OVUM OPINION

Turkey emerging as viable European nearshore market

Reference Code: OI00143-035 Publication Date: November 2011 Author: Peter Ryan

OVUM VIEW
Summary
With no shortage of offshore locations positioning themselves as viable delivery centers for Western enterprises, executives face tough choices in where to locate outsourcing operations. This has been especially true recently for firms looking for European nearshore capacity, what with instability pervading parts of the Middle East and North Africa. It is amongst this backdrop that Turkey appears to be gaining interest from outsourcing vendors and their clients alike as a reasonable nearshore option for European language delivery. However, before this location gains mainstream acceptance, a number of key questions around stability, capacity, and infrastructure will need to be fully addressed.

Turkey's domestic market bodes well for move to offshore

A recent visit by Ovum analysts to Istanbul for the 2011 Istanbul Call Center Expo yielded some interesting findings around this country's CRM sector. While it is clearly a major global consumer market, what was clear at this conference was the breadth in which CRM pervades Turkey. Not only were many global technology providers present, outsourcers were also in attendance, including global vendor Teleperformance, as well as leading local players such as Global Bilgi. What was also clear was the desire for CRM outsourcers in Turkey to move into offshore delivery especially into Western Europe. On paper, Turkey appears a reasonable possibility for such work, considering its short distance to most European capitals by air, a solid infrastructure in the contact center hub of Istanbul, and an already strong domestic market from which to draw expertise.

Turkey emerging as viable European nearshore market Ovum (Published 11/2011) This report is a licensed product and is not to be photocopied Page 1

However, it is also important to consider the questions that vendors and clients with limited exposure to Turkey are certain to ask in regard to offshoring from this market.

Stability is the watchword for European enterprises

Any outsourcing vendor and their base of European clients consider both political and economic stability when looking for new delivery locations. This is especially acute due to the disruptions that have recently occurred in the offshore contact center delivery hubs including Egypt and Tunisia. While minimal disruptions were reported in regard to overseas CRM delivery in both these countries, when embarking on new delivery sites, executives will be looking to avoid political and economic instability whenever possible, as well as public security disruptions. Turkey appears to be in good shape, with no major political crises looming and stable GDP growth and inflation forecast for the coming five years. Regardless, outsourcers selling offshore services from this country should expect heightened levels of due diligence from clients.

Finding the right fit outside of Istanbul

We also question the scalability of Turkey's offshore outsourced contact center in the long term. There is no question that the capital of Istanbul is currently under-used in regard to take-up of European-language CRM services, which are said to be in abundance (notably in English, German and, interestingly, Russian). With a population in excess of 10 million that has capacity to grow quickly, hitting saturation points among multilingual talent could occur quickly (as has occurred in both Cairo and Bogota, cities of similar proportion). However, how this translates in the country's secondary cities is very much in question. In some centers that have developed around tourism, contact centers would face stiff competition for multilingual labor; and in other cities relatively unknown to Western executives, there would be significant questions around both the quality of physical infrastructure and the availability of university-educated labor (which would be assumed to be at least somewhat multilingual). The challenge for Turkey's CRM outsourcing leaders and economic development agencies is to attack these questions head on, and formulate the investment climate needed to move to the next level of offshore delivery. It is Ovum's view that if the Turkish contact center outsourcing community works closely with the various levels of government, this country over the long term has the capacity to become an alternative European nearshore destination.

APPENDIX
Disclaimer
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