousand for another two respondents. The rest of the respondents paid taxes lower than EUR 200 thousand.

During the last few years, Romania has become an attractive market for the outsourcing industry, although there are still some limitations inherent to an economy in transition. Romania is highly appreciated in terms of language availability, the quality of human resources, the cost of doing business and the cultural adaptability, but poorly ranked in terms of government support.Regulatory and public policy changes are perceived as frequent and even too frequent by a significant number of participants. Furthermore, fiscal and labour legislation have a negative impact on a significant proportion of the surveyed companies.

The size of companies varies from less than 100 employees to over 3,000. The employment structure is similar for most of the companies, with more than 75% own full time employees (only two of the respondents are exception to this rule). Female employees are in a majority in most of the companies, but this is in close connection with the services provided (e.g. while this is valid for finance & accounting, IT services are mainly provided by male personnel).

Most companies surveyed have seen a increase in the size of net workforce growth during the last three years, more than half of them registering an increase of up to 30% of their headcount each year and the same trend is expected in the future.

The attrition rate is less than 30% for the majority of the respondents, a significant part of the attrition rate being determined by employees with an employment period in the company of less than one year.

The employees’ seniority level follow the same pattern for all the participants to the survey, with the top managers being the most experienced, followed by middle management and the least experienced being operational staff. However, the average education level of employees is a bachelor’s degree. Usually, one manager or team leader is appointed to supervise between 10 and 20 employees.

Formal training programs are implemented by the companies participating to the survey. The training curricula is diverse, covering technical matters, foreign languages and soft skills and is distinctively prepared for top and middle management vs. operational staff.

Challenges during the recruitment process are mainly related to finding employees with the appropriate matching mix between technical knowledge and language capabilities and to some extent a lack of language capabilities matching the company’s needs.

Financial performance


Employee information

provision of value added services is more and more common. The most frequently encountered include project management, business process reengineering, business analysis, consulting services and 6 sigma process improvement


BUSINESS SERVICES industry

Industry report/ 7 Business services industry

The companies that participated in the survey are either SSCs, BPOs, ITOs or a combination of these categories, as illustrated in the chart above. Out of twenty companies, seven are organised as BPOs, four as SSCs and three as ITOs. The majority of the respondents have their headquarters in Bucharest and some have one or two offices in other major cities in Romania.

From a process standardisation perspective, the surveyed companies can be split into three different categories: developing, advanced or partners.

Respondents split by type of organization

Companies split by processes standardization maturity level

Participants in the survey and their maturity level

All the surveyed companies are located in major Romanian cities: Bucharest, Timisoara, Cluj-Napoca, Iasi, Sibiu, Craiova etc.


Source of capital

Respondents split by origin of invested capital

Respondents split by origin country of the capital

With the exception of one company participating in the survey, which was funded exclusively by Romanian capital, all were established either through foreign direct investment or through a combination of foreign and Romanian capital.

The main foreign investors in Romania are companies located in the western European countries, such as France, Germany, Italy, the Netherlands, the UK, Ireland and in the USA.

In addition, a Brazilian and a Bulgarian company have also set operations in Romania.

Note: deviation from the total panel represents the non-responding companies / not applicable data.

Six companies are currently in the developing stage, meeting some industry specific targets and using measures and practices in accordance with the main business process standards.

40% of the respondents (eight companies) are in an advanced stage. They meet industry specific targets, while their processes and measures are set with wide optimization and automation of business processes.

Another six companies are already at a high maturity level, applying Six Sigma methodology for quality improvements and acting as true partners for their clients.


The respondents are optimistic about development in the next one to two

years. All are planning to extend their operations in Romania, some of them

simultaneously with the stabilization of current activities.

Plans for the next one to two years

Respondents split by their plans for the next year

Most of the participants in this survey have development plans for the next one to two years, either through expanding their customer database, or through enlarging the portfolio of activities or both.

More than a half of the respondents intend to extend their markets by providing new types of services to new customers. Less than a quarter will still be in the process of standardizing and optimizing current operations, while developing new business opportunities.

The total number of answers exceeds the number of respondents, as most of the companies plan to use more than one of the alternatives.


