AIBESTas a trusted, innovative, socially responsible and a growth driver for our economy – is now...

ANNUAL INDUSTRY REPORT

2019

AIBESTAssociAtion for innovAtion, business excellence,

services And technology

AIBEST ANNUAL INDUSTRY REPORT 2019

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CONTENTS


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CONTENTS

Key highlights

1. Overview of Bulgaria as a sourcing destination

2. Factors affecting the business services industry

in Bulgaria

2.1 Cost of doing business

2.1.1 Taxes

2.1.2 Labour costs and salaries

2.1.3 Electricity prices

2.1.4 Internet speed and connections

2.1.5 Standard and cost of living

2.2 Office space

2.3 Talent pool

2.4 Global rankings

3. Profiles of Bulgarian cities as sourcing locations

4. Vendors landscape

4.1 Distribution of companies by segment

4.2 Sourcing locations

4.3 Distribution of companies by incorporation date

4.4 Distribution of companies by country of origin

of the investors

4.5 Distribution of companies by geographic scope

of services provided

4.6 Foreign languages used in sourcing

4.7 Shared Service Centres

4.8 Long-term investments

5. Employment structure

5.1 Total and FTE employment

5.2 BPO sector employment

5.2.1 Voice-based BPO

5.2.2 KPO

5.2.3 FAO

5.2.4 HRO

5.2.5 Other BPO

5.2.6 SSC

5.3 ITO sector employment

6. Market size

6.1. Total turnover in the sourcing industry

6.2. ITO sector turnover

6.3. BPO sector turnover by segments

6.4. Average revenue per employee

6.5 Most dynamic companies

7. Costs

7.1. Cost structure

7.2. Tax expenses

8. Profits and profitability

8.1. ITO Sector

8.2. BPO Sector

9. Industry trends

9.1. Corporate investments

9.2. Forecasts

10. Report concept and methodology

11. List of companies researched for the purpose

of this report

List of abbreviations

List of figures

Sources

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About Aibest

Association for innovations, business excellence, services and technology (AIBEST), previously Bulgarian Outsourcing Association (BООOA), is an independent industry organization representing the modern business services and technology sector in Bulgaria.

Focused on developing the country as a leader in knowledge-intensive products, services, solutions, and as a globally recognized destination for educated talent, AIBEST is an ecosystem of companies from across the industry – technology companies and providers of value-adding services related to BPO, ITO,

KPO, LPO, HRO and others.

For more information:

About SeeNewsSeeNews is an independent provider of business news and market intelligence for Southeast Europe. As a one-stop-shop with over 15 years of expertise SeeNews gives a 360-degree perspective on Southeast Europe, helping the customers to make informed business decisions. SeeNews provides market moving news and analyses for business, finance and industry professionals. The news stories keep the customers ahead of the curve, while the market research and company intelligence give actionable insights. SeeNews delivers bespoke market research, focused on emerging markets around the globe.

For more information:

phone: +359 2 8012 630

e-mail: [email protected]

www.seenews.com

This report was commissioned by the Association for innovations, business excellence, services and technology (AIBEST) and prepared by SeeNews, a consultancy delivering company profiles, market reports and analysis for the emerging markets. The views and opinions expressed in this report are those of the author and do not necessarily represent the views of the Association, nor does the report anticipate decisions taken by the Association.

Association for innovations, businessexcellence, services and technology


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phone: +359 87 704 2142

e-mail: [email protected]

www.outsourcinginbg.com


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Dear readers, We have come a long way since the establishment of the Bulgarian Outsourcing Association in 2012 and achieved many of the goals we set back then. Our vision – to make outsourcing a leading industry in Bulgaria and position it as a trusted, innovative, socially responsible and a growth driver for our economy – is now fulfilled. Our industry has grown by 19.5%* and our contribution to Bulgaria’s GDP has reached 5.2%* (*2018 VS 2017). Bulgaria ranks first in terms of attractiveness as an outsourcing destination in Southeast Europe, according to the Global Services Location Index for 2019. This is well-deserved recognition and the result of the quality of our globally competitive products and trust of our partners worldwide.

We take part in significant transformations. We create trends. Technology and innovation undoubtedly change our business, the environment that we operate in and the role we play. From an almost entirely cost-oriented industry, we are now an industry that creates added value through innovation, technology, product development, modern business services and solutions, marketed far beyond the borders of our country. We aim to develop Bulgaria as a leader in knowledge-intensive

products, services, solutions, and a globally recognized destination for educated talent. Our target market is the world.

The evolution and rapid growth of the industry is a clear sign that it is time to take a step forward. We need a strong new voice.

As one of the largest employers in the country, we must take even greater responsibility for our society. It is the weight of our social and economic footprint that drives the development of Bulgaria’s middle class. Our young people need to see meaning in their work, to have a clear career path, and to work with a cause.

What we have achieved and will continue building on with our development strategy is now limited by the term “outsourcing”, traditionally used to describe our business. To continue growing, we must have a solid platform for an ecosystem that attracts the right skill- and mind-set, and partners and partner organizations in and out of Bulgaria.

This is the reason why our 2019 Annual Industry Report is signed with our new name: AIBEST – Association for innovation, business excellence, services and technology.

Ilia Krustev, Chairman of the Managing Board, AIBEST


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Key highlights

AIBEST 2019 Annual Industry Report includes data about 583 Bulgarian companies engaged in business process sourcing (BPO) and information technology sourcing (ITO). Based on the analysis of the data we identified the following highlights for the development of Bulgaria’s sourcing industry in the five-year period 2014-2018:

• In 2018, sourcing contributed 5.2% to Bulgaria’s real GDP, or EUR 2.4 bln. The industry is growing substantially faster than the national economy and by 2022 its turnover will almost double both in terms of value, to EUR 4.8 bln, and as a share of the economy, to 9.2%. The Bulgarian sourcing providers performed impressively as the industry’s growth rate in 2018 reached 19.5%, compared to the 15.8% forecasted in the last year’s edition of our report.

• The sourcing industry is becoming an important contributor to the national economy in tax terms as well. In 2018, it paid EUR 24.2 mln in taxes or by EUR 8.6 mln more than in the previous year. The industry’s tax contributions accounted for 2.1% of all taxes paid in the economy, compared to 1.4% in 2017. Sourcing providers spend on average 1.0% of their operating revenue on taxes.

• Sourcing companies continued to raise salary expenses in 2018 and accounted for 8.5% of the total salary costs in Bulgaria, up from 8.1% in 2017. The industry’s social security contributions followed the trend, accounting for 7.0% of the national total, compared to 6.3% a year earlier. These shares are expected to grow further by 2022.

• SSC was the segment with the highest annual labour costs per company, amounting to EUR 12.3 mln, or five times more than the industry’s average of EUR 2.3 mln. The picture was similar in terms of social security contributions, where the average sum per SSC company stood at EUR 1.8 mln, while the value for the industry averaged EUR 0.339 mln. The SSC dominance stems from their larger size and higher wages in sophisticated knowledge-intensive activities. Shared service centres nearly doubled their number compared to the previous edition and numbered 22 with a trend for further growth in the short run.

• The sourcing industry employed 73,694 end-of-year (EoY) employees and 66,565 full-time employees (FTEs). By 2022, the number of FTEs in sourcing is expected to reach 80,000. BPO continued to boast the majority of the employment in the industry, accounting for 69.3% of the total FTEs in 2018.

• The market is divided almost equally between BPO and ITO with the latter represented by 293 companies or just three more than the BPO number. In last year’s edition of the report, the BPO had the lead with more than 51% of the companies.

• In terms of operating revenue, however, BPO continued to lead, accounting for 58.0% of the total sum in 2018. The ITO vendors added the remaining 42.0% and their share inched up in comparison to the previous year.

• In 2018, the annual growth of the industry’s operating revenue accelerated to 19.5% from 18.1% in 2017 as a consequence of the industry’s untapped potential and the continuing transition towards more complicated knowledge-intensive and value-added activities. Forecasts based on the compound annual growth rate in the period 2014-2018, show a persistent rise in company numbers and aggregate revenue by 2022.

• Sourcing continued to be a profitable industry – its 2018 net profit totalled EUR 174.3 mln, and after two years of decline, it grew by 57.4% year-on-year. BPO contributed with 61.4% to the total result and also had the edge in annual growth terms by reporting a net profit nearly two times higher than in 2017, while ITO’s net profit jumped by 36.1%.

• The foreign customer base of Bulgaria’s sourcing providers continued to be dominated by clients from Western Europe, the UK, and the USA as the main overseas market.


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1. OvERvIEw Of BULgARIA as a sourcing destination

Fig. 1 - Bulgaria Factsheet 2018

Area GDP Real Annual Growth Rate

Unemployment

Other Major Cities

Population GDP per capita (EUR, current prices)

Average Monthly Wage

Form of government

Currency

Exports

Average Annual InflationTaxes

Capital

Labour Force

FDIMembership

110 994 sq km 3.1%

5.2%

Plovdiv, Varna, Burgas, Ruse

7 025 0377 842

EUR 574

Parliamentary Republic

Bulgarian lev (BGN), pegged to the euro at BGN 1.95583

EUR 29.9 bln

2.8%Corporate tax - 10%; Income tax - 10%; VAT - 20%

Sofia

3.326 million people

EUR 1.744 blnEU, IMF, NATO, UN, WTO

BULGARIA MACROECONOMIC INDICATORS


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Fig. 2 - Bulgaria Economy Forecast

Unemployment rate (% of total labour force)

Inflation, average consumer prices (y/y change in %)

Volume of exports of goods and services (y/y change in %)

Volume of imports of goods and services (y/y change in %)

Gross domestic product, constant prices (y/y change in %)

2

3

4

5

6

2019 2020 2021 2022 2023

Bulgaria continues to rank highest among the global services locations in Southeast Europe (SEE), outscoring all rival offshoring destinations. According to the 2019 edition of management consulting firm A.T. Kearney’s Global Services Location Index, Bulgaria went down two spots to the 17th place but maintained its leading position in SEE. The index ranks the 50 most attractive destinations for business services worldwide based on criteria such as financial attractiveness, people and skills availability, business environment and digital resonance in each country. Bulgaria’s best performance was on the financial attractiveness criterion. The country is also highly competitive globally in terms of business environment. However, it faces serious challenges in the areas of people availability and digital skills.

Additionally, the country has a well-developed telecommunications infrastructure, with Internet connection speed being among the fastest in SEE. Information security and privacy regulations are in accordance with existing EU legislation. Bulgaria offers well-educated and highly-skilled professionals in the areas of information technology and languages, but in order to match the demand for labour force and keep up with the sourcing sector development on a European level, the talent pool with suitable skills needs to be expanded.

As an EU-member, Bulgaria is highly integrated into the European economy. Its currency is pegged to the Euro, which guarantees a stable business environment as well as zero exposure to foreign exchange risks. Thanks to the flat 10% corporate and personal income taxes, Bulgaria has some of the lowest operational costs in the region.

Source: International Monetary Fund - World Economic Outlook Database - April

2019

%

20 clients

4 locations


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2. fACTORS AffECTINg ThE business services industry in bulgaria

Bulgaria’s 10% corporate tax is the second lowest in the EU. Hungary is the only member state with a lower tax rate, of 9.0%. The corporate tax rate in Bulgaria is more than two times lower than the EU-average of 21.3%. Among the coun-

2.1 cost of doing business

2.1.1 taxes

Fig. 3 - Corporate Tax Rates in Southeast Europe

Source: Trading Economics

tries in Southeast Europe, Bulgaria ranks second, along with North Macedonia, Kosovo, and Bosnia and Herzegovina, which also have a 10% corporate tax. Montenegro tops the chart with a tax rate of 9.0%.

Albania Bulgaria Croatia Kosovo North Macedonia

Moldova Montenegro Romania Serbia SloveniaBosnia and Herzegovina

15.00%

10.00% 10.00%

18.00%

10.00% 10.00%

12.00%

9.00%

16.00%15.00%

19.00%

SOFIATECHONE


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In 2018 Bulgaria had the lowest average hourly labour costs across the EU. Official statistics show that in the year under review, the hourly labour cost in the country was EUR 5.4 on average. This is more than five times lower than the EU-28 average of EUR 27.4. However, Bulgaria is gradually catching up with the rest of the member states since its labour costs increased to 19.7% of the EU-28 average from 18.3% the previous year. Bulgaria’s closest competitors in the SEE region have considerably higher average hourly costs. Romania had average costs of EUR 6.9 in 2017, while Croatia and Slovenia had even higher costs - EUR 10.9 and EUR 18.1, respectively.

As far as the average monthly net wage in the economy is concerned, Bulgaria ranked fourth in the region with EUR 562 in 2018, up from EUR 524 in the previous year. While wages in the sourcing industry are getting significantly higher, Bulgaria’s competitive advantage over the other European countries remains. However, Bulgaria counts among the countries with the most expensive sourcing talent within SEE. In 2018 the average monthly gross salary in the information technology and communications sector stood at EUR 1,390, growing considerably faster than the average for the economy, by 8.9% on the year. Among the other countries in the region, only Slovenia offered higher IT salaries.

Bulgaria’s electricity prices for industrial consumers are lower than the EU-28 average. In 2018 the average electricity price, including all taxes and levies, was EUR 0.10 per kWh, compared to EUR 0.14 per kWh for EU-28. The electricity rate for Bulgarian industrial consumers was among the 10 lowest in Europe and was more expensive only than that of North Macedonia and Montenegro among the SEE states.

Bulgaria offers favourable cost of living compared to the other major SEE countries, as measured by the Cost of Living Index by the database of user contributed data Numbeo. Bulgaria is on par with Romania and Serbia and considerably cheaper than Slovenia and Croatia. Countrywise, significant differences in the cost of living exist between Sofia and the other large cities, which is an opportunity for cities with more favourable cost structure like Plovdiv and Varna to attract workforce and investors.

2.1.2 labour costs and salaries

2.1.3 electricity prices

2.1.5 standard and cost of living

2.1.4 internet speed and connections

Bulgaria’s broadband internet speed was among the best in SEE, on par with Slovenia, Romania, Serbia and Croatia, and in the Top 50 globally in 2019, according to the Worldwide Broadband Speed League. In terms of average price per megabyte, Bulgaria offers by far the cheapest internet in the region and the seventh cheapest in the world.

2.2 office space

The centre of the Bulgarian sourcing industry Sofia has competitive rental rates for prime office premises. With EUR 15.0/sq m per month in June 2019, the prime office rents in the Bulgarian capital were below the average among the sourcing destinations in the SEE region. Outside the central business district of Sofia, class A office rates varied between EUR 13/sq m and EUR 14/sq m, while class B rates were as low as EUR 8.0/sq m to EUR 11/sq m depending on the location of the office space within the city.

The second most important sourcing location in the country, Plovdiv, features one of the lowest prime office rents in SEE, at EUR 9.0/sq m. However, its annual growth was twice as fast as that of Sofia. Rental prices in Sofia were slightly higher than those in Zagreb, Ljubljana and Skopje and approximately equal to Sarajevo and the large Romanian cities outside Bucharest. They remain lower than in Belgrade – EUR 17.0/sq m and Bucharest – EUR 18.0/sq m. Monthly prime rates in Tirana and Podgorica are the highest in SEE, standing around and above EUR 20/sq m. The comparisons are based on data of realtors Colliers International, BNP Paribas Real Estate and CBS International.

While an undisputed leader in Bulgaria, Sofia is also among the top locations in terms of total office space in SEE, second only to Bucharest and considerably ahead of Zagreb, Ljubljana and Belgrade. Bulgaria’s capital had 2.202 million sq m of office space, of which 1.925 million sq m class A and B, up by 7.3%


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Fig. 4 – Major Office Space Projects in Sofia Launched or Under Construction in 2018-2019

Richhill Business Centre 27 700 sq m completed Mladost 4Sofia

Space Tower

17 000 sq mcompleted

Tsarigradsko ShoseSofia

Synergy Tower

32 160 sq munder construction: Q3 2021

Tsarigradsko ShoseSofia

Adora Business Centre

10 500 sq mcompleted

Mladost 4Sofia

Advance Business Centre

32 000 sq munder construction: 2020

Mladost 4Sofia

Bulgaria Mall Tower B

18 500 sq m completed Bulgaria Blvd.Sofia

Garitage Park Building A

27 700 sq m completed

Mladost 4Sofia

Plovdiv Plaza 10 400 sq m completed Plovdiv

Kamenitsa Office Park

10 500 sq munder construction Plovdiv


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2.3 talent pool

Fig. 5 – Population Aged 20-34 in Major Bulgarian Cities by Year

150 000

100 000

50 000

0

200 000

250 000

300 000

350 000

2014 2015 2016 2017 2018

Plovdiv Varna Burgas Veliko TarnovoSofia Source: NSI

Bulgaria’s total workforce stood at 3.326 million people at the end of 2018, a decrease of 0.9% compared to the previous year. Out of them, 613,923, 2.7% less than in 2017, were aged 20-34 and based in the five best developed cities of the Bulgarian sourcing industry. The young population decreases faster in smaller cities, partially due to migration to the capital or abroad.

In 2018, Burgas marked the sharpest decrease, of 4.0% y/y, followed by Veliko Tarnovo with 3.9% and Varna with 3.0%. The capital Sofia and the second largest Bulgarian city Plovdiv also suffer from declining youth labour force compared to 2017, although at a slower pace, of 2.3% and 2.4%, respectively.

