The office is dead - long live the office!

It seems like you can't open a business magazine or a blog about professional services these days without reading one of two arguments: that the pandemic has killed the office – or that the pandemic has shown us more clearly than ever how crucial offices are for the future of business.

My take? Both sides are right – and that’s good news for the future of shared services centres in central Europe.

Let’s start with the argument that the office is dead. Certainly for the majority of white-collar jobs, the past 12 months or so of lockdowns and distancing have proven that technology is now good enough that they can be done anywhere, regardless of where your co-workers are located.

That’s good news for the shared services industry, because thus far perhaps the biggest barrier to moving jobs to SSCs has been a psychological one: the mindset that says “that job could never be moved offshore.” Today the pendulum has swung to the opposite extreme: people are asking “If it can be done in a basement in the commuter belt of our headquarters city, why not in a basement in the suburbs of Budapest?”

Well, they’re half-right. The pandemic has taught us that many jobs can indeed be moved out of headquarters. But the other way the pandemic is reshaping the future is by teaching us the value of keeping certain teams together in a central location.

Obviously, security concerns are one reason for doing so; in fact, many jobs that involve handling critical data have never left the office, and the employees who perform those tasks have never stopped commuting. A more fundamental reason, though, is productivity. While people in certain jobs thrive in isolation, others see a massive benefit from sitting together in the same space and learning from each other. It’s about intangibles like building a team culture, a community, and a sense of shared responsibility for the work, and it’s also a rather simple risk-management issue: there are growing stories of situations where employees who were working from home simply neglected key duties.

In the future, some of the people in such jobs may spend, say, 30% of their time working at home, or even as much as half. But the work will still be organised around the basic principle of people coming together in a common physical location to get things done.

What does all this mean for the central Europe of tomorrow? The future looks bright for the shared services industry here, which has been growing by 15-20% in recent years, driven by a combination of new companies arriving and existing ones growing by moving higher up the value chain. New projects continued to flow in last year despite Covid-19, particularly in financial services and FMCGs – two sectors that were hit less hard by the pandemic. Recent private equity acquisitions of CEE based (yet global) software developers show as well the great potential in technology.  And as the economy picks up steam, we expect a surge in interest.

What makes the region so attractive? There are several factors, including proximity to western European markets, lower labour costs and a highly skilled workforce, thanks in part to the region’s universities, which continue churning out qualified graduates every year. We’re also seeing a cluster effect, where specialists congregate in particular cities or regions, which in turn attracts more companies from the same industry, in a virtuous circle of growth.

Another reason CEE stacks up well against the competition is because of European clients’ need for employees who speak European languages – something that’s harder to find in competing regions such as India or the Philippines. And despite all the talk about how Covid-19 has changed everything, the world is still round. Time zones are still a thing. It’s hard enough to find a team of 25 German speakers in Manila, let alone a team of 25 German speakers who want to work in the middle of the night. There are good reasons why most multinationals have at least three centres, for the Americas; Europe and Africa; and Australasia. And Covid-19 has done nothing to change that.

As less sophisticated jobs are automated or move to lower-cost locations, CEE centres continue moving up the value chain, adding new services; one area in which we’ve been seeing growth is in marketing, sales support and reporting functions. And growth isn’t just driven by companies moving operations here from their home markets. They’re also choosing CEE as the location for services they’re building from scratch. Data science is a good example – and one where once again the region’s high-quality educational systems are giving it an edge.

Projects are distributed around the region roughly in proportion to countries’ populations, with a slight edge for Poland: its 38 million people are about 40% of the total population of the 10 central European EU members, but the country pulls in roughly half the projects, largely because its population is distributed over several centres rather than concentrated in the capital city. The cluster effect is also at work here: investments by a certain industry can be a reason for competitors to show up as well.

Ultimately, the bright future of shared services in CEE also means a promising future for hundreds of thousands of young professionals who work in the industry, which offers high-quality, well-paid jobs and long-term career paths. Economically speaking, it’s also a sector that leaves money in the region: for the multinationals they serve, SSCs are cost centres. All the more reason to hope that governments in the region will wake up and realise how much they could help the sector with just a few simple initiatives, such as incentives for hiring disabled workers or training older ones. That would be a true example of future thinking – and a tangible silver lining of the pandemic.