SERVICESin scope

Industry report/ 11 Services in scope

The surveyed companies provide a wide range of services to respond to their

clients’ needs.

The most frequently rendered services are customer support and finance &

accounting.

The companies made efforts to increase their portfolio of services and more

than a half succeeded in doing so.

Main services provided

Services provided

The surveyed companies offer a wide range of services that vary from customer support, finance & accounting, applications and software development to print & mail, call centers, banking services and others. With the exception of one company which specializes in providing only finance & accounting services, all the other companies provide more than one type of service, with a maximum of eleven different services.

Customer support and finance & accounting represent the most frequently supplied services amongst the surveyed companies (by thirteen and twelve out of twenty respectively), followed by application / software development and IT infrastructure services, each being rendered by ten companies out of twenty. Other services in the respondents’ portfolios include: procurement, order administration, collection, human resources, logistics, marketing, testing, document management, research and analytics and others, as stated in the chart above.

In addition to the core services provided, some of the companies surveyed provide additional support to their customers, such as master data management, compliance and audit support, consultancy and process reengineering services.

In line with the overall growth in the Romanian outsourcing market, more than a half of the respondents increased their portfolio of services comparing to last year (eleven out of twenty companies), while nine companies maintained their portfolio. None of the companies surveyed saw a contraction in their activity compared to 2013.


Geographical area spread for the provided services

Changes to the geographical spread in 2014 vs. 2013

Most frequently, services are provided to clients located in Europe, North America and Romania.

However, the geographical spread covers also South America, Africa, CEE, Asia Pacific as well as the Middle East, but to a lower extent.

The geographical spread increased in 2014 compared to 2013 for more than a third of the companies surveyed, while there was no change, either positive or negative, for the others.

Geographical spread for the provided services


Client industries

Split of companies by client industries

The most frequently encountered clients are from the Technology & Telecoms,

Automotive, Consumer Services and Goods sectors.

The services are provided to clients operating in a large number of industries.

The most frequently encountered clients are from the Technology & Telecoms, Automotive, Consumer Services and Goods sectors. Other clients come from of the Banking, Insurance and Financial Services, Industrial Goods and Energy, Utilities and Basic Materials sectors.

A lower number of respondents provide services to clients operating in other industries, as detailed in the chart above – Health Care, Media & Entertainment, Airlines and so on.

A further two industries were mentioned by the participants: Furniture and Retail & E-commerce.


Main technologies used

Outsourcing companies are focused on increasing the efficiency of the services provided, while maintaining costs at acceptable levels.

Over the last few years, the importance of IT tools and applications used in delivering services has constantly increased, as a significant mean of generating added value to clients. The IT tools and applications which are used varies from well-known ERP applications to in-house built IT solutions. Irrespective of whether they cover a wide range of activities (e.g. SAP, PeopleSoft), or are specialized in certain specific ones (e.g. Readsoft, ticketing systems), they are all meant to support and facilitate delivering timely and high-quality services.

The most frequently encountered ERP application is SAP, used by seven out of eighteen respondents that detailed the technologies implemented. Various CRM, ticketing, workflow, OCR and even programming tools are also used by the participants in the survey.

Call centerapplication

Peoplesoft Read Soft CRM tools

LivePerson

PBX

JDE Avaya Siebel SAP

Sharepoint Microsoft-basedWeb-basedapplications

Ticketingsystems

UCMSHR & Pay

SPSS

Cisco CADWorkflow

tools


A specific feature of the outsourcing industry is that the services are rendered mostly in the original language of the clients. Consequently, language proficiency varies according to the company profile and the geographical spread of its clients. As most are located in Europe and the USA, English and other important European languages are used in the process of delivering services.

Besides English, the other languages most encountered are German, French, Spanish and Italian followed by Russian, Portuguese, Dutch and Czech. A few companies also mentioned Hungarian, Polish, Greek, Turkish and Serbian as languages used in their activities. Furthermore, some of the companies deliver services in Slovak, Finnish, Swedish, Norwegian, Hebrew, Arabic, Croatian, Danish, Estonian, Lithuanian and Latvian, but to a considerably lesser extent.