If we look at the five-year trend, the demographic problem becomes evident. Between 2013 and 2018 the five leading sourcing centres in the country lost considerable share of its population aged 20 – 34, from 8.7% in Sofia to 13.8% in Burgas.

Bulgaria has a well-developed educational system. It spans a wide network of secondary schools with an intensive focus on languages, mathematics and science as well as 51 universities across 14 cities. Out of them, 38 offer majors related to the sourcing industry, which is the second highest number in SEE behind Romania.

Bulgarian students are among the best-performing globally at technology and science high school competitions.

y/y as of June 2019. Total take-up (all leasing transactions on the market) reached 66,780 sq m, while 404,000 sq m of offices were under construction. Once again, the sourcing sector was the primary demand driver in H1 2019, with IT and sourcing companies accounting for more than 45% of the overall office space demand.

The sourcing sector is expected to continue to push office development up in the short run. In the first half of 2019, more than 107,000 sq m of office space was completed and another 454,000 sq m was planned in Sofia. Vacancy rates notched up to a total of 9.9% and 9.0% for class A premises only, due to the record high build-up of office space launched in January-June 2019. Vacant space is scarce in the city centre, while in suburban areas, where most new projects are located, the rental rate is considerably higher. However, in the medium term shortage of class A space is expected, caused by still high demand from IT and BPO companies.

Additionally, an emerging interest in office space in other cities, such as Plovdiv, Varna, Burgas and Veliko Tarnovo) is observed. Especially Plovdiv and Varna are considered by investors as increasingly attractive options for second and third locations.

The number of sourcing vendors, based in the three most popular locations in Sofia, is almost three times higher than the total number of BPO and ITO providers based in all other Bulgarian cities. In 2018 more than half of all Sofia-based sourcing vendors were located in the city centre, Mladost district (including Business Park Sofia and the foothills of Vitosha Mountain, around Sofia’s ring road) or Tsarigradsko Shose Blvd.

The top areas in Sofia in terms of new space in H1 2019 remained Tsarigradsko Shose Blvd. and Business Park Sofia, where more than 80% of the newly launched office space is located. The third most popular area was Hladilnika, which is expected to be the major hotspot of office construction in the next three to five years according to MBL. After 2022 the bulk of office buildings development will be concentrated along Tsarigradsko Shose Blvd. and in Hladilnika, followed by the eastern parts of the city. The central business district, Business Park Sofia and the areas next to Sofia Airport and along Bulgaria Blvd. will witness negligible expansion of the office space due to the limited availability of land plots. The main roads and the neighbourhoods with good transport access account for more than 90% of the planned office developments in the capital.


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Fig. 6 – Number of Schools and Universities Preparing Students for Potential Outsourcing Jobs in 2019/2020

Fig. 7 – Prizes for Bulgaria from International High School Competitions in October 2018 - September 2019

Number of Schools and Universities Preparing Students for Potential Outsourcing

Source: Countries’ ministries of education

AlbaniaBulgaria Croatia KosovoNorth Macedonia

Moldova Montenegro Romania Serbia Slovenia Bosnia and Herzegovina

44

3835

20 19 18 1714 12

9 8

Mathematics

Informatics

Gold Silver Bronze

Gold Silver Bronze

34 76 49

Language Schools 102

High Schools of Mathematics, Science and Economics

129

Universities in Language, Economics or IT Majors 38

9 17 23

Approximately 80% of the population at working age has secondary or higher education. In the last five years more than 10,400 Bulgarian students graduated in computer science, software development and mathematics. In 2018/2019 around 12,000 students were enrolled in these majors. In 2018 there were 54,480 university and college graduates and over 20,000 of them could be suitable employees for the sourcing industry.

In an effort to match higher education to the needs of the sourcing industry, the Association for innovation, business excellence, services and technology (AIBEST) launched in 2019 a master’s programme in sourcing jointly with the Sofia University.

Fig. 8 – Graduates Potentially Suitable for Outsourcing by Year and Field (%)

7.9% 7.3%3.1%

81.7%2014

9.1% 7.4%3.0%

80.5%2015

8.2% 7.6%3.2%

80.9%2016

10.8% 6.7%3.6%

78.9%2017

11.0% 6.7%4.1%

78.2%2018

Economics and business administration

Mathematics and information technologyMedia and communication

Language studies

Source: NSI

The language skills of Bulgaria’s labour force are still insufficient in comparison to the other European countries. Eurostat data shows that 50% of the working age population speaks at least one foreign language, which is considerably below the EU average of 64.5% and lower than all SEE countries except Romania. This share reaches 60% in the 25-34 years age group. Bulgaria is the SEE country with the lowest share of people aged 25-34 who speak two or more foreign languages.

English is by far the most popular language among secondary school students. More than 87% of them learn English, which is the lowest value among the SEE countries. In the 2018 edition of the English Proficiency Index Bulgaria ranked fifth among the participating six SEE nations. The other most common foreign languages included German, Russian, French and Spanish.

Another area where Bulgaria’s human capital needs significant improvement is the STEM (Science, Technology, Engineering, and Mathematics) skills. Major challenges for Bulgaria include lack of adequate IT skilled workforce and national strategies to


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combat the low interest and high dropout rates in STEM studies. A positive trend in the country is the rapid development of private initiatives for adult and formal secondary IT education.

The performance of high school students in Bulgaria in technical and language skills as measured by the latest PISA Mathematics, Science and Reading test was above the SEE average, only behind Slovenia and Croatia, but in the lower half of the global ranking – 45th out of 70 countries.

2.4 global rankingsBulgaria and Romania, as the only representatives of SEE in the 2019 edition of the Global Services Location Index, continued to slip down the ranking mainly on inadequate people skills availability and low digital resonance. Bulgaria went down two notches and, although outpacing the former European leader Poland, lost its second place on the continent after being outperformed by the UK, Estonia, Lithuania and Germany. The factors that pushed Bulgaria and Romania behind are mostly

World Press Freedom Index 2019

Forbes Best Countries for Business 2019

Corruption Perceptions Index 2018

Democracy Index 2018

Doing Business 2019

Economic Freedom of the World 2018

E-Government Development Index 2018

Environmental Performance Index 2018

Euro Health Consumer Index 2018

Global Gender Gap Index 2018

Global Innovation Index 2019

Global Peace Index 2019

Global Services Location Index 2019

Human Development Index 2018

Index of Economic Freedom 2019

Globalization Index 2018

International Property Rights Index 2018

Logistics Performance Index 2018

Prosperity Index 2018

The Global Competitiveness Index 2018-2019

The Open Budget Index 2017

The Venture Capital & Private Equity Country Attractiveness Index 2018

World Competitiveness 2019

Business Process Outsourcing and Shared Service Location Index 2016

Fig. 9 - Positions of SEE Countries in International Rankings

180

180

180

35

50

190

193

162

161

167

163

149

189

180

137

125

160

149

140

115

125

63

157

48

56

21

51

47

52

63

31

37

51

17

26

40

18

31

30

47

46

59

46

77

46

111

129

Bulgaria

Total countries in ranking

connected with the comparatively weak digital skills of the population. At the same time, the biggest gainers were the most technologically developed countries in Western Europe and North America, which implies that the new crucial factor for a country to keep up with the rest as a sourcing location is investment in digital skills.

Among the traditional factors, Bulgaria continued to suffer from diminishing and hard to find qualified labour force paired with increasing ITO and BPO wages, leading to deterioration of the compensation costs attractiveness component. The positive signs come from the solid infrastructure, stable economic and political systems and strategic location, which attracted the World Bank to invest in a shared services centre in the country.

In most of the other international rankings related to the social and economic situation, Bulgaria ranks ahead of the other SEE countries, especially in competitiveness, innovation and globalization. Democracy, economic freedom and business environment are the other merits of Bulgaria, while in terms of health, human development, press freedom and corruption it falls behind most of its neighbours.


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Fig. 10 – Number of Sofia-headquartered outsourcing companies by segment

Other locations of Sofia-based outsourcing companies

3. PROfILES Of bulgarian cities as sourcing locations

Sofia

BPOSector

ITOSector

239

2250

76

65

8 16

KPO

VBPO

HRO

BPO - SSCFAO

Other BPO

ITO

1713

11

44

5 5

16 Veliko Tarnovo

Veliko Tarnovo

Other locations in Bulgaria


Other international locations

Other international locations

17

24

16

754

4

9

Plovdiv

Plovdiv

Ruse

Ruse

Varna

Varna

Burgas

BurgasUK

USA

Companies based in other locations with offices in Sofia

BPOSector

ITOSector

Blagoevgrad

Veliko Tarnovo

Varna

Peshtera Burgas

Gabrovo

VarnaPlovdiv

Pazardzhik

6

1

1

1

1

1

2

2

2

SOFIATECHONE

SOFIATECHONE


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Headcount of Sofia-headquartered companies

Main foreign languages used in Sofia-basedoutsourcing companies

Number of students enrolled in outsourcing-related majors in Sofia in 2018

Number, headcount and turnover of Sofia-based companies

FAO

355

9 575

2 699

13 579

11 638

5 435

18 644

HRO KPO SSC VBPO Other BPO

ITO

Computer science

Language studies

Economics

70.8%

22.2%

7.0%

German

French

English

76.1%18.3%

11.3%

Total number of students: 35 790

327

35 384

1.446 366

43 247

1.438 417

50 005

1.598444 474

57 031

61 925

1.885 2.230

Headcount

Operating revenue hh(EUR bln)

Number of companies

The sum may exceed 100% as a company may use more than one foreign language

2014 2015 2016 2017 2018


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Fig. 11 – Number of Plovdiv-headquartered outsourcing companies by segment

Other locations of Plovidv-based outsourcing companies

Plovdiv

SofiaBelgium

Companies based in other locations with offices in Plovdiv

BPOSector

ITOSector

20

2

1

2

5

2

1 2

Burgas

Pazardzhik

Veliko Tarnovo

Sofia

17

11

1

Blagoevgrad

Troyan

Gabrovo

Sofia

16

11

1

KPO

VBPO

HRO

FAO

Other BPO

ITO

BPOSector

ITOSector


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Headcount of Plovdiv-headquartered companies

Main foreign languages used in Plovdiv-basedoutsourcing companies

Number of students enrolled in outsourcing-related majors in Plovdiv in 2018

Number, headcount and turnover of Plovdiv-based companies

Computer science

Language studies

Economics

German

French

English

75.0%15.6%

6.3%


2014 2015 2016 2017 2018

Headcount

Operating revenue (EUR mln)

Number of companies

FAO HRO KPO SSC VBPO Other BPO

ITO

72

63

026

811

719

14.21621 29 30 32

1 267

1 547

1 728

33.947 43.02454.435

27

993

23.193

12.2%

19.1%

68.8%

819



24

Fig. 12 – Number of Varna-headquartered outsourcing companies by segment

Other locations of Varna-based outsourcing companies

Varna

Companies based in other locations with offices in Varna

BPOSector

ITOSector

ITOSector

Sofia

12

13

21

6

BPOSector

Sofia Sofia

Veliko Tarnovo


International locations

6

6

6

3

16

1

Burgas

Gabrovo

Teteven

Veliko Tarnovo

Sofia11

1

1

17

VBPO

HRO

FAO Other BPO

ITO


25

Headcount of Varna-headquartered companies

Main foreign languages used in Varna-based outsourcing companies

Number of students enrolled in outsourcing-related majors in Varna in 2018


ITO

369

0 0 0

1 192

153 148

Number, headcount and turnover of Varna-based companies

Computer science

Language studies

Economics

German

French

English


2014 2015 2016 2017 2018

Headcount


Number of companies

1 862

58.191

28.74722.25716.06413.109

1 442

1 2471 196

1 057

2926221932

76.5%14.7%

14.7%

19.3%

80.7%

0.0%



26

Fig. 13 – Number of Veliko Tarnovo-headquartered outsourcing companies by segment

Other locations of Veliko Tarnovo-based outsourcing companies

VelikoTarnovo

Companies based in other locations with offices in Veliko Tarnovo

BPOSector

ITOSector

ITOSector

Sofia

Varna

BPOSector

Plovdiv Varna

Sofia

1

Sofia

VBPO

Other BPO

ITO

4

2

1

1

2

6

44


27

Headcount of Veliko Tarnovo-headquartered companies

Main foreign languages used in Veliko Tarnovo-based outsourcing companies

Number of students enrolled in outsourcing-related majors in Veliko Tarnovo in 2018


ITO

0 00 0 3

122

160

Number, headcount and turnover of Veliko Tarnovo-based companies

Computer science

Language studies

Economics

German

Chinese/Japanese

English


2014 2015 2016 2017 2018

Headcount


Number of companies

1.046

137

6 6 7 7 7

209

276

299

285

1.791 3.238 6.347 4.567

71.4% 28.6%

14.3%

9.5%

11.5%

79.0%The sum may exceed 100% as a company may use more than one foreign language


28

Fig. 14 – Number of Burgas-headquartered outsourcing companies by segment

Other locations of Burgas-based outsourcing companies

Burgas

Companies based in other locations with offices in Burgas

BPOSector

ITOSector

ITOSector

Plovdiv

Veliko Tarnovo Sofia



Varna Plovdiv

Sofia Ruse



BPOSector

Plovdiv Sofia

Slanchev Bryag

Sozopol

Varna

Vietnam

1

Varna

VBPO

Other BPO

ITO

52

1

1 1

1

1

1

19

16

108

26

22 20

19

128

23

28


29

Headcount of Burgas-headquartered companies

Main foreign languages used in Burgas-based outsourcing companies

Number of students enrolled in outsourcing-related majors in Burgas in 2018


ITO

0 00 0 2

59

12

Number, headcount and turnover of Burgas-based companies

Computer science

Language studies

Economics

Russian

English


2014 2015 2016 2017 2018

Headcount


Number of companies

7.6723.3122.6822.5162.496

5

41

49

53

59

73

5 57 8

75.0%

12.5%


39.9% 52.0%

8.1%


30

%

4. vENDORS landscape

4.1 distribution of companies by segment

In terms of number of companies, there is almost complete parity in the Bulgarian sourcing industry. The intensive recent development of ITO gave slight advantage to this sector with 293 companies against 290 BPO providers. The BPO sector contains voice-based BPO, FAO and HRO services, shared service centres, KPO, research and data processing and similar activities. Voice-based BPO and HRO providers continued to dominate the BPO sector with 101 and 73 companies,

Fig. 15 - Number of Companies by Segment and Size in terms of FTEs

respectively. Shared service centres nearly doubled their number compared to the previous edition and numbered 22 with a trend for further growth in the short run.

We have not included segmentation for the ITO sector due to the high integration of activities - software development, networking solutions, software support and consultancy.

2017 2018

50-249 50-249>249 >24910-49 10-49<10 <10

ITO BPO HRO VBPO KPO FAO SSC Other BPO

95 94

38

34

4 32

13

23

18

6

3

4

13

4

3

1

6

6

3

26

18

10

15

11

7

77

60

40

103

57

16

ITO BPO HRO VBPO KPO FAO SSC Other BPO

93 106

3944

4

415

10

12171

1626

6

3

20

12

61

68

10 16

6

3 23

1643 8 13 3 1 6

��

��

��

��

��

��

��

��

��

��

��

��

��

��


32

4.2 sourcing locations

The Bulgarian sourcing industry is almost exclusively concentrated in Sofia - 81.6% of the vendors are headquartered in the capital, which is a slight annual decrease from 83.6% in 2017. The remaining 107 vendors have their headquarters in 21 other Bulgarian cities. Bulgarian sourcing companies operate 166 secondary offices in 22 cities and towns in the country, as well as 51 units in 28 foreign countries. In all the leading industry centres outside the capital - Varna, Plovdiv, Burgas, Veliko Tarnovo and Ruse, there were more secondary offices than headquarters. This is a sign of the expansion of activities of Sofia-based vendors throughout the country.

Fig. 16 - Major Cities by Number of Sourcing Companies

Headquarters Secondary officesSecondary offices

A growing number of Bulgarian BPO and ITO providers open offices abroad. Bulgaria-based sourcing companies have the greatest number of offices in the UK - nine, followed by the USA, Germany, North Macedonia, the Netherlands, Spain, Austria, Israel, Romania and the Philippines. Other Bulgarian sourcing companies with more notable international presence were ITO provider Scale Focus AD with offices in seven countries and voice-based BPO vendor ES Bright Consultants OOD with foreign offices in four countries.

Sofia

Plovdiv

Varna

Burgas

Veliko Tarnovo

Ruse

Blagoevgrad

Stara Zagora

Gabrovo

Shumen

Pleven

Haskovo

Pazardzhik

Botevgrad

Karnobat

Kazanlak

Vidin

Bankya

Levski

Mezdra

Montana

Peshtera

Silistra

Svilengrad

Teteven

Troyan

Kozloduy

Slanchev Bryag

Sozopol

Smolyan

Vratsa

Yambol

476

34

32

8

7

4

4 3

3

2

5

1

1

1

1

1

1

1

1

1

1

1

1

1

1

22

22

1

1

3

1314

14

39

37

21

1

1

1

1

1

1

Bulgaria Abroad

UK

USA

Netherlands

N. Macedonia

Germany

Spain

Austria

Philippines

Romania

Israel

Italy

Belgium

France

Switzerland

Australia

Canada

Czech Republic

Egypt

Ghana

Greece

India

Kenya

Mexico

Poland

Serbia

Singapore

UAE

Vietnam

9

5

3

3

32

2

2

2

2

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1


33

4.3 distribution of companies by incorporation date

The sourcing industry in Bulgaria has been one of the fastest developing sectors for the last decade. More than half of the companies have been established since 2012 and 39% of all vendors were set up in the period 2014-2018 alone. Most of the companies established in this period were in the BPO sector – 121 against 106 ITO providers. After the peak between 2014 and 2016, culminating with 60 companies established in 2016, the dynamics in the industry slowed down to 35-40 new vendors per year due to the gradual market saturation.

