White Paper

Sourcing has encouraged internationalization as greater competition has made sub-contracting and labour supply patterns more international.

As multinationals are adopting more global perspectives, it has become easier to operate global organizational strategies as a result of technological innovations (especially in telecommunications and information technology) which have given firms greater flexibility in developing internationally-extended organizations.

Specifically in Eastern Europe, improved education and training provision has been encouraged by the production & service provision demands of many investors, resulting in the introduction of strong IT skills into the regional economies.

Substantial rationalization of international IT services in specific EU sectors has increased both the opportunities for firms to serve the Single Market from fewer locations (and make use of economies of scale where they have not been fully exploited. Skilled-labour-intensive sectors such as IT services provision is one such sector.

Labour is one of the most important service costs for IT outsourcing firms. Depending on the nature of the labour-intensity of the IT service provision, it can be as significant a consideration for firms as market proximity. In addition to the costs of labour, the availability of a skilled (and adaptable) workforce has been increasingly singled out by companies as one of the crucial determinants of a sourcing decision.

The process of European economic integration has produced significant shifts of investment within the EU as a result of labour sourcing restructuring, as well as attracting new inflows of investment from IT and Technology companies outside the EU wanting to take advantage of the Single Market.

Wage levels are cited as the key services cost affecting IT services decisions.

In Europe migration has largely been the principal mechanism for labour market adjustments, as workers at comparable skill levels have moved from low-wage to high-wage areas.