Austria is located in Central Europe, with Germany and Czech Republic to the north, Slovakia and Hungary to the east, Italy to the south and Switzerland and Liechtenstein to the west. Central Europe, Eastern Europe in particular has changed dramatically since the fall of communism. Since joining the EU in 1995, Austria emerged as one of the more developed nations with a small and open economy. During that same period, rapid advancements in technology have had a tremendous effect on globalization, offshoring in particular.
Offshoring is a process where businesses move business processes from one country to another, whether it is manufacturing, customer support functions or accounting. More often, it is an opportunity for businesses to cut costs, so they can focus on their core competencies. Traditionally, a form of offshoring constituted outsourcing production pieces of a value-chain to low-wage countries, a model that is not followed in Austria.
Historically, offshoring opportunities have NOT existed in Austria and may NOT in the traditional sense in the near future. For one, the labor market in Austria has one of the higher wages in the region, which makes the country less attractive compared to neighboring countries. A more crippling reason is Austria’s inherent status in the region. Austria is considered a centerpiece in Central Europe for integration, both economically and politically. In effect, the world is regionally comparing a high-income nation like Austria with other former neighboring low-income communist countries. The resources in the low-income countries are a lot more attractive than those in Austria. The latest Gartner report for the Top 30 countries for offshoring services in 2010-2011 include European countries like the Czech Republic, Hungary, Portugal, Poland, Romania, Bulgaria, Belarus and the Baltic states (Estonia, Lithuania, and Latvia). To no surprise, these are neighboring countries that do not include Austria.
Offshoring has now evolved into strategic trends that extend beyond low-cost manpower but into countries for their innovative capacity, access to talent pools and political\cultural ties. The latest trend places Austria as a growing consumer (client) of nearshoring. Nearshoring has the same motivations as offshoring, the only difference is that business processes move to a nearby country or often to a country that shares a border. Today, the shift towards nearshoring in Austria is a direct result of strong European integration in the region. The integration is promoted by common ties such as language, culture and economic relations.
Austria, like many nations around the world, is affected by the global economy which continues to shape the trends in offshoring. That trend places Austria on the other end of the spectrum as a growing consumer of Offshoring\Nearshoring opportunities. Despite a solid national infrastructure, there are many factors that make Austria a less attractive country to host any offshoring opportunities. Austria’s situation with its neighbors in many ways is similar to the US\Mexico relationship. Similarities with political trade agreements, a shared border, and attractive talent pools make a compelling case to outsource. Unfortunately for Austria it is not on the receiving end. No matter, the lack of jobs is not an issue in this country where unemployment is at a paltry 4.26%. Austria can now focus their energies on other issues.