In 2018 and the first half of 2019, new sourcing companies were established in five Bulgarian cities. Three of every four new set-ups were located in Sofia, followed by Varna, Plovdiv, Blagoevgrad and Burgas. Thus, despite the trend of expansion outside the capital city, Sofia remains the most preferred location among investors, while Varna continues to establish itself as the second most important Bulgarian sourcing location at the expense of Plovdiv.

Fig. 17 - Number of Sourcing Companies by Year of Establishment

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

4

2

4

2

3

4

4

7

7

11

9

4

11

15

20

25

32

37

24

29

30

34

34

47

49

60

34

37

4


34

4.4 distribution of companies by country of origin of the investors

Sourcing vendors owned by local individuals or legal entities prevail in the structure of the industry in Bulgaria. As of September 2019, 309 companies, or 53.0% of all sourcing providers analyzed in the current report, had Bulgaria-based majority owners. ITO prevailed among domestically majority owned vendors with 162 companies, while 147 companies were active in BPO operations.

The remaining 274 sourcing companies had foreign majority owners, originating from 43 countries. The sectoral structure

of foreign-owned sourcing companies differed from that of the domestically owned ones and BPO dominated with 143 providers compared to 131 ITO companies. More than half, or 140, of these companies were owned by entities based in the UK, the USA, the Netherlands or Germany. While most sourcing vendors with direct owners from the UK and the Netherlands were engaged in BPO, investors from the USA and Germany concentrated clearly in the ITO sector, as well as those from France, Switzerland and Canada among the smaller nations.

Fig. 18 – Number of Sourcing Companies with Foreign Majority Owners

UK

USA

Netherlands

Germany

Cyprus

Israel

France

Switzerland

Belgium

Austria

Ireland

Serbia

Canada

Italy

Luxembourg

Romania

Slovakia

Turkey

Finland

Ukraine

Cayman Islands

Costa Rica

Denmark

Gibraltar

Hungary

India

Malta

Norway

Virgin Islands

Armenia

Brazil

Czech Republic

Greece

Hong Kong

Kyrgyzstan

Latvia

Marshall Islands

Curacao

Russia

Spain

Sweden

Syria

UAE

20

22

15

13

9

6

6

7

3

2

2

5

3

1

1

3

1

1 1

2

25

14

20

11

9

8

3

2

4

3

3

1

4

3

3

1

4

2

3

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

2

2

2

2

ITO BPO


35

4.5 distribution of companies by geographic scope of services provided

The constantly broadening foreign customer base of the Bulgarian sourcing companies is dominated once again by Western European and UK clients. A total of 263 Bulgarian BPO and ITO vendors provide their services to foreign clients, mainly such based in the UK, Germany and the Netherlands in Europe, plus the USA, where 92 companies have clients. One in six Bulgarian companies in the industry has US-based partners, while every ninth sourcing company in Bulgaria is active in the UK and German markets.

In addition, the Bulgarian sourcing industry maintains relationships with customers in another 57 countries worldwide. The other most important customer regions are Central Europe, represented above all by Austria and the Czech Republic, Southern Europe and the Middle East, represented by Cyprus, Turkey, Malta and Israel, as well as the leading Asian economies China, Japan, India and South Korea.

Fig. 19 - Number of Sourcing Companies Servicing Foreign Markets

USA

UK

Germany

Netherlands

Switzerland

France

Austria

Belgium

Italy

Canada

Ireland

Sweden

Australia

Cyprus

Norway

Turkey

Czech Republic

Israel

Romania

South Africa

Spain

Denmark

Finland

Japan

Poland

South Korea

Malta

Russia

China

India

Serbia

Slovakia

Belarus

Greece

Hungary

Iceland

Luxembourg

New Zealand

Slovenia

UAE

Ukraine

Bahrain

Bermuda

Bosnia and Herzegovina

Virgin Islands

92

85

67

33

28

23

21

17

15

14

13

9

7

7

7

7

6

6

6

6

6

5

5

5

5

5

4

4

3

2

2

2

2

2

2

2

2

2

1

1

1

3

3

3

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

Chile

Croatia

Georgia

Gibraltar

Kazakhstan

Kuwait

Latvia

Liechtenstein

North Macedonia

Malaysia

Mexico

Oman

Philippines

Portugal

Tunisia

Vanuatu

Sofia

Varna

Plovdiv

Top 3 cities / Top 3 Clients` Countries

USA77 62 56

UK Germany

USA8 6 3

UK France

Germany7 5 4

UK Netherlands


36

4.6 foreign languages used in sourcing

Foreign languages are crucial components of the companies’ activity and an important indicator. Bulgarian sourcing vendors cover 33 foreign languages from around the world. English is the working language in 439 companies, or 49.0% of all sourcing entities in the country. It is by far the most widely

used foreign language in Bulgaria. German and French follow with shares 11.2% and 6.8% respectively. The other popular foreign languages in the sector include Spanish, Turkish, Dutch, Russian, Polish, and Swedish.

Fig. 20 - Foreign Languages Used by Bulgarian Sourcing Companies

English

German

French

Italian

Spanish

Turkish

Dutch

Russian

Swedish

Polish

Portugese

Hungarian

Romanian

Greek

Czech

Arabic

Chinese

Norwegian

Danish

Finnish

Hebrew

Serbian

Japanese

61

23

12

42

439

15

10

44

19

12

24

12

100

15

9

7

6

4

4

6

4

5

4

Sofia

Varna

Plovdiv

Burgas

VelikoTarnovo

Top 5 cities / Top 3 Languages

6

5

English362 87 54

German French

26 5 5French

24 5

1

2

2

1

French

Chinese/Japanese

English

English

English

English

German

German

Russian

German

N/A

3

3

2

2

1

3

2

2

1

1

Korean

Estonian

Slovak

Hindi

Lithuanian

Croatian

Catalan

Latvian

Macedonian

Slovenian


37

4.7 shared service centres

4.8 long-term investments

Shared service centres are the most rapidly developing sourcing segment in Bulgaria in the last five years. The most prominent recent new entries include the World Bank Group, global media Financial Times and German retailer Lidl. Bulgaria is the second most important SSC location in Southeast Europe after Romania, since SSCs are still present only in the larger and more mature sourcing markets in the region.

As an emerging SSC hotspot, Bulgaria has attracted global technology companies fueling the development of the sourcing industry with their shared services centres in Sofia, and increasingly in cities such as Varna, Plovdiv and Burgas. A growing number of manufacturing and trading companies also operate SSCs serving their local and global financial, IT and HR operations either as part of the company structure, or as separate legal entities.

The Bulgarian sourcing vendors analysed in the report invested a total of EUR 87.3 mln in long-term assets in 2018. That represented an annual rise of 5.6%, significantly lower than the previous year’s jump of 17.0%. Segmentwise, SSC was the leading sourcing segment in terms of total investments in long-term assets with EUR 42.0 mln, or almost half of the

The major competitive advantage of Bulgaria over its neighbours, excluding Romania, in this sourcing segment is the availability of skilled labour force. SSCs generally fall in the medium-sized or large-enterprise category and rely on a wide pool of talent, which is readily accessible only in larger countries and big cities. Thus, Bulgaria competes only with Romania as a potential location of US-based and Western European companies for their regional operations. However, Bulgarian SSC segment is expected to reach faster saturation, given the still limited pool of talent compared to Romania. In order to achieve sustainable growth in the SSC segment, inflow of suitably skilled talent into the national workforce is necessary.

overall investments in the industry. The bulk of the investments were made by three segments, which accounted for more than 90.0% of the aggregate figure for the industry. SSC, ITO and VBPO largely invested in acquisition of own real estate to suit their high personnel numbers, while smaller companies in the FAO and HRO had negligible long-term investments.

Fig. 21 - Investments in Long-Term Assets (mln EUR)

VBPO

HRO

KPO

FAO

ITO

SSC

Other BPO22.991

46.922

27.088

31.376

42.019

0.223 0.462 0.816

1.702

0.6011.415

1.627 1.919 1.295 3.188

0.255 0.143 0.172 0.920 0.290

16.605

18.407

27.448

32.534

26.043

2.529

5.7758.202

11.295 11.215

1.5703.134

5.051 3.612 3.986

2014 2015 2016 2017 2018

10

0

20

30

40

50


38

5.1 total and fte employment

5. EmPLOYmENT structure

The dynamic development of the sourcing sector in Bulgaria is reflected by its constantly growing number of employees. In the period 2014-2018 they grew by a CAGR of 15.1%. In 2018 Bulgaria’s sourcing industry registered a headcount of 66,565 full-time employees, up by 5,643 compared with 2017. The largest annual increase, of 14.0%, was observed in the ITO sector. Thus, it employed 20,403 people and accounted for 30.7% of the overall full-time employment in the industry. The BPO sector added 3,134 FTEs to its headcount, or a 7.3% y/y rise, and reached a share of 69.3% of the total sourcing industry employment. Voice-based BPO occupied 19.4% of the

industry’s full-time employment and added a total of 12,906 persons in 2018, up by 10.6% y/y. Shared service centres continued their rapid expansion by an annual rate of 11.3% and had a headcount of 13,579 people. Despite being the only segment to record a decrease in the number of FTEs, HRO was the third largest employer in the BPO sector with a headcount of 9,582. The 4.1% annual drop was caused by the split of one of the largest players in the segment, Adecco Bulgaria EOOD, which saw more than 1,000 employees of the company move to the newly created ITO provider Modis Bulgaria EOOD.

Fig. 22 - Full Time Employees in the Outsourcing Industry

2014 20162015 2017 2018

50 000

45 000

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

0

10 7547 119

8 90010 288 11 673 12 906

7 105

8 4439 278

9 9889 582

1 795

1 9422 319

2 590 2 763

720

706704

741 738

7 453

8 425

9 972

12 19913 579

2 871

4 322

5 363

5 837

6 594

13 825 15 426 17 894 20 403

VBPO

HRO

KPO

FAO

SSC

ITO

Other BPO


40

VBPO

HRO

KPO

FAO

SSC

ITO

Other BPO

Fig 23 - End-of-year Employees in Sourcing Industry

At company level, 13 entities had more than 1,000 FTEs in 2018, compared to 11 in the previous year, which bears witness to the gradual consolidation in the industry and outlines the trend for expansion of the largest players. Enterprise Services Bulgaria EOOD, a spin-off from Hewlett-Packard Global Delivery Bulgaria Center EOOD, continued to be the largest sourcing employer with 3,126 FTEs in 2018. Callpoint New Europe AD with 2,464 employees outpaced the HRO provider S Group Human Capital EOOD, which saw a decline in its personnel and ranked third with 2,395 employees. Sutherland Global Services Bulgaria EOOD marked the sharpest increase

* Shared service centres of companies, active in industries other than sourcing, which are not separate legal entities and generate less than half of the company’s operating revenue, are not taken into consideration in the rankings, unless the exact number of employees in the SSC unit is specified.

2014 20162015 2017 2018

60 000

50 000

40 000

30 000

20 000

10 000

0

10 17613 296 14 794

19 32522 031

6 1029 782 10 783 13 603 15 331

7 018

9 4359 762

11 54010 738

1 997

2 1602 402

2 955 2 744

763

761748

792 659

7 418

8 5199 127

12 03614 974

2 630

4 6245 345

6 521

7 217

among the companies with more than 1,000 employees. In 2018 it grew by more than a third of its 2017 headcount, and passed the 2,000 mark. The new entries among the companies with over 1,000 FTEs were Cargill Bulgaria EOOD with its SSCs in Sofia and Varna and Modis Bulgaria EOOD.

In terms of end-of-year (EoY) employment, the sourcing industry grew by 10.4% y/y to 73,694 employees as of end-2018. The BPO EoY headcount represented 70.1% of the total, or 51,663 persons, while the remaining 29.9%, or 22,031 employees, were active in ITO companies.

In 2018 the ratio between the FTEs and EoY employees (FTEs/EoY) stayed unchanged on the year at 0.90, but significantly down from 1.01 in 2016, which indicates increased employment on a part-time basis.


41

Fig. 24 - Top 10 Sourcing Companies by Number of FTEs in 2018

Enterprise Services Bulgaria

Callpoint New Europe

S Group Human Capital

Sutherland GSB

IBM Bulgaria

Trenkwalder

Adecco Bulgaria

60ОООK

SiTel Bulgaria

Hewlett-Packard GDBC

Other Companies

3 1262 464

2 3952 002

1 7871 636

1 3581 329

1 316

1 129

50 557

In terms of average headcount in a company, Sofia reported the highest value among the eight Bulgarian cities hosting the headquarters of more than one sourcing vendor. In 2018 an average of 148 employees worked in Sofia-based sourcing companies. Out of the largest 25 employers in the industry, 24 were based in the capital and one in Plovdiv – the BPO provider SBTech (Global) Limited - Bulgaria Branch. Varna ranked second among the locations with highest average headcount

with 78 employees per company, followed by Plovdiv with 66. In the other five major locations, the profile of the average company was small, with personnel varying between 41 FTEs in Veliko Tarnovo and eight FTEs in Blagoevgrad. This ranking reflects the concentration of large-scale operations almost exclusively in Sofia, and to a lesser extent in the other two big cities Plovdiv and Varna, while the other centres in the industry are home to predominantly small ITO and HRO providers.

Fig. 25 - Average Number of FTEs per Company by Location

Sofia

Varna

Plovdiv

Veliko Tarnovo

Gabrovo

Ruse

Burgas

Blagoevgrad 8

10

12

29

41

66

78

154


42




Sutherland GSB

Trenkwalder

Adecco Bulgaria

60ОK

SiTel Bulgaria


Ingram Micro SSC

Other Companies

5.2 bPo sector employment

Fig 26 - Top 10 BPO Companies by Number of FTEs in 2018

Fig. 27 - Top 10 VBPO Companies by Number of FTEs in 2018

3 126

2 464

2 395

2 002

1 636

1 358

1 329

1 316

1 129

1 068

31 244

5.2.1 voice-based bPo

The VBPO segment increased the number of FTEs by 1,233 (10.6% y/y growth) to 12,906 people and was the second largest employer within the BPO sector in 2018. In terms of EoY employment, VBPO recorded a 12.7% annual rise to reach 15,331 employees as of December 2018. All Top 10 vendors

in the segment were in the group of large companies with personnel of more than 250 persons, and the three largest companies had headcount exceeding 1,000 - Callpoint New Europe AD, 60KhО EAD and SiTel Bulgaria EOOD.


60KО

SiTel Bulgaria

Concentrix Services Bulgaria

TTEC Eastern Europe

C3i Europe

Tek Experts

Convergys International

Bulgaria

SiteGround Hosting

Regiocom

Other Companies

2 464

1 329

1 316

959820

668548

480

416

366

3 540


43

Fig. 28 - Top 10 KPO Companies by Number of FTEs in 2018 Fig. 29 - Top 10 FAO Companies by Number of FTEs in 2018

5.2.2 KPo 5.2.3 fAo

The KPO segment encompassed 19 companies with 2,763 FTEs in 2018. Compared to 2017, its FTEs went up by 6.7% y/y. As of December 2018, EoY employees totalled 2,744 or 211 people fewer than a year earlier. The drop is due to the sharp decrease in the EoY employees of GfK Bulgaria, Market Research Institute EOOD, which numbered 483, or by 321 persons fewer than in December 2017 and by 134 below the average annual value for the company. It was one of the three large companies with personnel over 250 to dominate the segment’s headcount, along with the leader Experian Bulgaria EAD and A Data Pro OOD.

The FAO remained the smallest employer in the BPO sector with 738 FTEs in 2018, which was 0.4% down y/y. As of December 2018, EoY employees totalled 659 or 133 people fewer than a year earlier. TMF Services EOOD, the second largest FAO employer in FTE terms in 2018, was responsible for the drop, as its EoY value stood by 121 persons below the average annual headcount. FAO is the most consolidated segment in terms of employment with the Top 3 vendors occupying 82.8% of the overall segment headcount. The leader Taxback EOOD alone employs exactly half of the people engaged in FAO activities.

Experian Bulgaria

GfK Bulgaria

A Data Pro

EXL Services Bulgaria

Isobar Commerce

J&T Services

Cquest Research and

Consulting

833

617353

195

189

134

93

7663

44 166

Indeavr

Sibiz Bulgaria

Premier Research Germany

Other Companies

369

125

117

56

15 15 13 8 7 7 6

Taxback

TMF Services

Safecharge Bulgaria

SB Co EAD

Vest Corporate Services

Tungsten Network

Cycle Credit Bulgaria

ANC

VerdeTax

BPO Bulgaria

Other Companies


44

Fig. 30 - Top 10 HRO Companies by Number of FTEs in 2018Fig. 31 - Top 10 Other BPO Companies by Number of FTEs in 2018

5.2.4 hro 5.2.5 other bPo

HRO reported a 4.1% y/y decline in the number of FTEs in 2018, as the companies from the segment have lost an aggregate of 406 full-time employees since 2017, when a total of 9,988 FTEs were employed in the HRO segment.

The total EoY headcount as of end-2018 stood at 10,738 people, which represents an annual decrease by 802 persons, or by 6.9%.