Languages used in managing processes

The main languages used in managing processes and supporting customers

are English, German, French, Spanish and Italian.

The number of foreign languages used in the normal course of business ranges

from two to twenty-two languages spoken within the same company.


Performance indicators and benchmarking activities

To measure their performance, the companies calculate and track various indicators.

The most preferred ones are time and volume indicators, but great emphasis is placed on measuring customer satisfaction, cost indicators and team workload.

Benchmarking of activities is common practice amongst outsourcing companies, helping service providers to position themselves against their clients or overall on the outsourcing market. The benchmarking methods used to the greatest extent by the participants in the survey are between group entities or externally against client metrics.

Most of the respondents use more than one benchmarking method.

Performance indicators


Value added services

Clients expect better, more efficient and innovative solutions from their service

providers. Consequently, value added services are a key differentiator on the

outsourcing market.

Project management, processes reengineering, business analysis and

consulting services are the most frequently provided value added services.

Nowadays, SSCs and BPOs act more as business partners to their clients rather than only as service providers. Besides transactional operations, value added tasks are consistently transferred, increasing the complexity of Romanian outsourcing companies.

The added value services rendered vary with the type of business services supplier and also with the type of client. More than three quarters of the respondents provide project management services, while more than half assist their clients with business process reengineering, business analysis and consulting services.

Value added services provided


Certifications and programs implemented

Fifteen out of the total number of twenty respondents have obtained at least one specific certification. The most frequently encountered certifications are those related to:

• Environmental (ISO 14001)

• IT (ISO 27001, PCI DSS)

• Quality Management Compliance (ISO 9001)

Other certifications obtained, but to a lesser extent, are CMMI, SSAE 16 / ISAE 3402.

With the exception for two companies that did not make this information available, the other eighteen respondents have various programs implemented to support delivery of high-quality services. The most preferred programs are related to quality improvement, customer satisfaction and innovation. Other programs include monitoring continuous improvement, process optimization, as well as Software Delivery Maturity & Transparency programs.

Specific certifications

Programs in place


Innovations

Innovations

Accomplishing innovation with operational processes is one of the main drivers for the outsourcing industry and a catalyst for growth. The long lasting economic downturn has forced clients to increase pressure on prices and raised their expectations of receiving more efficient processes.

About half of the respondents have either patented or non-patented innovations implemented. Six respondents use patented innovations such as SEP SM or patents held by the parent company for some industry specific in-house tools and processes.

Additionally, four participants in the survey have non-patented innovations, related mainly to automation of manual work, HR software solutions and performance management software solutions.

One of the companies has both patented and non-patented innovations



EMPLOYEEinformation

Industry report/ 21 Employee information

Number of employees, gender distribution and average age

Number of employees

In terms of headcount, the respondents are generally large companies, only three of which have less than 100 employees, while nine companies out of twenty hire more than 500 employees. The total workforce employed by the participants in the survey counts for about 12,500 employees.

For eighteen of the respondents, more than 75% of headcount are own full time employees, while the other two respondents reported less than 25% of own full time employees.

Nineteen out of twenty companies provided information about the gender distribution, female employees being in a majority in most of the companies. Only three companies (i.e. two ITOs and one BPO) have a different gender distribution, with male employees being in a majority. The overall average shows that female employees are approximately 64% of the total number of employees, whilst man represents for the remaining 36%. For the above mentioned ITOs and BPO, the percentage of male employees varies between 58% and 97%.

The majority of the companies reported an average age for employees between 25 and 35 (eighteen out of nineteen companies provided this type of information). Only one company has an average age for its employees of less than 25.


Annual workforce growth

Annual workforce net growth during last three years

Annual workforce forecast net growth



During each of the last three years the surveyed companies recorded net growth in the number of employees, more than half registering an increase of up to 30% of their headcount each year, proving once again that the outsourcing industry is developing rapidly in Romania.

In 2011 only, one of the respondents reduced its number of staff, but the generating reasons have not been made available to us.

The forecasted net growth in headcount for the current year and the next two years is in line with the ambitious development plans of all the participants in the survey.

