Greece May Pose Nearshore Competition

As Greece struggles with colossal debt and significant popular resistance to austerity measures, such as increasing the national retirement age, recommended by the European Union (EU), there is significant possibility that depending on what political party wins the country’s elections on June Euro_coins17, Greece may exit the EU this month and stop using the euro as its currency. Greece would instead revert to using its traditional drachma unit of currency.

Predictions of the affect a Greek shift from the euro to the drachma would have on both the world economy and Greek economy are mostly dire. But while some observers say speculation on Greece’s potential to cause a global recession by dropping out of the EU are overblown, most everyone agrees there will be a significant blow to Greece’s already weak economy.

While I’m not about to offer a detailed analysis of all the potential international economic impact of Greece once again conducting business in drachmas, I would like to briefly look at how it might impact the Greek outsourcing industry and create a new low-cost rival for nearshore outsourcers.

Currency Collapse Could Create New Low-cost Services Market
As reported by the New York Times, most Greek businesses fear a return to the drachma, which would be devalued 50-70% compared to the euro, resulting in severe inflation and a virtual halt to imports. There is no clear consensus, however, on whether a sharp reduction in Greek labor cost would create a new demand for Greek services.

In the short term, Greece exiting the EU would not likely create a new market for low-cost BPO. The New York Times reports Greece’s manufacturing industry is already weak (except for the historically strong Greek shipbuilding industry) and that 85% of Greek businesses employ 10 people or less.

But in the longer term, the availability of low-wage employees in a developed Western nation with credible education, IT infrastructure, Western cultural sensibilities (after all, Greece is the birthplace of Western civilization), and English-language skills may create enough demand that enterprising Greeks may start to create BPO service providers.

Even if these companies started small, assuming they could provide quality services, a quick development of a new Greek BPO market that would appeal to nearshore customers would certainly be a realistic possibility. In addition to the advantages listed above, nearshore providers should also keep in mind that while Greece is further away from the US than Latin America, it is still much closer in terms of time zone and travel time/expense than Asia, Africa or Eastern Europe, and if its currency is devalued by 50% or more, will offer lower operating and loabor costs than most Latin American countries.

The Nearshore Can Compete
Of course, it is still up in the air as to whether Greece will truly pull the trigger on leaving the EU and what the effects will wind up being. Considering that many experts also predict full-scale civil unrest if this occurs, a lack of security and stability may prevent any significant BPO industry from developing.

And even if a new low-cost Greek BPO market does arise in the next few years, nearshore BPO providers are already dealing with emerging low-cost rivals such as “insourcing” providers based in depressed areas of the US such as Detroit, as well as the possible emergence of new nearshore destinations in troubled regional nations such as Haiti.

Nearshore BPO providers can compete with Greece (or other European nations with an eye on dropping the euro, including Portugal, Spain and France) by continuing to offer quality service, reasonable rates, support from governments and educational institutions, and general convenience and reliability. The nearshore BPO industry has spent much of its short lifetime playing the role of David against the Goliaths of India, China and the Philippines, now it must prepare to take on other Davids, as well.

Topics: greece, BPO, Nearshore Outsourcing, austerity, nearshore, EU

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The Softtek Blog provides perspectives and practical know-how on the digital technology and the trends that today touch every industry.

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