More than 75% of the companies in the HRO segment had 100 employees or less. At the same time the three largest HRO providers - S Group Human Capital EOOD, Trenkwalder EOOD and Adecco Bulgaria EOOD employed more than half of the segment’s workforce.

Non-classified BPO companies employed 6,594 FTEs in 2018, which accounted for 14.3% of the total BPO full-time employment. FTE numbers in the Other BPO segment recorded the fastest annual growth rate among all other BPO segments, of 13.0%, and added 757 employees to its headcount.

In EoY employment terms, Other BPO grew at a slower rate of 10.7% on the year and employed 7,217 persons as of December 2018.

The six largest companies in the segment had personnel exceeding 250 persons and employed more than half of the segment’s total workforce.


Trenkwalder

Adecco Bulgaria

Easy Consult

Manpower Bulgaria

Dr. Pendl & Dr. Piswanger

Bulgaria

PPD Bulgaria

SBTech (Global)

IQVIA RDS Bulgaria

HP Inc. Bulgaria

Unify Service Center

Bulgarian Online Research

Dantek

OnProcess Technology Bulgaria

Internet Securities Bulgaria

Bright Marketing Research

Other Companies

2 395

1 636

1 358

778

612

352

282

255

245

242

1 427

Toro GroupS

Hi Way Jobs

HRS Staffing Bulgaria

ICAP Employment

Solutions Bulgaria

Other Companies

879

744

557

549

399284236

214192

174

2 366


45

Mr. Tsekov, you have managed ScaleFocus’ growth strategy and or-ganizational transformation since its foundation. Is it more challenging now than it was in the beginning?

The truth is we always challenge our-selves. When we laid ScaleFocus’ foun-dations, we wanted to prove that it is possible to build a fast-growing, agile, IT company in Bulgaria. A company that will prove itself outside the coun-try. And we did it. For the last five years, we continued to grow because of our focus on specific customer needs and the development of tailor-made solu-tions for them. This approach resulted in close to 1000 employees, five sales offices located in the UK, Switzerland, the USA, Germany, and Bulgaria, over 500 completed projects, five develop-ment centers and over 200 clients ser-viced in more than 24 countries. But is it less challenging now? No, not at all!

You sound excited?

That’s exactly how I feel! Today Scale-Focus is a mature IT solutions provider. We more than doubled our revenue and employees from 2017 to 2018, we established ourselves as a top service and software engineering company in Bulgaria and on the Balkans. During this time, we acquired Upnetix, the regional market leader in custom cli-ent-tailored software solutions and one of the 50 agencies certified to develop on Google platforms. We are prepared for our next challenge - to be the most innovative software solution company in the whole of Eastern Europe.

This is an ambitious long-term strat-egy. What is your vision for the fu-ture of ScaleFocus?

There are different aspects to it, but I want to emphasize the most important of them - innovation in the services and people. For us, innovation is an import-ant part of our DNA. It helped us being agile and kept us ahead of the techno-logical curve.Today we are concentrated in IoT, Secu-rity, Cloud, Data, Automation, Machine Learning, and Streaming Analytics in-novations through our R&D center. For example - we have developed an auto-mated quality assurance platform that can process a huge amount of data in a short period of time. The experience and partnerships that we gained from our successful projects with compa-nies like RedHat, Cisco, Microsoft, IBM, Amazon, and SAP, helped us expand our knowledge in industries like Tele-com, Insurance, Fintech and Finance, Healthcare, and Logistics and Trans-portation. We offer not just services but tailor-made solutions and consultancy, based on the client’s needs.

Advertorial

Plamen Tsekov, CEO and founder of ScaleFocus, the leading Bulgarian software engineering, and IT consultancy company:

In just 7 years ScaleFocus has grown to become a leading value-added IT service company in the SEE region (and biggest in terms of revenue), it has close to 1000 employees, over 150 clients and it has won over 50 industry awards. What’s next for ScaleFocus?

WE NEVER STOP CHALLENGING OURSELVES

It looks like ScaleFocus is outgrowing its outsourcing and staff augmenta-tion beginnings. Am I correct?

Yes. This is still an important part of our business, but as I said - we constantly challenge ourselves. ScaleFocus is a company that offers a full lifecycle de-livery - strategic optimization and sup-port of IT infrastructure, high level of customer care, management and main-tenance. We are building long term re-lations. A year ago, we were the first to implement SAP S/4HANA in Bulgaria for a client. Our experts develop technolo-gies that are critical for the operations of financial, telco and insurance com-panies. We offer application manage-ment services for healthcare providers. Our security experts consult our clients and implement custom-made solutions that protect their business. And this is just a fragment of our service portfolio.

You’ll need highly trained experts to accomplish your vision. Do you think that there are enough in Bulgaria?

In Bulgaria, we have a strong technical education. But we are proactive, and we are investing not only in people but in the cities, as well. Currently, we have five development centers, four of which are in Bulgaria - Sofia, Plovdiv, Varna, and Burgas. In September we announced an unprecedented initiative - the ScaleFocus Academy that will train 10,000 IT specialists across the country in the next five years. The Academy is free and will work with local schools, universities, and organizations. Free training for 10,000 people is an am-bitious goal. In the first two years, we will invest about 800 000 EURO. Also, we have a wide range of internal train-ing initiatives for our employees. Our mission is to shape the highly moti-vated and talented young people into well-prepared technology gurus.


46

Fig. 32 - Top 10 SSCs by Number of FTEs in 2018

5.2.6 ssc

Shared service centres were the BPO segment with the most numerous workforce in 2018, employing 13,579 FTEs, or 20.4% of the overall sourcing headcount in Bulgaria. It enjoyed the second highest y/y growth rate among the BPO segments – 11.3%, considerably above the industry average of 9.3%.

The increase in EoY employment in the SSC segment was even sharper – by 24.4% y/y, or 2,937 persons. Thus the aggregate headcount of the 22 SSCs came in at 14,974 as of December 2018.

More than half of the vendors in the segment belonged to the group of large enterprises with more than 250 employees. Each of the five largest SSCs had personnel of above 1,000 FTEs - Enterprise Services Bulgaria EOOD, Sutherland Global Services Bulgaria EOOD, Hewlett-Packard Global Delivery Bulgaria Center EOOD, Ingram Micro SSC EOOD and Cargill Bulgaria EOOD.


Sutherland GSB


Ingram Micro SSC

Cargill Bulgaria

Paysafe Bulgaria

Coca-Cola EPSB

Coca-Cola HBSO

AIG Europe

DXC Technology Bulgaria

Other Companies

3 126

2 002

1 129

1 068

1 032960682

662

470

436

4 917

IBM Bulgaria

Modis Bulgaria

VMWare Bulgaria

Visteon Electronics Bulgaria

SAP Labs Bulgaria

Interoute Bulgaria

Progress Software

Codix Bulgaria

Atos BCC

MentorMate Bulgaria

Other Companies

5.3 ito sector employment

Fig. 33 - Top 10 ITO Companies by Number of FTEs in 2018

The ITO sector employed 20,403 FTEs, which represented 30.7% of the total sourcing workforce in 2018. The growth rate of the sector’s FTEs slowed down a bit in 2018 to 14.0%, down from 16.0% y/y in 2017 as the vendors faced increasing difficulties to attract enough skilled IT talent on the tightening labour market.

The EoY employment numbers of the ITO sector slowed more severely and the growth rate halved to 14.0% y/y in 2018 from 30.6% in the previous year. The aggregate EoY headcount of the ITO providers stood at 22,031, adding 2,706 new employees to the overall EoY numbers of the Bulgarian sourcing industry compared to 2017.

Traditionally, ITO companies are considerably smaller than their BPO counterparts. In 2018, only 5.5% of the ITO vendors belonged to the large companies with more than 250 employees, while 70.3% of the companies in the ITO sector were micro and small enterprises with 49 or fewer employees.

1 787

1 031

793

783

741

717

452

414410

404

12 500


47

6.1. total turnover in the sourcing industry

6. mARkET size

In 2018, the sourcing industry continued to grow rapidly with its operating revenue jumping by 19.5%, thus reaching EUR 2.4 bln. That was the record-high annual growth rate for the last three years, reflecting the untapped potential of the Bulgarian sourcing market. Both ITO and BPO contributed to the impressive overall performance, achieving annual

rises of 20.0% and 19.1%, respectively. The BPO sector kept contributing the bulk, or 58.0%, of the industry’s total operating revenue in 2018. However, the ITO segment is gathering pace - it added the remaining 42.0% of the total sum in 2018, compared to 39.6% five years earlier.

Fig. 34 - Operating Revenue and Employment in the Outsourcing Industry by Sectors

5 000

4 000

3 000

2 000

1 000

0

478

27 063

32 738

37 924

43 028 46 16247 547 48 973 50 442

51 956

10 754

13 825

15 426

17 894

20 40322 035

23 79825 702

591717

839

1 077

1 212

1 460

1 7582 118

1 3891 632

1 9182 253

2 647

1 166980925729

ОООmln EUR people

80 000

70 000

60 000

50 000

40 000

30 000

20 000

10 000

02014 20162015 2017 2018 2019 2020 2021 2022

27 758

BPO Employees ITO Operating RevenuesITO Employees BPO Operating Revenues


48

Fig. 35 - Operating Revenue by Segment (mln EUR)

Fig. 36 - Top 10 Medium-sized and Large Sourcing Companies by Net Revenue per FTE in 2018 (EUR)

ITO

SSC

VBPO

Other BPO

KPO

HRO

FAO

2 500

2 000

1 500

1 000

500

0

478

258303 364 454

524626

748

893

1 066

162 176 236184 196 233 278 332

397474

73

15 17 19 21 23 25 28 31 34

44 51 65 81 92 110 132 159 19186 99 120 114 127 142 159 178

231 249294

403506

635

798

1 001

591717

839

1 007

1 212

1 460

1 758

2 118

2014 20162015 2017 2018 2019 2020 2021 2022

IBS Bulgaria

CNSys

myPOS

Cisco Systems Bulgaria

Coca-Cola Hellenic IT Services

SiteGround Hosting

Amdocs Bulgaria

Direct Services

Paysafe Bulgaria

Kaufland Service

179 636

159 783

158 845

142 380

101 654

98 994

82 613

82 133

80 140

78 141


49

6.2. ito sector turnover

6.3. bPo sector turnover by segments

In 2018, the growth of ITO’s operating revenue accelerated to 20.0% from 16.9% in the previous year, thus making 2018 one of the best years in the sector’s development in the period 2014-2018.

The leader in terms of revenues among the ITO companies in 2018 continued to be IBM Bulgaria EOOD. The company retained its top position despite the 1.8% y/y decline in operating revenue to EUR 66.3 mln.

The 10 leading ITO companies in revenue terms had a key role for the development of the sector in 2018 as they accounted for 37.4% of its total operating revenue in 2018.

The BPO sector also enjoyed a prolific 2018 – its operating revenue went up annually by 19.1%, with the growth rate remaining almost unchanged in comparison to 2017 when it stood at 19.0%.

Almost all BPO segments saw their operating revenues rise in 2018, with the only exception being HRO, which experienced a 4.8% annual decline to EUR 114.0 mln.

The top performer in terms of annual operating revenue increase was VBPO with 37.0%, ahead of Other BPO, which enjoyed 19.1% growth, and SSC with 15.5%. FAO was the sector with the lowest revenue sum - EUR 22.7 mln and annual growth – 7.8% among the BPO segments.

Looking at the revenue of BPO companies, the sole leader was Enterprise Services Bulgaria EOOD with operating revenue of EUR 118.1 mln, well ahead of the second in the ranking - Paysafe Bulgaria EOOD with EUR 76.9 mln. The 10 leading companies play a significant role for the sector, as they sliced a 38.1% share in the BPO total operating revenue.

Fig. 37 - Top 10 ITO Companies by Net Revenue (mln EUR) in 2018

Fig. 38 - Top 10 BPO Companies by Net Revenue (mln EUR) in 2018

IBM Bulgaria

VMWare Bulgaria

SAP Labs Bulgaria

Visteon Electronics Bulgaria

CNSys

Modis Bulgaria

Atos BCC

Interoute Bulgaria

Scale Focus

Bulpros Consulting

Enterprise ServicesBulgaria

Paysafe Bulgaria


Sutherland GSB

SiteGround Hosting


Experian Bulgaria

Cargill Bulgaria

PPD Bulgaria

SBTech (Global)

118.1

66.3

76.9

55.3

67.4

45.3

57.6

38.4

41.2

28.1

39.1

22.4

34.6

18.5

17.7

32.6

19.6

31.6

19.3

30.3


50

Fig. 39 - Average Revenue per Full Time Employee by Segment (EUR)

6.4. Average revenue per employee

In 2018, similarly to the trend in the previous year, the average annual rise in revenue outpaced that of FTE employees thus bringing the average revenue per employee to EUR 35,991, up from EUR 32,904 in 2017.

On a segment level, VBPO average revenue per FTE employee recorded the highest increase, by 23.9%, to EUR 31,240. All other BPO segments and the ITO sector reported an annual rise with the only exception being HRO, where the fall in revenues was higher than the decline in FTE employment.

In terms of end-of-year (EoY) employment, the picture was similar for the sourcing industry as a whole, as the average revenue per employee increased, by 8.3% y/y, in 2018. However, there were significant differences segment-wise. Here, the highest revenue per employee growth, of 29.6%, was posted by the FAO segment, while the change in the HRO segment was positive, at 2.3%. SSC and ITO reported declines of 7.2% and 3.5%, respectively.

2014 20162015 2017 2018

70 000

65 000

60 000

55 000

50 000

45 000

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

0

Other BPOVBPO HRO KPO FAO SSC ITO Average Sourcing


51

Fig. 40 - Average Revenue per End-of-year Employee by Segment (EUR)

2014 20162015 2017 2018

80 000

75 000

70 000

65 000

60 000

55 000

50 000

45 000

40 000

35 000

25 000

20 000

15 000

10 000

5 000

0

Fig. 41 - Most Dynamic ITO Companies Fig. 42 - Most Dynamic BPO Companies

6.5 Most dynamic companies



52

7.1. cost structure

7. costs

In 2018, labour costs in the sourcing industry increased by 17.2% y/y, at a significantly lower rate than the 19.5% rise of the aggregate operating revenue. In 2017, the total labour costs had grown at a slightly faster rate of 20.7% y/y. Labour costs grew across almost all segments in 2018, with the Other BPO segment expanding at the highest rate of 22.4% y/y, closely followed by the ITO and SSC sectors, with growth rates of 20.4% and 19.5%, respectively. The KPO segment saw the slowest increase, of 4.2% y/y to EUR 50.4 mln, while HRO was the only segment to decrease its labour costs on an annual basis - by 6.0%.

Fig. 43 - Labour Costs in Outsourcing by Segment

In terms of social security contributions, the annual growth of the industry was significantly faster compared to salary costs – 23.2% y/y, with all but one segment reporting double-digit rates in 2018. The KPO segment even doubled its social security contributions to EUR 12.7 mln from EUR 6.2 mln in 2017. HRO was the only segment with falling social security contributions, albeit by a moderate 0.7% annual rate.

2014 2015 2016 2017 2018 2019 2020 2021 2022

1 200

1 000

800

600

400

200

0

222.5

122.0 138.1175.9

215.6257.6

310.5

374.3

451.2

543.9

287.5

352.2

418.7

504.3

618.8

759.3

931.7

1 143.2

78.448.648.624.7

7.7 9.0 10.4 11.1 12.1 13.6 15.3 17.1 19.2

29.1 36.6 48.4 50.460.3 72.1 86.2 103.041.8

63.190.0 108.4 132.7

177.1 236.4

315.6

421.3

57.2 66.1 80.6 75.7 84.6 94.5 105.6 118.0107.3131.7

158.8187.6

233.3

290.1

360.8

448.7

ITO

SSC

VBPO

Other BPO

HRO

KPO

FAO


54

Fig. 45 - Labour Costs per Company by Segment

Fig. 44 - Social Security Contributions in Sourcing by Segment (mln EUR)

2014 2015 2016 2017 2018 2019 2020 2021 2022

150

120

90

60

30

0

23.6

16.019.7

24.331.8

37.144.8

54.0

65.1

78.4

32.539.8

52.4

65.3

80.1

98.3

120.6

148.0

12.37.93.61.1 1.1 1.2 1.4 1.5 1.7 1.9 2.1 2.4

4.4 6.2 6.2 12.7

15.2 18.1 21.725.9

5.38.3 11.7 14.0 17.4

23.231.0

41.4

55.2

9.6 10.8 12.5 12.413.8 15.5 17.3 19.3

16.7 20.324.8

29.837.1

46.1

57.3

71.3

Employment expenses in the ITO segment

As a consequence of the increasingly tightening labour market in the field of BPO and ITO, paired with the continuous dynamic development of both sectors, the labour costs of the BPO and ITO vendors rose further in 2018. However, the rate of growth slowed down across most segments, as a sign of companies’ reluctance to attract additional labour force at a higher price. ITO was among the few segments to record accelerating growth in labour costs, which exceeded EUR 500 mln and accounted for 41.3% of the overall labour costs in the industry in 2018, up from 40.2% in the previous year. In 2018, the average labour cost per FTE in the ITO segment increased by 5.6%, a significant acceleration compared to the 2.5% y/y growth in 2017.