About three quarters of the respondents expects to maintain the trend of headcount increase of up to 30% over the next three years.


Attrition rate and tenure distribution

Attrition rate

Average attrition rate considering seniority in the company

The attrition rate represents the degree of voluntary and involuntary departure from the company workforce.

The majority of the surveyed companies registered an attrition rate of less than 30%. Only two BPO companies had an attrition rate higher than 40%. One of these two respondents had an average age for its workforce of less than 25 years old. The low level of maturity of the workforce could be an explanation for the high attrition rate.

As a trend, we have observed that in most of the companies, a significant part of the attrition rate is determined by employees with an employment period in the company of less than one year – amongst the total number of leavers, an average of 39% were in their first year with the company. However, with higher percentage was reported by eight of the total respondents.

An average of 27% of the leavers were in their second employment year with the company, with higher percentages in six of the surveyed companies.


Employee satisfaction survey, number of employees supervised per manager

Yearly employee satisfaction survey

Average number of employees supervised per manager

Employees are amongst the main assets of a services company, consequently management emphasize on their needs and expectations. Almost all the companies have implemented or intend to adopt an yearly employee satisfaction survey. However two respondents do not find useful such a tool and do not intend to develop one in the near future.

All the respondents, without exception, have introduced performance management systems to assess and evaluate either the individual performance, group performance or both.

The number of employees supervised per manager varies from less than 10 to more than 25.

Most commonly, companies appoint a manager / team leader for every 10 to 20 employees.



Level of education

Average education level

The average educational level of employees is university degree for twelve out of the fourteen surveyed companies that disclosed data on this subject. Two companies mainly employ people holding a master’s degree (70% of the total number of staff). The number of employees with bachelor’s degrees ranges from 20% to 95%, with the most frequent percentages being between 60% and 80%.

Employees holding an advanced degree represent up to 70% of the total number of employees, with the most encountered percentage being between 10% and 30%.



Classification of companies based on the certifications held by employees

Employees have various types of knowledge and competences as certified by national or international diplomas. The type of certifications depends on the employees’ professional profile, but are mainly related to business analysis, project management, financial topics, computer and internet technology, marketing and the supply chain.

As expected for outsourcing companies, the majority of the headcount are proficient in various foreign languages.

Foreign languages, financial, business analysis and project management

certifications are held by the employees of more than 50% of the surveyed

companies.

Professional certifications


The most common languages spoken by employees of the surveyed companies are English, German, French, Italian, Spanish and Russian.

Seventeen out of twenty companies provided information about the percentage of employees proficient in various languages. Amongst these companies, the percentage of English language speakers ranges between 10% and 100%, with most scoring more than 80%.

To a considerable lesser extent, German and French are also encountered amongst the respondents’ employees. The percentage of German speakers ranges between 1% and 50%, with the most observed value around 17%, while the number of French speakers range between 12% and 75%, the most observed value being around 35%.

Other common language proficiencies reported are in Italian, Spanish, Russian and Portuguese.

A very limited number of employees are proficient in Dutch, Polish, Czech, Greek, Swedish, Slovak, Finnish and Hebrew.

The markets are growing and new services will be provided to new clients, consequently the need for companies to hire foreign language speakers is increasing. Eight respondents assume that their needs in term of language proficiency will remain stable in the near future. Twelve respondents mentioned they will mainly hire speakers of French, Italian, Spanish, German, Russian, Turkish, Swedish, Norwegian, Dutch, Slovak, Czech and Arabic.

Foreign languages spoken by employees

Languages spoken by employees

Language proficiency needs


Seniority level of employees

Employees total seniority level follows the same pattern for almost all the companies which participated in the survey. The top management, is the most experienced, with a total seniority level usually of more than 10 years. However, few companies have top managers with a cumulative work experience of between 5 and 10 years. In terms of work experience, middle management follows closely the top management, most of the middle managers having a total work experience of 5 to 10 years. Operational personnel are the least experienced, most of them having up to 2 years work experience.