14.0

13.0

12.0

11.0

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

02014 2015 2016 2017 2018


ITO SSC VBPO Other BPO HRO KPO FAO


55

Fig. 46 - Labour Costs per Full Time Employee by Segment (EUR)

30 000

28 000

26 000

24 000

22 000

20 000

18 000

16 000

14 000

12 000

10 000

8 000

6 000

4 000

2 000

0

2014 2015 2016 2017 2018


Fig. 47 - Social Security Contributions per Company (EUR)

2 000 000

1 900 000

1 800 000

1 700 000

1 600 000

1 500 000

1 400 000

1 300 000

1 200 000

1 100 000

1 000 000

900 000

800 000

700 000

600 000

500 000

400 000

300 000

200 000

100 000

0

2014 2015 2016 2017 2018



56

Fig. 48 - Social Security Contributions per FTE (EUR)

Fig. 49 - Taxes Paid by the Sourcing Industry (mln EUR)

5 0004 8004 6004 4004 2004 0003 8003 6003 4003 2003 0002 8002 6002 4002 2002 0001 8001 6001 4001 2001 000

800600400200

02014 2015 2016 2017 2018

Other BPO

VBPO

HRO

KPO

FAO

SSC

ITO

Average Sourcing

7.2. tax expensesIn 2018, the sourcing industry’s taxes soared by 55.3% to EUR 24.2 mln, which is by far the highest value in the period under consideration. For comparison, in 2017, companies in the industry paid a total of EUR 15.6 mln in corporate taxes. The sourcing industry is expected to increase its contribution to the national economy and almost double the amount of paid taxes in the period 2018-2022 to EUR 38.0 mln. In the next five years, a shift in the taxpayers’ structure by sector is expected and BPO will dominate in 2022 with 67.5% of the total contribution, while in 2018 it accounted for 51.2%. The reason for this is the faster growing profitability of BPO vendors, especially in the more complex BPO sub-sectors SSC and Other BPO.

2014

16.2

2015

18.2

2016

16.4

2017

15.6

2018

24.2

2019

21.7

2020

26.1

2021

31.5

2022

38.0

Employment expenses in the BPO by segment

In 2018, labour costs per FTE in the BPO sector showed highly differentiated behaviour by segment. Whereas labour costs per FTE went up by 9.6% y/y and 7.3% y/y in FAO and SSC, respectively, which represented a significant annual acceleration, the fastest rising segments from the previous year, HRO and KPO, both turned to negative in 2018 as a result

of slower growth in wages. In absolute values, Other BPO and SSC outpaced KPO as the highest-paying BPO segments with annual labour costs per FTE of EUR 20,119 and EUR 18,968, respectively, against EUR 18,255 for KPO. HRO remained at the bottom of the ranking with EUR 7,905 per FTE in 2018, down from EUR 8,072 in 2017.

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EY Bulgaria tax, accounting, payroll and law capabilities are forged by our heritage in assurance and transactions advisory and enriched with our people to inject sector knowledge.

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58

Fig. 50 - Net Income in Outsourcing by Sector (EUR mлln)

8. PROfITS AND profitability

In 2018, the sourcing industry registered its record high net profit for the period 2014-2018. Moreover, after two years of decline, in 2018 the profit jumped by 57.4% y/y to EUR 174.3 mln. The growth was fuelled by the performance of the BPO sector where the net profit reached EUR 107.0 mln, compared to EUR 61.3 mln in 2017. The ITO sector also performed well, raising its net profit by 36.1% to EUR 67.3 mln.

The results of BPO’s segments continued to be mixed – half of them enjoyed improved profits, while the other half saw a decline in profitability. VBPO came on top in terms of net profit increase, as it did in terms of annual growth in operating revenue. FAO was on the other end with its net profit slumping by 62.0%.

The bulk or 76.0% of the sourcing companies with financial results for 2018 reported net profits in the year under review. The share of the companies in the red was 18.3% and the

remaining 5.7% posted neither a profit nor a loss. The large share of profitable companies and the uptrend in the sourcing industry’s net profit improved its net profit margin to 7.3% in 2018 from 5.5% in 2017. The profitability of companies established in 2016-2018 was higher than the industry’s average – 10.7%.

In 2018, the sharp rise in profit brought the sourcing industry’s average net income per FTE to EUR 2,618 – an annual jump of 44.0%. It was the third-highest average net profit per FTE in the 2014-2018 period, with the bottom being EUR 1,818 – registered in 2017. Following the jump in VBPO’s net profit, its net income per FTE was the highest among the sourcing sectors and segments, at EUR 3,770. It was by 14.3% greater than the value of the second in the ranking – ITO with EUR 3,298.

2014 20182016 20202015 20192017 2021 2022

Total Sourcing

78.9

28.4

107.3132.5 121.3

110.7

174.3

216.9

261.4

315.3

380.4

104.5

78.961.3

107.049.4

67.3

70.8

85.2

102.6

123.6

146.1

176.2

212.6

256.9

42.428.0

BPO

ITO


59

Fig. 51 - Net Income by Segment (mln EUR)

70

65

60

55

50

45

40

35

30

25

20

15

10

5

02014 2015 2016 2017 2018

13 000

12 000

11 000

10 000

9 000

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

02014 2015 2016 2017 2018

Fig. 52 - Net Income per FTE by Segment (EUR)

Other BPO

VBPO

HRO

KPO

FAO

SSC

ITO

Other BPO

VBPO

HRO

KPO

FAO

SSC

ITO

Average Sourcing


60

Fig. 53 - Net Profit Margin by Segment, %

Other BPO

VBPO

HRO

KPO

FAO

SSC

ITO

Average Sourcing

Fig. 54 - Best ITO Performers by Net Profit Margin Fig. 55 - Best BPO Performers by Net Profit Margin

8.1. ito sector 8.2. bPo sector

In 2018, a major booster of ITO’s profitability was the result of Progress Software EAD. The company reported a net profit, calculated excluding revenue from sale of intellectual property rights, of EUR 17.8 mln versus EUR 6.6 mln in 2017. The other ITO providers also performed well with their total net profit climbing by 15.5% to EUR 49.5 mln. ITO’s net profit is sharply growing since 2015 with the average annual growth rate for the period 2015-2018 standing at 25.6%. The continuing development of the sector is expected to boost its net profit, which is forecasted to exceed EUR 120.0 mln by 2022.

The BPO sector also had a sole leader in terms of net profit in 2018. Sofia-based SiteGround Hosting EOOD, topped the ranking with a net result of EUR 20.6 mln, while a year earlier it was just EUR 0.750 mln. The performance of the other BPO providers was also impressive as their combined net profit was by 42.6% higher than in 2017, reaching EUR 86.3 mln. The fluctuations in BPO’s net results brought its average annual net profit growth rate for 2015-2018 below that of ITO’s – at 15.0%. However, the expectations are for a stable development of the BPO sector and its net profit is seen reaching more than EUR 250.0 mln by 2022.

IT Gix

CST

MWD Technologies

PLDA

Mirchev Ideas

Outcons

ST6

Centroida

13BIK

Adastra Bulgaria

49.3%

46.1%

40.9%

39.6%

35.8%

35.2%

31.4%

28.8%

27.6%

26.8%

AFF Media

Markovski Solutions

SiteGround Hosting

Sibiz Bulgaria

Talent Hunter

Colliers International

Minds AD

Fair Point

myPOS

ICover Services

77.0%

58.7%

50.1%

47.8%

42.3%

40.2%

38.2%

34.5%

31.2%

28.3%

2014 2015 2016 2017 2018

25

20

15

10

5

0


61

9. INDUSTRY trends

9.1. corporate investments

• The World Bank Group launched its global shared service centre in Sofia in July 2019. It is planned to employ 300 IT, HR and financial specialists by 2024.

• The BPO vendor Sutherland Global Services Bulgaria EOOD opened a new office in Plovdiv in October 2019, where it planned to create 300 new jobs.

• In October 2019, the Bulgarian branch of Belgium-based KBC Group NV opened its shared service centre in Varna, which will provide recruitment, IT and risk and project management services to the other entities in the group. It will employ 300 persons and will start operations by the end of 2019.

• In September 2019, the software company Scale Focus AD launched its own IT academy in Burgas in partnership with the other IT companies operating in the city. It plans to expand to other municipalities and aims to train 10,000 IT specialists in Bulgaria.

• The ITO provider Immedis EOOD announced in June 2019 its plans to expand its headcount with 200 new employees in Varna by the end of 2020.

• In June 2019, the European Commission launched a new investment mechanism for support of digital start-ups in Central and Eastern Europe - the Digital Innovation and Scale-up Initiative (DISC). Its focus is on the scale-up of innovative companies in the region, which could benefit above all the ITO sector in Bulgaria.

• The VBPO provider Tek Experts EOOD plans to expand with more than 400 new employees by the end of 2019.

• The KPO provider Experian Bulgaria EAD invested USD 5.0 mln in its new office in Sofia in the building Space Tower launched in May 2019.

• The ITO company Modis Bulgaria EOOD opened a second office in Plovdiv and announced its plans to create over 400 new jobs in 2019.

• Kaufland Service EOOD opened its second IT HUB in Sofia in connection with the planned expansion of the activity, which should double the company’s headcount with 100 new employees by 2020.

• In January 2019, Facebook announced that it would hire 150 employees in Sofia in partnership with the VBPO provider Callpoint New Europe AD (Telus International Europe).

• DXC Technology Bulgaria EOOD announced that it has hired 600 new employees in 2019 and plans to expand its group headcount to 7,000 in the next four years.

• The global business news provider Financial Times opened an office in Sofia in partnership with Xoomworks Bulgaria EOOD. By the end of 2019, its FT Core unit plans to employ 130 specialists responsible for engineering, development, design and economic analysis.

• In October 2018, Japanese game developer Sega Games Co. Ltd. announced its plans to establish a new unit in Sofia under the name SEGA Development Services Sofia by June 2020.

• In 2018, the German retail chain Lidl launched an IT research and development unit, Lidl Digital, in Sofia, which will employ more than 120 specialists by the end of 2019.


62

9.2. forecasts

The global sourcing industry will accelerate its growth in the next five years. All segments will also grow faster than in the period up to 2018, being led by the SSC, which will double its size within the analysed period. BPO will become the smallest segment in size, but it will still grow at a higher rate than ITO.

The latest major trend in Bulgaria’s sourcing industry is the rapid entry and expansion of shared service centres of global technology companies and financial institutions, such as the World Bank Group, Facebook and the Financial Times, to name only a few. This is a sign of the improved image of the country as a destination where high value-added services are provided by skilled talent and is a prerequisite for further development of this segment.

SSC are starting to evaluate their success not only through cost savings but by measuring the benefits of improved process control, risk reduction, better compliance, quality and sustainability. Furthermore, the excellence in customer service is becoming a factor of a significantly growing importance. A quality customer service can put an SSC ahead of competition in an already crowded market. Such a trend is bringing the need for SSC to retain experienced and skilled talent to the fore. SSC’s operations are thus focused more on streamlining processes, and improving agility and quality of service than ever before.

The SSC’s operations are shifting from traditional manual and human-based work to more knowledge-based activities. Automation technologies are the main factor fuelling this transformation, enabling SSC to improve productivity, innovation, as well as service agility and quality. Automation also facilitated the development of new competencies among SSC thus refuting the prediction for job-losses and put the sector on a path of consistent growth.

The positive effect of the expansion of the ITO and BPO sectors outside Sofia was most evident in Plovdiv in the five-year period under consideration. In 2018, Varna turned into the most promising and dynamically growing sourcing location, although the vast majority of the new hires were again in the capital. Average salaries in the industry in these three cities exceed more than two times the average in the economy. There are positive signs in smaller cities, such as Veliko Tarnovo and Stara Zagora, where new ITO and BPO jobs are growing but salaries are only barely above the economy’s average in those cities.

The main challenge for the sourcing industry will continue to be the saturation of the labour market in terms of skilled workforce. The emergence of numerous professions that did

not exist in the past or were practiced by professionals with a wide specialisation necessitate tuning the education sector in order to meet the constantly evolving requirements of the sourcing and technology sector.


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EmPLOYmENT IN ICT TO grow steadily driven by rising investment

interview

Photo Zornitsa Rusinova - Deputy Minister of Labour and Social Policy

Deputy Minister Rusinova, has the introduction of the so called Blue Card had an effect on the labour market and in particular on the outsourcing sector? What has been the appeal of the Blue Cards in the last year both for non-EU skilled workers and Bulgarian employers, and which are the main factors that hinder winning over more qualified professionals with the Blue Card?

The Blue Card enables highly-skilled non-EU citizens to take jobs in a country which is an EU member and to live there with

their families. The purpose of implementing this scheme in Bulgaria is to improve the conditions for recruiting staff for hard-to-fill jobs on the labour market in our country. I believe it is a mechanism that benefits the whole economy and the outsourcing sector as part of it. Year to date, the Employment Agency has given access to the Bulgarian market to 2,205 foreign nationals, citizens of third countries. A total 337 of them have obtained permits to do highly qualified jobs under the EU Blue Card scheme. For the same period last year, their


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number was 172, we thus have an almost twofold growth. This trend shows that the scheme is attractive both for foreign professionals and the local businesses.

The greatest number of job permits was issued to citizens of Russia, Ukraine, China, Turkey, North Macedonia, Cuba, India, Serbia, Israel, Kazakhstan, the U.S., Armenia, Albania, Malaysia, Belarus, Morocco, Mauritius, Egypt, Iran and Uzbekistan. They are chiefly IT, engineering and management specialists.

In order to provide better conditions for recruiting scarce talent, the Ministry of Labour and Social Policy has taken steps to facilitate the administrative procedures. For example, since May 23, 2018 the Employment Agency has issued permits for admission to the labour market without a preliminary labour market test of the employer. However, under Eurodirective 2009/50/EC on highly-qualified employment of third-country nationals, the applicants should have a university degree, certified by duly-legalised documents. Another mandatory requirement is that the salary of a foreign worker should be at least 1.5 times higher than the average for Bulgaria, which is currently about BGN 1,830.

What measures are you planning to encourage Bulgarian nationals living abroad to return to the country?

The return of Bulgarians living and studying abroad would have an extremely favourable effect not only on the scarcity of qualified staff but on demographic trends as well. For this purpose, the Ministry of Labor and Social Policy organises career forums in the countries where the largest Bulgarian diasporas live. Since the beginning of 2019 we have held five events - one each in Vienna, London, Cologne, Munich and The Hague. Our aim is to provide opportunities for young people to meet leading Bulgarian employers, as well as to show them that in Bulgaria they would have as good career prospects and standard of living as abroad. Career forums enjoyed increased interest. Each of them was attended by some 200 youths. The surveys we made among them show that 50-60% of the respondents feel motivated to make a career in Bulgaria and have discovered attractive opportunities for professional development. The majority of them say they would like to return after getting a degree abroad.

What are the main lines along which the ministry is working with the educational institutions for reducing the shortage of qualified professionals in the IT sector?

Preparing a workforce with adequate skills and knowledge to meet business demands is one of the priorities of the Ministry of Labor and Social Policy. Employers in the IT sector have had the opportunity to organise specific trainings for their staff or

to recruit new workers through one of the programmes funded by the Human Resources Development Operational Programme (HRDOP). Enterprises are carrying out 43 projects under the Specific Training programme, which enables companies to train their employees or unemployed and inactive youth up to 29 years old to meet the needs of a specific workplace. The total budget of the projects is over BGN 8 million. The programme is directed primarily at companies operating in high technologies, manufacturing or information technology. Very often, employers have complained that the system of professional development and the key competences trainings do not meet the needs of their businesses. Investments in job-specific training can solve one of the most pressing problems of the Bulgarian business - the shortage of qualified staff.

Investing in skills and digital competences will be a priority for the HRDOP in the 2021-2027 programming period. This way, there will be greater opportunities for internships and apprenticeships at specific workplaces, which will improve the conditions for professional development.

What are your expectations for the development of the labour market and the outsourcing sector in the next three years?

A few days ago, the Ministry of Labor and Social Policy presented its projections for the development of the labor market by 2034, which show a steady growth of employment in the key sector for our economy, that of information and communication technology. Employment is seen to continue to grow, driven by increasing investment. We expect that in 2024 the employed in the ICT sector will be 94,100, which is 3.2% of the total number of employed in Bulgaria. In the long term, in 2034, as a result of declining population and employment, the number of workers in the industry will shrink slightly, by about 2,000 people. Information technology and information services will be key catalysts of demand for developers of software and software applications as well as analysts, whose number will reach 18,500 or 35.8% of the employed in the industry in 2034. A curious detail is that this sector is expected to have the largest share of employees between the ages of 30 and 39 - about 40% of all the employees in the industry.


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BRIDgINg ThE gAP between education and business

Starving for talent to sustain its dynamic growth over the past years and keep abreast of innovations, the sourcing sector has been eager to tap all available resources. Naturally, the universities were the first places to look for unexplored opportunities for cooperation, much to the benefit of all stakeholders.

The Sofia University St. Kliment Ohridski and the Plovdiv University Paisii Hilendarski are among the most active partners of the Association for innovations, business excellence, services and technology (AIBEST).

The Sofia University is an associate member of AIBEST and is in close contact with a the organisation.

AIBEST is the main partner of the Sofia University’s Faculty of Economics in this sector, as evidenced by the new MA programme Outsourcing Projects and Companies. The programme, established together with AIBEST, was launched this autumn.

“We have also partnerships with individual members of the association. We have joint Master’s programmes such as Applied Econometrics and Economic Modelling in English in partnership with Experian, the Your Future is Here initiative for attracting young people back to Bulgaria together with Cargill, and we have a number of guest lectures and seminars with the participation of representatives of the sector taking place in our faculty,” the Dean, Atanas Georgiev, says.

The Faculty of Economics with the Sofia University has proven itself as leader in innovations in education and is constantly updating its Bachelor’s and Master’s programmes to better respond to the market needs, Georgiev explains.

“We are in constant contact with the leading companies and institutions from a number of sectors of the economy in order to follow their needs for knowledge and skills and to come up with the most appropriate educational product for them,” he says.

Apart from developing the Bachelor’s, Master’s and PhD programmes in the past year the Faculty has been developing strongly post-graduate qualification through training courses offered by the Centre for Educational Services. The Centre

offers training in shorter and business-oriented topics which can supplement other programmes or prepare students for them.

The Plovdiv University has been a AIBEST member since 2013 and its Philology Faculty has been encouraging direct contacts between educational institutions and businesses for more than a decade, implementing various programmes and projects.

Together with sourcing services provider Sofica Group and online media Pod Tepeto, the faculty has implemented successfully a project for market-oriented modules in humanities. The project was carried out with the support of the Operational Programme “Human Resources Development” 2007-2013, co-financed by the EU’s European Social Fund under scheme BG051PO001-3.1.07 BG051PO001-3.1.07 “Update of the curriculum in higher education in accordance with the requirements of the labour market”.

The Plovdiv University is also implementing a Master’s programme, English Language and Business Management, which it launched together with AIBEST representatives in 2017. The programme responds directly to the qualification needs in the sector as the lecturers come from the outsourcing industry, says Associate Professor Dr Elena Getova, Deputy Dean of the Faculty of Philology, Plovdiv University Paisii Hilendarski.

During the 2016-2019 period the faculty organised regular meetings with employees of established companies in Plovdiv and the region, seeking attractive ways to present career opportunities before its students. Awards and scholarships were granted by Telus International to top performing graduates.

The university’s Faculty of Philology has signed cooperation agreements with Telus International and is in close contact with 60 О, A Data Pro and ScaleFocus, among others.

For years, the Plovdiv University has had close business relations with A Data Pro which is assisting it with the technological equipment of the Communication Competencies and Educational Services Laboratory for the needs of the faculty.

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fINITE TALENT POOL, RISINg COSTS PROmPT SOURCINg companies to expand outside sofia

offices outside sofia

Bulpros, 60K, ScaleFocus, A Data Pro, Telus InternationalО the number of companies that have expanded their operations outside Sofia by opening offices in other big cities in Bulgaria over the past years is constantly on the rise.

Intensifying competition for talent and rising costs in the capital are at the core of the companies’ expansion strategies.

“Several factors can be at play here. What comes to mind and this is something that even we at 60K are faced with is the fact that there is a finite talent pool,” Jon Gladwish, CEO of 60K, says. “We as a company will have a significantly smaller pool of talent to pick from but costs in terms of salaries as well as the office space will increase.”

In Sofia the problem is being exacerbated by the presence of a number of big multinational companies, he explains.

“If you look at the outsourcing industry you have several big companies and we all compete for the same people with the most in-demand skills. I am not just talking about language skills but rather people with high level of computer literacy and programming knowledge as well,” Gladwish comments.

ScaleFocus, a company with offices in Sofia, Plovdiv, Varna, and Burgas, too singles out talent pool as the most important factor for its decision to invest outside Sofia.

“We are always on the lookout for top talent from all over the country. And there are a lot of bright software engineering minds that just need an exciting work environment and challenging projects on a global level,” the company says.

When deciding where to set foot first, the big cities have a natural advantage.

“If you take 60K for example, we need to have the ability to scale up or down in terms of the number of agents we have on a certain project very quickly. I don’t think we would have been able to do that in a smaller city such as Blagoevgrad or Burgas, for example,” Gladwish explains.

Another important factor, according to ScaleFocus, is the lifestyle enablement. Cities like Plovdiv, Varna, and Burgas are growing fast. At the same time, they have a well-developed infrastructure while providing a different kind of lifestyle, compared to Sofia.

Tax cuts and subsidised rents are among the incentives that the local authorities can provide to sweeten their offer to investors.

CREATING ECOSYSTEMS

However, education trumps all when it comes to picking a location.

One of the most important factors for the companies to invest outside Sofia is the development of the education - technical, linguistic and mathematical, in particular, Ivaylo Slavov, CEO of Bulpros, says.

Besides the established locations such as Plovdiv and Varna, cities like Burgas and Veliko Tarnovo are very promising and they will definitely experience further development of the business in the coming years, he comments.

The sourcing companies should build on what the local universities do and contribute to the development of the educational programmes, thus building the next generation of IT experts, ScaleFocus comments.

A city such as Plovdiv or Blagoevgrad that is actively trying to attract investment can, for example, provide office space, according to gladwish. There are plenty of buildings lying empty and in a poor state of repair that can be repurposed and used and even if it’s not completely free, the local municipality can offer subsidised rent.

In his view, creating such an ecosystem will give companies the opportunity to concentrate on their core business and encourage them to invest in the particular location.

Acting in this direction, ScaleFocus has launched an IT academy for children in Burgas.

“With the power of the Internet and the evolution of technology, children are engaging in IT in the early stages. This is the exact reason why we launched the ScaleFocus Academy in Burgas,” the company explains. “We want to challenge the people and to give them the opportunity to develop their IT career and pursue their dreams without the need to leave their home place.”

ScaleFocus is also working closely with the two universities in Bourgas, consulting and planning how to engage and educate more local talent.

As part of the strategic partnership with the two universities in the city, the company trains young software specialists on real projects, delivering software for its global customer base. “And we are happy with the results - a newly opened IT high school and the upcoming first classes of our free ScaleFocus Academy in November,” the company says.

“We believe that the biggest incentive for the sourcing companies should be the self-driven mindset of how important the development of a local IT environment is,” ScaleFocus says.

“We see IT companies that originate from smaller cities, grow fast and are already working with global clients. We want to keep that trend and to help the local IT scene reach the point when there is no difference whether you start a company in Sofia, Varna, Plovdiv, Burgas, or another Bulgarian city.”

The most important role of the local authorities is to back the creation of an ecosystem which supports the establishment of new businesses, according to Slavov. This includes kindergartens, schools, universities, training centres, infrastructure, shopping facilities, and political stability.


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BULgARIA’S SOURCINg SECTOR well positioned to face external headwindsFabrizio Zarcone, Country Manager for Bulgaria, the Czech Republic, and Slovakia, Europe and Central Asia, World Bank Group

why did the world Bank group choose Bulgaria’s capital Sofia as the location of a new shared services centre?

what services will the centre provide?

what are your expectations about the development of Bulgaria’s sourcing sector?

what specific steps can the government take in support of the country’s sourcing sector?

The World Bank Group announced the establishment of a second shared services centre in Sofia, Bulgaria in early 2019. Sofia was chosen following a competitive search for a location, based on a broad number of criteria including the quality of the IT infrastructure, and the local talent pool, along with considerations of cost effectiveness. The new centre was officially opened on July 18, 2019 to provide corporate and technology support to the World Bank Group’s business operations around the globe. The centre is expected to complement an existing World Bank Group shared services centre in Chennai, India which opened in 2001 and currently serves the organisation with accounting, HR, IT and other services.

The WBG’s Information and Technology Solutions (ITS) unit will be the first one to start providing services from Sofia. ITS will be looking to make best use of local talent in determining what functions and programs will be placed in Sofia. Other functions are analysing options and timelines for placing staff positions and services in Sofia. It is anticipated that in the medium term, multiple WBG Shared Services functions will be added to the centre. The World Bank Group expects the centre to employ up to 300 people in the medium term, with about 75 IT experts to be employed by the summer of 2020.

In the last several years a vibrant private sector has emerged in Bulgaria helping to improve economic performance beyond

The World Bank has been partnering with the Bulgarian government in the last almost 30 years providing support in good times and in the times of hardship. Our Country Partnership Framework for Bulgaria identified two areas with transformational impact on Bulgarian economy, namely i.) strengthening institutions and ii.) investing in people. Adopting policies in these areas will ultimately contribute to the economic welfare of the country and they are relevant for the development of outsourcing industry as well. Adopting policies for human development allows Bulgaria to generate the necessary skills for the digital economy, while strengthening institutions provides the bricks for building a vibrant and productive private sector. Furthermore, the outsourcing sector contributes to reduce brain drain and in this context the government support in the two areas above mentioned makes a strong economic sense.

expectations. GDP growth accelerated to 3.7 percent in 2016-18, due in part to a dynamic export sector which took advantage of improving external conditions and an expanded share in global trade. Now, Bulgaria features a young, energetic local private sector which successfully competes internationally in areas such as machine building, automotive parts, IT, and outsourced business activities. Still, there are some external headwinds on the horizon - according to the latest World Bank Economic Update for Europe and Central Asia the economic growth across the region is slowing following a global downward trend. These developments further underline the need to boost productivity growth and increase investments. In this context, the outsourcing sector in Bulgaria is well positioned and I am positive that it could face the external environment challenges.

interview


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SkILLED wORkfORCE, DEvELOPED IT INfRASTRUCTURE back growth of shared business services in bulgaria

Shared business services in Bulgaria have been enjoying a healthy growth over the past years, as a number of global companies acknowledge the country’s geographical location, well-developed IT infrastructure and multilingual workforce as key advantages.

The latest opening took place in October 2019 when Belgium-based financial group KBC launched a shared services centre in Varna. The centre will employ over 300 people within the next few years, mainly in human resources, project management, IT, risk management and property management. KBC has picked Varna after assessing several other cities in Central and Eastern Europe, the Bulgarian government noted.

Three months earlier the World Bank Group said it has opened a shared services centre in Sofia, which will provide corporate and technology support to the group’s global business operations.

The location of the new centre, which is expected to employ about 300 people in the medium term, was chosen after a competitive search based on technical conditions, stability, the quality of the IT infrastructure and the local talent pool, the World Bank Group said at the time.

The centre in Sofia complements the existing World Bank Group shared services centre in Chennai, India, which serves the organisation with accounting, HR, IT and other services. In addition to providing IT and corporate services, the Sofia centre will allow the institution to better serve its locations across different time zones and continue improving the diversity of its workforce.

“Global companies have already noticed and understand that Bulgaria is a location where they can establish shared service centres which are not just cost effective, but also bring the additional value they seek,” Eva Elges, Cargill Business Services Sofia Centre Lead and EMEA Finance Lead, comments.

“The benefits are well recognised: geographical location, highly educated workforce, multi-language skill set, flexible workforce, strong IT infrastructure and growing locations outside of Sofia alone,” Tony McMurray, Managing Director at Ingram Micro GBS, says. The company employs just over 1,000 associates in Bulgaria.

For Elges, the main reason why international providers of shared business services opt to do business in Bulgaria, is the people’s potential.

“One of the biggest assets of Bulgarian people are willingness and passion for learning and developing professionally, combined with good university education and additional qualifications and diplomas. And all of this combined with the ability to speak at least two or three different languages,” she explains.

Cargill Business Services Sofia has more than 1,200 employees now. The company has won three awards in a row for Shared Service Centre of the year – in 2017, 2018 and 2019.

“This speaks more than enough of the potential of our people, who are the most valuable asset for the shared service sector in Bulgaria,” Elges says.

Like the other segments in the industry, the shared services too are experiencing a shift to value-added services.

“For the future I do not see a significant increase in the number of new entrants or the volume of people involved in shared services centres but what I do see is a potential shift in the work they do, i.e. with more robotics and the introduction of more value added services across existing players there should be a shift in resource to the more value added,” McMurray opines.

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fLEXIBLE LAYOUT, INNOvATIvE DESIgN:the new must-have for offices

Consolidation into a single office building, a sharp focus on the multifunctionality of the

project and innovative layout are the current key trends on the Sofia office space market, where the IT and sourcing are poised to remain the most active occupiers. At the same time, more sector players are looking to expand their operations in other Bulgarian cities, leading real estate consultants say.

Relocation and consolidation into a single office building is the main trend witnessed since 2016, Vesela Petrova, Operations Director at Colliers, notes.

Moving to a new building, the companies are likely to lease larger office areas than they actually need, Stanimira Pashova, Office Space Manager at Cushman & Wakefield Forton, adds.

“Such a move ensures additional space for flexible office solutions and further expansions, thus ensuring more sustainability and comfort for the employees,” Pashova explains.

Moving to a new building, the companies are likely to lease larger office areas than they actually need.

Space flexibility and innovative solutions have come to the fore as key requirements as office space is becoming a key element of the package which companies offer to would-be employees amid growing competition for talent.

“Office occupiers have shifted their attention from focusing on the building itself to multifunctionality,” Petrova notes.

Dimitar Ivanov, Deputy Manager, Office Agency at MBL, too points to an increased emphasis on the quality features of the office space environment demanded by companies.

“Due to the high competition for labour force, the main focus now is on providing unique working conditions, a mix of prerequisites such as shorter time to commute, technical specifications, efficiency, interior design and amenities,” he explains.

These requirements are taken into consideration by office building developers, which is expected to result in exciting innovations from the supply side in the following years. Lease and space flexibility remain a key criteria of the demand side, which drives the rapid increase of new flexible workspace locations, Ivanov comments.

The office space is no longer just square metres but it plays an important role in the employers’ branding, Pashova stresses.

The office space evolution in recent years has resulted in innovative layout solutions, such as separate zones for recreation, gaming and creativity, imaginative furniture design, etc.

“In short, when IT and BPO companies choose office space, the main factors are location and employees’ satisfaction rather than financial optimisation,” Pashova comments.

Petrova, too, singles out convenient location, modern and functional layouts and comfortable workspace as key tenant requirements together with creating a social environment for the employees, providing a work-life balance and better comfort at the workplace. In her view, public transport availability, access to the office and amenities nearby are gaining importance in the office selection process.

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Plovdiv, varna, burgas attract growing interest

As a number of sourcing companies seek to expand their operations outside of Sofia, interest in other big cities is picking up.

“We keep seeing companies looking at expanding opportunities in secondary cities. The main points of interest have been Plovdiv, Varna and Burgas,” Petrova says.

A number of large openings in recent months, such as Fadata and Scale Focus in Burgas, and KBC Group in Varna, exemplify the trend.

office space plays an important role in the employers’ branding.

for it and bPo companies the main factors when choosing offices are location and employees’ satisfaction rather than financial optimisation.

Public transport availability is gaining importance in the office selection process.

several big sourcing companies expected to open new locations outside of sofia around the beginning of 2020.

“We definitely see such a trend, since the capital city offers limited growth opportunities for the IT and BPO industry,” Pashova confirmed, adding that although the core operations of these companies remain in Sofia, regional centres provide an excellent option to open a second or third location.

“With the opening of Kamenitsa Office Park in Plovdiv we expect to see another portion of expansions and newcomers in the city, as well,” Pashova says.

A positive fact for these companies is that the secondary cities’ municipal councils are constantly investing in efforts to introduce measures supporting the smooth

operation of businesses, Petrova explains. Another favourable factor is that there are forward-thinking real estate investors determined to respond to the increasing office demand and deliver projects with unique concepts.

As an example she points to Central Park, currently under construction in Burgas.

“This is a modern multifunctional complex, which along with providing an office solution to the companies expanding in Burgas will impact the whole community in the city,” Petrova says. In her words, Central Park will transform the cityscape and the lifestyles, delivering an IT academy, a large botanical

garden with exotic plants, infrastructural enhancements and lots of retailers. All that will be done with care for the environment, through the application of renewable energy and passive technologies.

MBL too has helped a significant number of sourcing companies expand their operations outside of Sofia, especially in 2019.

During this year some of the largest sourcing companies have either opened brand new centres, or expanded their existing locations outside of the capital, Ivanov says. The leasing activity has increased in both Varna and Plovdiv over the last few quarters.

Notable transactions in Varna include the opening of Coca-Cola European Partners (3,200 sq. m.) and KBC Group’s (5,500 sq. m.) brand new centers. Plovdiv’s transactional activity was represented by SBTech’s (3,200 sq. m.) and Scalefocus’ (1,500 sq. m.) new lease acquisitions in Kamenitza Hill.

Ivanov added that MBL expects several other established sourcing companies to open new locations outside of Sofia around the beginning of 2020.

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Your local partner:Kinnarps Bulgaria, Kammarton Bulgaria Ltd. 9, Arsenalski str. 1421 Sofia, Bulgaria


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CREATIvITY, DIgITAL mINDSET essential for sourcing sector employees

As the sourcing sector shifts towards innovative and complex services involving analytics, the skills which the companies look for in their employees are changing, too. Creativity and a digital mindset have come to the top of the list of required skills and bridging the gap between market demand and the existing talent pool is becoming increasingly difficult.

In an environment where knowledge is widely and freely accessible and new skillsets are demanded, companies are trying to close a well-known skills gap or build connections among peers who can share expertise, global human resources, consulting firm Mercer says in its latest Global Talent Trends Report.

“In employees’ opinion, creative thinking and learning about technology are the top two skills that would help them stay competitive,” Stela Yulzari, Mercer Talent Information Solution Consultant, adds.

The conclusions of executive search and consulting firm Stanton Chase are very much in the same vein. Agility and adaptability, creativity and thinking out of the box, communication skills and emotional intelligence, digital mindset and leadership are essential as the companies seek new skills related to data science, data analytics and business intelligence, its Managing Director Darina Peneva notes.