Although there are some newly hired managers (one of the respondents entire team of top managers had a maximum 2 years seniority in the company), the tendency is for this category of personnel to have broad experience, with more than 5 or even 10 years in the surveyed company. For three out of thirteen participants detailing the age pyramid, more than 80% of the top management has more than 10 years experience in the company, while for another five respondents, more than 60% of them have 5 to 10 years.

Middle management usually has lower experience with the company compared to the top managers, most of them being in the company for 5 to 10 years.

Seniority of operational personnel is low, most of them being with the company for less than 5 years, with a significant proportion of them for even less than 2 years.

Seniority in the company

CategoryTop Management

Middle Management

Operational personnel

Seniority in the company<1 year1-2 years2-5 years5-10 years>10 years

<1 year1-2 years2-5 years5-10 years>10 years

<1 year1-2 years2-5 years5-10 years>10 years

Min5%

10%6%0%0%

5%4%

15%6%3%

14%14%10%

0%1%

Max25%

100%42%

100%100%

22%67%90%

100%40%

54%61%53%42%16%


Professional competences

The professional competences encountered in each of the companies are in line with the services provided. Out of the total respondents, 17 companies have employees with process improvement competences, a critical factor in increasing the efficiency of the company’s activity.

The outsourcing companies typically have assembled a pool of human resources

with diverse skills and competences.

As they are focused on providing value added services to their clients, efficient

solutions and innovation, while maintaining costs at acceptable levels,

companies have employees who develop strong competences in process

improvement.

The range of competences also includes IT programming and support, finance,

human resources, procurement, order administration and others.

Considering that finance & accounting covers a significant share of the total services provided, strong competences in accounting services (statutory accounting, IFRS) can be found in about half of the respondents. Fourteen out of the total respondents reported competences in provisioning of IT support services, while eleven reported competences in IT programming (out of which ten combine IT programming with IT support services).

Twelve companies reported competences in procurement and order administration, while ten companies have competences in employment and HR compliance. To a lesser extent, fiscal legislation, labor law and environmental compliance competences can also be found.

Other competences briefly mentioned by some of the respondents relate to social responsibility compliance and more specialized HR activities.

Professional competences


Training programs for top and middle management

Category of training programs addressed to top and middle management

Average yearly training cost per top or middle manager

As they are promoters and drivers of development and delivery of high-quality services, top and middle managers are subject to various training programs in all the respondent companies (nineteen out of the total of twenty companies).

The greatest emphasis is placed on leadership skills, performance management and project management. Additionally, more than half the companies provide training courses related to various professional qualifications, negotiation skills, manager coaching, language competences, emotional intelligence and stress management.

Induction training courses are provided to top and middle management by about 79% of the respondents (fifteen companies).

Other trainings offered include management specific courses, international MBA programs as well as training in various sales techniques.

The yearly amount allocated for the training of a top or middle manager per year ranges between EUR 500 and EUR 1,000 for most of the respondents.



Training programs for operational personnel

Category of training programs addressed to operational personnel

Average yearly training cost per operational employee

During the last few years, the outsourcing market has recorded significant growth and the expected trend for the next few years is similar. To improve employees skills and competences, various formalized training programs are implemented by nineteen of the participants to the survey, distinctively customized for different categories of staff – top and middle management, and operational personnel.

The most common type of training provided to operational employees is the induction course, which is taken by all immediately after they are hired.

Great emphasis is placed on technical and foreign language trainings. Eighteen and sixteen companies respectively provide these types of courses to their employees. However, the training programs also contain courses dedicated to the development of employees’ soft skills (such as communication, time management, leadership and others).

The average training cost per year and per employee vary with the company, but most tend to allocate an amount of up to EUR 500 for each operational member of staff.



Given the expansion of activities recorded during the last few years and

considering the estimated increase for the next few years, the recruitment of

appropriate staff represent a challenge for outsourcing companies.

Various documents and tests are used in the recruitment process, with the

most common being collection of CVs and analysis as well as interviewing of

candidates. Other documents and tests are used, but to a lesser extent.

Recruitment documents and tests

Collection and analysis of CVs as well as interviewing of candidates are the most preferred documents / tests used by the participants in the survey during the recruitment process. The interview is ranked as the most important by nine of the companies and second by eight of them, while CVs were ranked first by seven of the respondents.