Today, the life-long learning approach is enlarging to life-wide learning, including new learning approaches and methods like electronic tutors, 3D virtual worlds, gamification, e-books, learning analytics, e-training, social networks, learning via augmented and virtual reality, YouTube, Peneva comments.

credentialing replaces academic qualification

In a society where learnability is valued highly and desired skills are a moving target, there is a renewed interest in credentialing what people have attained.

Academic qualification and prior performance rating are poor proxies for what a person can bring to a role, whereas credentialing can help to quantify a company’s progress toward the future of work, according to Yulzari.

According to Konstantinos Milonas, Cluster Head at Adecco Group Bulgaria and Greece, to respond to the changes in environment the market is going towards creating new roles, combining the needed skillset, or prequalification of traditional roles.

The market need for talents is growing each year, Peneva comments. Stanton Chase is focused on senior and middle management positions where companies seek experienced and knowledgeable professionals to step into the role and show immediate results.

As the market evolves, in the period up to 2022 employees will need 101 days of retraining and upskilling on average, Peneva said, citing a report shared at the World Economic Forum.

Hiring and then internally upskilling new workforce requires close collaboration between the talent acquisition and the

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“Most sourcing companies on the market have established a solid internal talent acquisition structure. It handles a constantly increasing workload in order to supply the business with the desired talent. The recruitment cost is increasing and time to hire is directly linked to it,” Pirovski comments.

“Often the expertise we are looking for is not available in the local market and we have to broaden the search in other countries. Recently, we conducted such a project for a sourcing company in collaboration with our offices in several European countries. The result was successfully identifying professionals who would like to relocate to Bulgaria, take the position and share knowledge and experience with the Bulgarian professionals,” Peneva notes.

Working acrosss borders

Companies undertake different measures in order to address the new challenges – they identify the gap between current and required skills supply, develop a future-focused people strategy, adapt skill requirements to new technologies and business objectives, redesign jobs and revise the workforce plan to close skills gaps.

Overall, addressing the need for new skillsets is a complex process which demands substantial adaptation, as well as considerable allocation of resources for professional support. Finding the balance in the relationship with dedicated recruitment partners is something practically every company needs to address in order to successfully fuel its sustainable growth, according to Pirovski. Choosing the right partner or mix of partners who are able to add value and support your business needs can make a big difference.

To supply the talent they need, a growing number of companies seek direct collaboration with government-run and private education organisations.

Sourcing companies in the region are increasingly acknowledging the need to work across borders in order to close the gap between the skillsets they require and the ones the labour market offers and stay competitive.

In that regard, a key factor for employers is selling Bulgaria as a great place for working and living, supporting the relocation and dealing with working permits, it adds. The procedure, however, is rather demanding especially for non-EU citizens, she comments.

An ever increasing number of hires comes from abroad as Bulgaria has gradually become competitive and an attractive place for career development of young professionals from countries both within and outside the EU, Pirovski too notes.

The sourcing sector expands aggressively and it is not surprising that most businesses are multinational, he goes on to say. This includes the big Bulgarian companies who already have global teams and offices in the neighboring countries at least. The very dynamics of the contemporary business environment makes it impossible to sustain effective operations and growth on a single market. Business needs are continuously diverging as companies are coming to the realisation that there is no just one challenge or solution but a multitude of them.

Choosing the right location when deciding to expand is the first challenge a company faces. There are a number of factors which need to be taken into consideration including available talent pool, local legal frameworks, working with migration authorities, discrepancies in the setup of operations and taxation, intercultural communication, relocation processes, etc.

Finding the suitable partners or convincing your existing clients to support your plans comes next. Even if a company is present only in Bulgaria, the need to tap into additional talent pools and find more skilled resources necessitates cross border collaboration.

Lastly, the one certain thing is that the sourcing sector is becoming ever more international in everything it does. “A great deal of anticipation is desired and companies need to translate their plans into actionable measures starting with adjusting the corporate strategy so as to accommodate for a smooth transition and effective tactical and operational setup,” Pirovski concludes.

learning and development corporate infrastructure, according to Ivaylo Pirovski, Delivery Manager at human resources consulting firm Easy Consult.

The dynamic changes in the business environment can create a fractured employee experience and distance the people agenda from emerging business needs. An integrated people strategy anchored in the organisation’s priorities can close that distance and help drive value in shifting times, according to the Mercer 2019 Global Talent Trends Report.

This view is shared by the other human resource consulting companies. Positioning a company’s talent acquisition strategy at the core of its operations is the first important shift in the mindset that many business leaders need to make, according to Pirovski.

www.unics.bg


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10. REPORT CONCEPT and methodology

The purpose of the AIBEST 2019 Annual Industry Report is to summarise the sector’s developments in Bulgaria in the five-year period 2014-2018 and provide reliable, comparable, comprehensive and independent data about the market stakeholders.

The main focus of the report is the analysis of the ITO and BPO segments of the sourcing industry, including voice-based BPO (VBPO), finance and accounting sourcing (FAO), human resource sourcing (HRO) and other vendors specialised in providing more than one type of services. In the 2018 edition KPO was included as a separate sub-category of BPO in the financial analysis to reflect its growing significance within the industry. For the same reason, in the 2019 edition, we take shared service centres (SSC) out of the Other BPO and examine it as a separate sub-category of BPO in the financial analysis.

The report preparation took place between June and October 2019.

Identification of companies

The AIBEST 2019 Annual Industry Report encompasses 583 companies from all sourcing segments. This year we included 109 additional providers of sourcing services compared to the previous edition of the report. On the other hand, we excluded three companies, which were written-off, inactive (with zero employees and operating revenue) or changed the focus of their activity. Additionally, we identified four sourcing vendors established in 2019. They are only listed in the report, but not included in the financial and employment analysis, since they do not have data for the period under consideration.

The identification process consists of the following steps:

• ОChecking the pool from the previous year for changes in companies (status, name, activity) and removing inactive or irrelevant companies. In the process of company identification, companies performing at least some amount of sourcing activities are included in the pool. The first pool was derived by individual desktop check of all companies in the trade register with industry classification in one of the following fields (NACE rev. 2.0): 58.29; 62.01; 62.02; 63.11; 63.99; 69.10; 69.20; 70.21; 70.22; 73.20; 74.90; 82.20; 82.99.

• ОChecking associations, clusters and other industry associations for new players and adding them to the pool if they meet the criteria.

• ОChecking www.jobs.bg for all employers in the areas of BPO and ITO and selecting relevant new players to add to the pool.

• ОRemoving companies with no recorded activity and one or less employees in the last year.

• ОFinal check of the pool and distribution by segments.

• ОSending of the final pool of companies to AIBEST for verification and confirmation.

Financial analysis

The financial analysis consists of four chapters – Employment structure, Market size, Costs and Profits and profitability.

We have used the official non-consolidated company records of all vendors to collect information about financial indicators such as labour costs and social security expenditure, operating revenue, net sales revenue, taxes, net profit and loss for five consecutive years - 2014-2018. Time analysis is based on the aggregated indicators of all companies for 2017 and 2018. Forecasts for the period 2019-2022 are calculated based on the CAGR of the companies in the respective segment in the five-year period 2014-2018. Any differences in the 2017 figures, compared to the ones published in the last year’s edition, are due to the changes in methodology described hereafter.

The financial analysis is preceded by the following steps:

• ОExtraction of financial data for the last five years from our database (Operating revenue; Net sales revenue from services; FTE employees; Labour costs; Social security costs; Income taxes; Alternative taxes; Net financial result; Share capital; Outgoing cash flows for fixed assets).

• ОExclusion of companies created within the last year from the financial analysis - they do not take part in rankings and in the number of segment’s companies by which the sum for the segment is divided to get average values. Furthermore, only companies with financial statements for the full years of the period are taken into account. Along with the rankings and financial analyses, we will provide a short explanation of the latest developments concerning the leading companies.

Employment

FTEs and EoYs are taken from the financial indicators pool with all identified companies. Calculations include: ranking by number; sum by segment; average by segment; average headcount by location (based only on companies with at least one employee in 2018). The expected slowdown in employment growth rates in the period 2019-2022 reflects diminishing workforce and market saturation in the sourcing industry. SSC is included as a separate BPO segment for the first time in the 2019 edition. Companies operating SSCs as a part of their organisational structure, but not as a separate legal entity, are not taken into account in the rankings by FTE and EoY numbers. In the cases of Sensata Technologies Bulgaria EOOD and Cargill Bulgaria EOOD, only SSC employees are included in the calculation of the total industry figures.

Market size

The main indicator for calculating the market size is Operating revenue from the official individual financial reports of the companies for 2018, with the exception of companies with sourcing or SSC units, more than 90% of whose operating revenue is formed by activity in other industries (Sensata Technologies Bulgaria EOOD, S&T Bulgaria EOOD, Cargill Bulgaria EOOD). For the latter we have taken net sourcing or SSC revenue as declared in their annual reports, or net revenue from services, where the abovementioned classification is not available. In the case of Progress Software EAD, we have omitted from the calculation revenue from sale and renewal


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of licenses, as well as the one-off revenue from sale of intellectual property rights. Forecasts up to 2022 are made using CAGR for the 2014-2018 period. Calculations include: ranking by number; sum by segment; average by segment; revenue/employee ratios; graphical representation - five-year trend; forecasts. SSC is included as a separate BPO segment for the first time in the 2019 edition. We will include rankings by Net Sales Revenue from Services or Net sales revenue as a whole for companies with estimated share of sourcing in their activities above 50%.

Most dynamic companies ranking is based on the year-on-year change in Net sales revenue for only ITO and BPO (no sub-segments). The top 25 companies in each segment are represented graphically. Net sales revenue (official individual financial reports of the companies) is used for calculation of the change. The ranking excludes:

- companies established in the last three years

- companies with nine or fewer employees

- companies with less than EUR 50,000 in net sales revenue

It includes only companies that have reported positive financial results in the last three years. In the 2019 edition Net Sales Revenue from Services replaces operating revenue as an indicator. The change is calculated as the average growth rate in the four years.

Costs

Labour costs and social security costs, total taxes from official financial reports are used. Forecasts up to 2022 are made using CAGR for the 2014-2018 period. Calculations include: sum by segment; average by segment; graphical representation - five-year trend; costs/employee ratios; forecasts. SSC is included as a separate BPO segment for the first time in the 2019 edition. In the case of Sensata Bulgaria EOOD, the labour costs and social security contributions are scaled proportionally to the SSC headcount of the company.

Profits and profitability

Net financial result (from official individual financial reports of the companies) is used. Forecasts up to 2022 are made using CAGR for the 2014-2018 period. We have excluded vendors with profit margins above 100%, companies with annual operating revenue below EUR 50,000, as well as recently created companies (last three years) from the ranking of companies by profit margin. Calculations include: sum by segment; average by segment; graphical representation - five-year trend; profit/employee ratios; net profit margin is calculated as net profit/loss over operating revenue (with the exception of companies with sourcing or SSC units, more than 90% of whose operating revenue is formed by activity in other industries, for which we have used net revenue from sourcing, SSC or services); forecasts. In the case of Sensata Bulgaria EOOD, net profit is calculated as the difference between shared services revenue and shared services costs, as declared in the company’s individual annual reports. The net profit of Progress Software EAD for 2018 is reduced by the amount of the revenue from sale of intellectual property rights. SSC is included as a separate BPO segment for the first time in the 2019 edition.

Non-financial chapters

Bulgaria as a sourcing destination

Factsheet data about Bulgaria are gathered from official government and statistical sources (NSI, Bulgarian National Bank).

Bulgarian economy forecasts are taken from the latest edition of IMF World Economic Outlook.

Factors, such as labour and electricity costs, taxes and office space developments are examined based on desktop research of official Bulgarian and EU sources and consultancy reports (Eurostat, Colliers International, Cushman & Wakefield Forton, BNP Paribas Real Estate, CBS and MBL).

Talent pool analysis is based on data from NSI. The number of schools and universities preparing potential employees for the sourcing sector is determined by manual checking of the database of the Ministry of Education and Science for the current (2018/2019) academic year. Data for the language skills of the young population is received from the Bulgarian Ministry of Education and Science. In the workforce education chapter and the city profiles, we have defined professional areas suitable for sourcing as follows: university majors in the areas of Language studies, Administration and Management, Economics, Mathematics, IT and Computer Science and Communication and Computer Technology, as well as mathematics, science, economics and language high schools. We have omitted general secondary schools with a limited number of classes profiled in one or more of the abovementioned areas from the number of schools suitable for sourcing.

The positions of Bulgaria in global rankings are derived from desktop research of international rankings relevant to the sourcing industry by different consultancy companies and institutions.

City profiles

All identified sourcing companies, headquartered in Sofia (the other cities, respectively), are grouped by segment and graphically represented. City profiles feature only vendors based in the respective city, not in the municipality or the district. Based on the research of companies made for the Vendors landscape chapter, all secondary offices in Sofia are grouped by headquarters location, as well as all secondary offices in other cities of Sofia (or other city)-headquartered companies are shown graphically. Headcount represents all FTEs, with which each company is included in the financial analysis, regardless in which company office they work, i.e. the headcount graph denotes all FTEs in Sofia-headquartered companies and not all FTEs working in Sofia.

Vendors landscape

For each company we identify: headquarters (according to the trade register), secondary offices in Bulgaria and abroad (through desktop research of website, annual report and job sites), ownership structure (latest available official data from the trade register), customers by country and languages (through desktop research of website, annual report and job sites). Data are grouped, analysed and graphically represented using MS Excel and Infogram. SSC is included as a separate BPO segment for the first time in the 2019 edition.

Industry trends

Corporate investments are taken from online and printed media, news integrators, company websites and annual reports. Events are gathered by desktop research and include events in Bulgaria and Europe that are relevant to sourcing.

Forecasts and key highlights

Conclusions based on the analysis in all other chapters.

List of companies

All identified companies are listed with their names as currently shown in the trade register. Companies are listed alphabetically and grouped by segment. AIBEST members are in bold in the beginning of each section.


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11. LIST Of COmPANIES researched for the purpose of this report

Accedia ADBulpros Consulting ADDynamic Solutions OODEPAM Systems Bulgaria EOODHeleCloud Bulgaria EOODInterconsult Bulgaria OODLirex BS ADPaysafe Bulgaria EOODProxiAd Bulgaria EADResolve Systems (Bulgaria) EOODScale Focus ADSoftServe Bulgaira EOOD13BIK EOODAB Solutions EOODAbalta Technologies EOODAbbaty ADAbilitics OODAccenture Bulgaria EOODAcronis Bulgaria ОOODAcsior EOODAdaSoft OODAdastra Bulgaria EOODAdDev Tech EOODadesso Bulgaria EOODAmdocs Bulgaria EOODAmexis OODAntipodes EOODAnyoption Bulgaria Limited EADArgon OODAstea Solutions ADAstound Commerce Bulgaria EOODAtaccama Bulgaria EOODAtlantify OODAtos Bulgaria Competency Center EOOD (formerly Infopartners OOD)Aviaso Bulgaria EOODAxway Bulgaria EOODBalkan Services OODBankSoft OODBDC Bulgaria OODBelvek OODBGO Software OOD (formerly BGO Media OOD)Bianor Services EOODBluBird BG Blubito EOODBora Solutions OODBosch Software Innovations EOODBoyarsoft EOODBright Consulting ADBSH OODBuchanan Technologies Europe EADBulbera EOODBusiness Services and Technologies OOD Catenate Bulgaria OODCeltis OODCentroida ADCisco Systems Bulgaria EOODClarity Solutions Bulgaria ООDClean Code Factory EOODCNSys ADCobuilder International EOODCode Nest OODCode Plus EOODCode Runners ООDCodeo Bulgaria EOODCodific OODCodix Bulgaria EAD

ITO Coherent Solutions EOODComptel Communications EOOD - in liquidationConcep Bulgaria EOOD Crazy Web Studio EOODCST EOODD Consulting OODData Solutions EOODDataArt Europe EOODDatastork Bulgaria OODDaticum ADDea Solutions EOODDelinx EOODDevelop Soft OODDevexperts Sofia EOODDevision OODDigiMark EOODDigital Lights EOODDision EOODDo IT Wise Consulting EOODDocumaster Bulgaria EOODDot Net Bulgaria EOODDreamix OODDSI OODDynamic Zones EOODeFellows OODeLando ADEndava EOODEnergize Global Services EOODEstafet EOODEuro Star - BG EOODEuroBG Software EOODEuropean Software Design OODEveda Consulting OODEvrista EOODFadata EOODFFW Bulgaria EOODFidweb OODFinatech Bulgaria EOODFlat Rock Technology EOODFlowMinds OODForschung - Direkt OODFourth Bulgaria EOODFrantishex EOODFuturist Labs OODGAN Software Services BG EOODGoDaddy Bulgaria EOOD (formerly Paragon Services EOOD)GoodSpring Technologies EOODGrafixoft OODGVC Services (Bulgaria) EOOD (formerly bwin.party services (Bulgaria) EOOD)Hack Soft EOODHaemimont ADHashlink EOODHedgeServ (Bulgaria) EOODHemmersbach Bulgaria EOODHosting Solutions OODHosting Well Done EOODHostway Bulgaria EADHQWebS EOODIBA Bulgaria EOODIBM Bulgaria EOODIBS Bulgaria EOODICON Worldwide EOODIndigoVerge OODInfoleven EOODInfragistics Bulgaria EOOD Ingima Bulgaria EOODInnexys Consulting ADInnovasys OODInsys OOD

Inteleksys OODIntelligent Systems Bulgaria EOODInteroute Bulgaria EADIntracol Technologies ADIphos OODIT Dev Pro EOODIT Gix OODIT-Economics Bulgaria EOODIT-Firm EOODItido Technologies OOD (formerly FutureSoft OOD)JAN Services EOODJSD Systems OODKeagan Solutions EOODKinguin Bulgaria EOODKodar OODKomplex 2000 OODKukui Cooperation - Bulgaria BranchLab08 EOODLead Consult OODLuxoft Bulgaria EOODM+W MediaNetworks EOODMAP Marketing Research OODMaster Plan EOODMatrix I.T. Global Services Bulgaria EADMavenir Bulgaria EOODMDG EOODMelon ADMENA Software EOODMentorMate Bulgaria EOODMicro Focus Bulgaria EOOD (formerly Entco Bulgaria EOOD)Microsoft Bulgaria EOODMINA EOODMirchev Ideas EOODMnemonica ADModis Bulgaria EOODMoon BG EOODMoorcode Sofia EOODMotion Software OODMotivian EOODmsgNETCONOMY Bulgaria OODMusala Soft ADMWD Technologies EOODNatek Bulgaria OODNemetchek OODNetpoint Services OODNetrix Worldwide EOODNevexis OODNexsys 2009 EOODNisoma OODNo Limit Software OODObecto EOODObject Systems International Bulgaria EOODOcado Bulgaria EOODOneBit Software EOODOrionOne EOOD (formerly Orange Dot EOOD)Oryx Bulgaria OODOutcons OODOutsource Consulting EOODOutsourceBG Services OODOxible OODPariplay Bulgaria EOODPastel Studios OODPaysera Bulgaria OODPDS Bulgaria EOODPLDA EOODPodix OODPredistic OODProgramista EADProgress Software EAD (formerly Telerik AD)PROS Bulgaria EOODPSIT Bulgaria OODPXP Services EOOD (formerly Kalixa Services Bulgaria EOOD)Quality House EOODQuality Tech EOODQuanterall OODR&D Solutions OODReward Gateway (UK) OODRexintegra EOODRila Solutions EADRINF Engineering Research OODRS Consult BG EOODS&T Bulgaria EOODSAP Labs Bulgaria EOODSata Services ADSciant ADSeafox OODSeeburger Informatik EOOD

Seedot OODSEGA Black Sea EOODSellerCloud Europe EOODSentia Services EOODService Centrix OODSFB EOOD (formerly Speedflow Bulgaria EOOD)Siemens EOODSirma Business Consulting ADSirma Solutions ADSkadIT OODSmart X Media EOODSmartcom-Bulgaria ADSmartTech EOODSofia Marine EOODSoft To Run OODSoftConsultGroup OODSoftware AG Development Center Bulgaria EOODSoftware Group BG ADSoftwareOne Bulgaria OOD (formerly Comparex Bulgaria OOD)Sofyma Web OODSoitron EOODSolitex IBS OODSouth Gate Tech EOODSouth Value EOODSpring Technologies EOODSQA Service OODST6 OODStam Soft OODStandByte EOODStarcoders EOOD Stars Interactive Services (Bulgaria) EOODStemo OODStivasoft OODStone Computers ADStrypes EOODSugarshack Animation Bulgaria OODSunny Soft OODSuper Dev EOODSynchSource Inc. - Bulgaria BranchTaller Technologies Bulgaria OODTaulia Bulgaria EOODTechnest Software Solutions EOODTechnofy EOODTechnologica EADTechnomex EOODTechPods OODTick42 OODTinqin ADTreasury Intelligence Solutions Bulgaria EOODTryond EOODTryzens Bulgaria EOODTSD Services OODUber Bulgaria EOODUHY International EADUNIQA Software - Service Bulgaria EOODUp2 Technology EOODUpnetix ADVarnasoft EOODVerint Systems Bulgaria EOODVirtual Affairs Bulgaria EOODViscomp EOODVisteon Electronics Bulgaria EOODVM5 OODVMWare Bulgaria EOODWAPI Bulgaria EOODWeb Technology OODWesternacher & Partner Consulting EOOD WF Core EOODXoomworks Bulgaria EOODZuhlke Engineering EOOD

FAO

ANC EOODBPO Bulgaria EOODCycle Credit Bulgaria EOODFisko Group EOODSafecharge Bulgaria EOODSB Co EADTaxback EOODTMF Services EOODTungsten Network EOODVerdeTax EOODVest Corporate Services EOOD


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KPO

Other BPO

Companies established in 2019 not included in calculations

SSC

VBPO

AT Global Solutions EOODCentric Technologies OODImmedis EOODTeams Bulgaria Outsourcing EOOD

HRO

Processflows (UK) Limited - Branch BulgariaAccess Consultancy OODAdecco Bulgaria EOODAdvance Human Capital OODAgencia Kariera OODAn - Mary 2 Sofia EOODAra.bg EOODArsis Global EOODAryxe (Bulgaria) ADAstrea Recruitment EOODBalkaninvest.eu EOODBica Services EOODBoyman Consulting OODBrightPoint OODBulcon Group OODBulwork Company OODCreativo EOODCross Source EOODCTeam OODDEKRA Arbeit Bulgaria EOODDevelop U OODDiscoverIT Academy EOODDr. Pendl & Dr. Piswanger Bulgaria EOODEasy Consult OODEpsilon CK OODFeuji Bulgaria EOODForexjobs OODGadol EOODGamito EOODGI Group EOODH Vision EOODHera Gold EOODHi Way Jobs OODHill International BG EOODHorizons Bulgaria OODHR Consulting Partners EOODHR Partners OODHR Services EOODHRS Bulgaria EOODHRS Group OODHRS Staffing Bulgaria EOODHuman Capital Store EOODICAP Employment Solutions Bulgaria EOODIntercontinental Recruiting EOODJordan Sheppard International OODLift HR Solutions OODLugera EOODManpower Bulgaria OODMarkovski Solutions EOODMinds AD (formerly Minds OOD)Mz3 EOODNordic Recruitment & Consulting EOODOTTO Work Force Bulgaria EOODPFG Bulgaria OODQuesters Bulgaria EOODRadioactive International Recruitment EOODRecruit Pro EOODS Group Human Capital EOODSeedset OODSeiteq Services EOODSmarter OODStanton Chase International Bulgaria OODSynectica Inter Recruitment OODTalent Hunter OODTechHuddle EOODTechwork.BG OODTigeronsite OODTimako Work Agency BG EOODTop Skills Recruitment OODToro GroupS OODTrenkwalder EOODUpSkill EOODWyser EOOD

A Data Pro OODEXL Services Bulgaria EADExperian Bulgaria EADAmplify Analytix EOODB Eye EOODBG Business Solutions EOODColliers International EOODCquest Research and Consulting

AIG Europe SA (Bulgaria Branch)Atos IT Solutions and Services EOODCargill Bulgaria EOODCargotec Bulgaria EOODCoca-Cola Hellenic Business Services Organization EOODHewlett-Packard Global Delivery Bulgaria Center EOODIngram Micro SSC EOODLouis Dreyfus Company Services Bulgaria EOODSandvik Bulgaria EOODSutherland Global Services Bulgaria EOODAES Europe Services EOODATT Global Network Services Bulgaria EOODCoca-Cola European Partners Services Bulgaria EOODCoca-Cola Hellenic IT Services EOODDXC Technology Bulgaria EOOD (formerly CSC Bulgaria EOOD)Enterprise Services Bulgaria EOODIBM Global Delivery Center Bulgaria EOODKaufland Service EOODKPMG IT Service OODSensata Technologies Bulgaria EOODXerox Business Services Bulgaria EOOD

60лK EADC3i Europe EOODCallpoint New Europe AD (Telus International Europe)Concentrix Services Bulgaria EOODTTEC Eastern Europe EADAlba Center OODAll Calls OODAlorica Bulgaria EOODAlpha ООch Bulgaria OODAT Consulting 2018 EOODAva Mar EOODAxivas Bulgaria EOODBG Trade Center OODBlue Bear Technologies EOODC3/CustomerContactChannels Bulgaria EOOD - in liquidationCall Cell BG OODCall Centre BG OODCall Group EOODCalling EOODCMSG EOODComstream OODConvergys International Bulgaria EOODCoreNet International EAD (formerly Euro Connect International EAD)Crossplatform Digital EOODCSMS EOODCT Europe OODCustomer Care BG EOODDMG Consult OODDMS Health Group EOODDortome BG EOODDynamo Software Bulgaria EOODE & G Finances EOODEnterpryze Consulting EOODEOS Services EOOD

ES Bright Consultants OODEuro Connect EOODEuroccor ADEurope and International BPO EOODFantastic Services OODFastKlean Bulgaria EOODFirst Online Solutions OODFuel for Sales EOODGLMR EOODGlobal Services Bulgaria ADGold 06 EOODInnotec International ADInterhuman Capital EOODInternational Contact Services EOODInternational Errands EOODIP Telecom Bulgaria OODISG Technology EOODKoalista Dynamic EOODKommlink EOODLCM Customer Support Services EOODLogikol Bulgaria ADMarketing Pragmatic EOODMetrica OODMisshosting EOODMRKT-Trade EOODmyPOS AD Nesla 369 OODOdessos Global Services EOODOkyanus Group Bulgaria EOODOnboard ADOpus Services OODOutdooraholics BG EOODPlaDo International OODPlus500BOS EOODPlutus EOODPoint Call Center Services OODPolarica EOODPublix EOODQueste EOODRegiocom SE - Bulgaria BranchRisk Hold EADServiceSource International Bulgaria EOODServiceTel OODSigmaPlan EOODSilent BG EOOD - in liquidationSiteGround Hosting EOODSiTel Bulgaria EOODSmart Service Solutions EOODSofia Logistics and Forwarding OODSwiss Broker EOODTax Back International-Varna EOODTeam Up Group EOODTek Experts EOODTelelink Business Services EAD TN Global EOOD (Siteground)UBX EOODUnited AMG OODVEK - AR EOODVitrus BG OODVivika EOODVox On International EOODWe Cool Company EOODWHG Services (Bulgaria) Limited EOODYoummday Bulgaria EOODZephyr Group EOOD

CXG OODHP Inc. Bulgaria EOODPontica Solutions OODABC Global EOOD AFF Media OODAsian Absolute EOODBeehive Hospitality OODBenchmark Support EOODBG Marketing 2010 EOODBI Smart Solutions OODBravo Consult EOODBright Marketing Research OODBulgarian Online Research OODCBRE Corporate Outsourcing EOODCM Services OODCommetric EOODD10 Solutions Bulgaria EOODDantek OODData Management EOODDirect Services OOD

LIST Of ABBREvIATIONSBPO - Business process sourcingCAGR - Compound annual growth rateEoY - End-of-yearEU-28 - European Union’s 28 member countriesEUR - EuroFAO - Finance and accounting sourcingFDI - Foreign direct investmentsFTEs - Full-time employeesGDP - Gross domestic productGSLI - Global Services Location IndexHRO - Human resource sourcingIMF - International Monetary FundITO - Information technology sourcingKPO - Knowledge process sourcingkWh - Kilowatt hourNSI - National Statistical InstituteSEE - Southeast Europesq m - Square metreSSC – Shared service centreSTEM - Science, Technology, Engineering, and MathematicsUK - United KingdomUSA - United States of AmericaVBPO – Voice-based business process sourcingy/y – year-on-year

EOODDeskGod OODDrooms Bulgaria EAD GfK Bulgaria, Market Research Institute EOODIndeavr OODIsobar Commerce EOODJ&T Services OODPlaybox Technology ME EOODPremier Research Germany Limited - Branch BulgariaSibiz Bulgaria OODV Media EOODWorld Outsourcing Matrix EOOD

E-motiv BG OODFair Point OODGenius Sports Services EOOD (formerly InPlay EOOD)Heat Design EOODICover Services EOODiGaming Bulgaria EOODInensia OODInfosource EOODIntelliWay Services ADInternet Securities Bulgaria EOODIQVIA RDS Bulgaria EOODISGBG EOODLinxguru EOODLocal Fame OODLOGO Market Research and Consulting OODMansion Technology and Operations Centre EOODMapex ADMellon Bulgaria EADMercure Group EOODOnProcess Technology Bulgaria EOODOrbica OODOsceola EOODOxtotech EOODPentagon Interactive EOODPlaytech Bulgaria EOODPlutus BG EOODPPD Bulgaria EOODPrice International EOODQuikfox OODRadioaktiv EOODRamensofia EOODSBTech (Global) Limited - Bulgaria BranchSC Global Marketing OODSize EOODSkyLine Marketing OODSmart Office Solutions EOODSquare Consulting Bulgaria OODT&T Global EOODTeam4s Europe OODTechnementals Technologies (Bulgaria) EADTradeTech Bulgaria EOODTravelStoreMaker.com EOODUnify Service Center EOODVKA Solutions EOOD


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SeeNews 2019

DISCLAImERLIST Of fIgURESFig. 1 - Bulgaria Factsheet 2018Fig. 2 - Bulgaria Economy ForecastFig. 3 - Corporate Tax Rates in Southeast EuropeFig. 4 - Major Office Space Projects in Sofia Launched or Under Construction in 2018-2019Fig. 5 - Population Aged 20-34 in Major Bulgarian Cities by YearFig. 6 - Number of Schools and Universities Preparing Students for Potential Sourcing Jobs in 2019/2020Fig. 7 - Prizes for Bulgaria from International High School Competitions in October 2018 - September 2019Fig. 8 - Graduates Potentially Suitable for Sourcing by Year and Field (%)Fig. 9 - Positions of SEE Countries in International RankingsFig. 10 - Sofia Sourcing ProfileFig. 11 - Plovdiv Sourcing ProfileFig. 12 - Varna Sourcing ProfileFig. 13 - Veliko Tarnovo Sourcing ProfileFig. 14 - Burgas Sourcing ProfileFig. 15 - Number of Companies by Segment and Size in terms of FTEsFig. 16 - Major Locations of Sourcing CompaniesFig. 17 - Number of Sourcing Companies by Year of EstablishmentFig. 18 - Number of Sourcing Companies with Foreign Majority OwnersFig. 19 - Number of Sourcing Companies Servicing Foreign MarketsFig. 20 - Major Languages Used in Bulgarian Sourcing CompaniesFig. 21 - Investments in Long-Term Assets (mln EUR) of Bulgarian Sourcing CompaniesFig. 22 - Full Time Employees in the Sourcing IndustryFig. 23 - End-of-year Employees in Sourcing IndustryFig. 24 - Top 10 Sourcing Companies by Number of FTEs in 2018Fig. 25 - Average Number of FTEs per Company by LocationFig. 26 - Top 10 BPO Companies by Number of FTEs in 2018Fig. 27 - Top 10 VBPO Companies by Number of FTEs in 2018Fig. 28 - Top 10 KPO Companies by Number of FTEs in 2018Fig. 29 - Top 10 FAO Companies by Number of FTEs in 2018Fig. 30 - Top 10 HRO Companies by Number of FTEs in 2018Fig. 31 - Top 10 Other BPO Companies by Number of FTEs in 2018Fig. 32 - Top 10 SSCs by Number of FTEs in 2018Fig. 33 - Top 10 ITO Companies by Number of FTEs in 2018Fig. 34 Operating Revenue and Employment in the Sourcing Industry by SectorsFig. 35 Operating Revenue by Segment Fig. 36 Top 10 Medium-sized and Large Sourcing Companies by Net Revenue per FTE in 2018 Fig. 37 Top 10 ITO Companies by Net Revenue (mln EUR) in 2018 Fig. 38 Top 10 BPO Companies by Net Revenue (mln EUR) in 2018Fig. 39 Average Revenue per FTE by Segment Fig. 40 Average Revenue per EoY Employee by Segment Fig. 41 - Most Dynamic ITO CompaniesFig. 42 - Most Dynamic BPO CompaniesFig. 43 - Labour Costs in Sourcing by SegmentFig. 44 - Social Security Contributions in Sourcing by SegmentFig. 45 - Labour Costs per Company by SegmentFig. 46 - Labour Costs per Full Time Employee by SegmentFig. 47 - Social Security Contributions per CompanyFig. 48 - Social Security Contributions per FTEFig. 49 - Taxes Paid by the Sourcing IndustryFig. 50 - Net Income in Sourcing by SectorFig. 51 - Net Income by SegmentFig. 52 - Net Income per FTE by SegmentFig. 53 - Net Profit Margin by SegmentFig. 54 - Best ITO Performers by Net Profit MarginFig. 55 - Best BPO Performers by Net Profit Margin

SOURCESA. T. Kearney www.atkearney.comAIBEST www.outsourcinginbg.comCapital www.capital.bgCIO www.cio.bgColliers Bulgaria www.colliers.com/bg-bg/bulgariaCushman & Wakefield Forton www.cwforton.comDnevnik www.dnevnik.bgEconomy.bg www.economy.bgEurostat www.ec.europa.eu/eurostatICT Media Top 100 www.ictmedia.bgInternational Monetary Fund (IMF) World Economic Outlook Database – April 2019 www.imf.org

InvestBulgaria Agency www.investbg.government.bgJobs.bg www.jobs.bgMinistry of Education and Science www.mon.bgMoney.bg www.money.bgNational Statistical Institute www.nsi.bgSeeNews’ database with the financial results of all Bulgarian companies for 2014-2018

Shash.bg www.shash.bgTrade Register Bulgaria www.brra.bgTrading Economics www.tradingeconomics.com

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