Recruitment of new employees has not been an easy process so far. Finding the required number of employees, with the appropriate mix of professional competences and language proficiency has challenged recruiters.

Main documents and tests used during the recruitment process, ordered descending by their importance by the participants in the survey are:

CVs

Interviews

Referencesfeedback

Practicetests

Certificates,diplomas

Letter ofintent

Personalitytest

Technicaltests

1 5

2 6

3 7

4 8


During the recruitment process, the most preferred tools are considered the

Internet, referrals and participation at careers fair.

Recruitment tools

Various recruitment tools are used during the recruitment process.

Main recruitment tools used during the recruitment process, ordered descending by their importance by the participants in the survey are:

The Internet is by far the most preferred tool, sixteen companies ranking it with the highest score. Referrals are ranked second by twelve of the respondents, while recruitment following participation and presentations at career fairs is ranked third, by ten of the respondents.

To a lesser extent, presentations given at universities and highschools are found useful by some of the companies.

Other tools were mentioned in questionnaires, such as working with recruitment companies and guerilla marketing / headhunting.

InternetHighschool/university presentations

Postersand flyers

Local andnational newspaper

Referrals

Career fairs 63

2 5

1 4


Considering the specific characteristics of the outsourcing industry, finding the appropriate personnel is not always an easy task.

65% of the participants (thirteen companies) consider most difficult to find candidates with the appropriate matching mix between technical knowledge and foreign language capabilities.

Lack of matching language capabilities required in delivering services to clients is another constraining factor during the recruitment process noted by 45% of the participants (nine companies).

To a lesser extent, insufficient technical knowledge and lack of matching skills are obstacles many employers face during the recruitment process.

Twelve participants in the survey consider the quality of education to have been unchanged over the last few years, while five participants noted a decline and only one company noted an improvement.

Talent pool

Difficulties in finding the appropriate personnel

Education output trends


FINANCIALperformance

Industry report/ 36 Financial performance

Turnover

Classification of companies based on turnover


With the exception of one company, which recorded a decrease in turnover in 2012 vs. 2011, all reported constant or increased turnover over the analyzed period, supported by expansion of activities and broadening of the client base.

The total turnover generated by all the participants in the survey ranges in 2013 between EUR 185 million and approximately EUR 260 million. The total turnover was computed by totalizing minimum values and maximum values of all ranges where companies positioned themselves.

The number of companies generating turnover higher than EUR 15 million has increased from six in 2011 to nine in 2013.

About 40% of the participants in the survey recorded a turnover of less than EUR 5 million for the period 2011-2013 and 25% of the surveyed companies generated a constant turnover higher than EUR 20 million over the entire period.

Industry report/ 37 Financial performance

Turnover and state budget tax contributions

Financial performance overview for 2013

Out of the fifteen companies that provided information on the amount of tax paid to the state budget (except VAT), 67% of the participants, i.e. ten companies, paid taxes in 2013 to state budget of more than half a million EUR, without VAT, while another 13% of them (two companies) paid taxes ranging between EUR 200 and EUR 500 thousand.

Taxes up to EUR 200 thousand were paid by three participants in the survey.

The total taxes (except VAT) paid by all the participants in the survey ranges in 2013 between EUR 5.55 million and approximately EUR 6.35 million. The amounts were computed by totalizing minimum values and maximum values of all ranges where companies positioned themselves.

C1C2C3C4C5C6C7C8C9

C10C11C12C13C14C15C16C17C18C19C20

Turnover(million EUR)

5-1015-20

<5<5<5

>205-10<5

15-205-10<5

15-2015-20

<5<5

>20>20>20>20

10-15

Taxes paid to state budget, except VAT

(thousand EUR)>500>500<50

no info>500

no info>500

200-500no info

100-200200-500

>500>500

no info>500>500

no info50-100>500>500


BUSINESSenvironment

Industry report/ 39 Business environment

Romanian business environment

Assessment of the business environment in Romania

During the last few years, Romania has become an attractive market for the outsourcing industry. Good availability of qualified resources, high language proficiency and a low cost labor market have placed Romania on the global outsourcing market.

Language availability, the quality of human resources (in terms of professional quality, work ethic, open mindedness, innovation), the cost of doing business and cultural adaptability are the criteria rated highest by most of the participants in the survey.

Government support is ranked poor or fair by almost all the respondents (“poor” by 45% of the respondents and “fair” by another 45%) and is also the criteria with the lowest ratings out of all the criteria listed above.

Romania is ranked low in terms of ease of doing business, probably also due to the fact that the business environment is specific to an economy in transition. When asked to rate the ease of doing business, companies were asked to consider the level of bureaucracy, the general business environment and the maturity of services and supplies. Considering these factors, 60% of the companies rated Romania at a fair level. Average ratings were given to the Romanian business environment in terms of globalization and legal maturity as well as the security and privacy of data and intellectual property.

Competition on the market is perceived as strong by more than half of the respondents. With the increased number of outsourcing companies on the market and with the expected growth of the already existent ones, the necessity of providing more efficient services has became a main driver for all the companies surveyed.

Indicator

Language skills

Government support

Infrastructure for SSC/BPO/ITO

Quality of human resources

Cost

Ease of doing business

Cultural adaptability

Globalization and legal maturity

Data & intellectual property

security and privacy

1 - poor

8

2

1

3 - good

6

1

6

7

12

5

5

7

4

2 - fair

8

4

2

12

1

7

6

4 - very good

10

1

7

11

5

1

8

2

7

5 - excellent

4

2

1

6

2

1


Regulatory environment

Regulatory and public policy changes

Number of companies subject to special regulation

Regulatory and public policy changes have an impact on the Romanian outsourcing industry and the way business is conducted. Opinions about changes vary amongst the participants, 35% of them considering changes to be frequent, while another 25% perceive them as being too frequent. However, 35% of the respondents (seven companies) stated that they had managed regulatory changes successfully.

Out of the total number of participants in the survey, nine companies are subject to special laws and regulations like Data privacy and protection laws, HR legislation, ISO, PCI DSS or SSAE 16 standards.



Areas of legislation with negative impact

Areas of legislation with positive impact

The legislative framework in Romania is constantly changing and coping with these changes is sometimes challenging.

As they are characterized by a variety of processes, activities and way of doing business, outsourcing companies have different opinions about the impact of various factors which affect their day-to-day activity.

Fiscal and labor legislation have a negative impact on the business of twelve and eleven of the respondents respectively, while they have a positive impact on the activity of other two companies.

Other areas with a negative impact mentioned by some of the respondents, although some of them exceeding the legislative area, are: data protection legislation (mentioned mainly by the ITOs), lack of government incentives, limited access to the EU funds and bureaucracy in dealing with the state authorities.

On the opposite side, government incentives and data protection legislation have a positive impact on the activity of five and three companies respectively.


Asked to state which legislative and fiscal changes that would determine them to transfer more business to Romania, the companies surveyed mentioned:

• Increased fiscal incentives

• More flexibility in hiring and terminating individual labor agreements

• More flexibility in arrangements for night shifts

• Decreased taxation of labor

• Facilities for increasing the headcount

• Lower social security / corporate taxation charges / VAT

• Access to various grants and subsidies

• Contributions to training/additional professional qualifications such as SAP certification

• Increased government support.

Fiscal and labour legislation improvements, corroborated with access to

various grants and subsidies, would boost investments in Romania.

INVESTMENTS

BOOSTINVESTMENTS

Fiscal and labour legislation

Grants and subsidies


The contacts at KPMG in connection with this report are:Richard PerrinPartner, Advisory Services

Tel: + 40 744 557 302Fax: + 40 372 377 [email protected]

Andrada IliescuManager, Advisory Services

Tel: + 40 747 333 003Fax: + 40 256 499 361 [email protected]

The contacts at ABSL in connection with this report are:Alexander WeiglPresident, ABSL in Romania

Tel: + 49 1511 4751 [email protected]

Cătălin G. CiupercescuProject Manager, ABSL in Romania

Tel: + 40 720 313 [email protected]

CONTACT


Date post:	05-Dec-2021
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