By Dan Berthiaume
Earlier this week, I attended the daylong Ireland Gateway to Europe expo held in Boston. The expo served as yet another reminder that BPO is truly a global phenomenon, with countries in every region of the world offering their own unique advantages as a BPO destination. While Ireland is not necessarily the ideal destination for all or even most BPO programs, there are a number of potential advantages BPO buyers should consider when selecting a location for their BPO delivery centers.
The Human Element
As the only English-speaking member of the Eurozone (Great Britain is part of the European Union but does not use the euro as currency), Ireland offers both full English proficiency and easy access to the 500 million residents of the EU, as well as protection of IP and other benefits provided by EU laws and business regulations. In addition, figures from the 2011 IMD World Competitiveness Yearbook and 2011 IBM Global Location Trends Report indicate Ireland ranks first worldwide for availability of skilled labor, third for availability of finance skills, fourth for labor productivity and fifth for Human Development Index (economic, social and educational).
Favorable Business Climate
While the Irish climate is not always known as being pleasant or friendly, Cormac Doyle, head of tax for Irish accounting/auditing firm MKO Partners, says Ireland’s business climate is welcoming. “There are pro-business government policies and a favorable tax regime,” said Doyle. “Like in American football when an offensive lineman does the hard work for the quarterback who takes all the glory, Ireland’s tax regime takes the glory.”
According to Doyle, companies setting up delivery centers in Ireland can obtain a 12.5% corporate tax rate, with a “significant” amount of the activity in the centers consisting of outsourced employees and services, but not all. In addition, if a company is developing any type of intellectual property (IP), that IP can also benefit from the 12.5% corporate tax rate if it is primarily developed in Ireland.
Other tax advantages Doyle cited for companies operating service delivery centers in Ireland include an R&D tax credit of 25% of holding expenditure, executive/personal tax incentives for relocating, tax depreciation for developed or acquired IP that can potentially reduce the effective rate to 2.5%, and a tax exemption for start-up companies on 1 million euros of profit over three years.
Plentiful Real Estate
Ireland is still recovering from a severe real estate crash, which can work to the advantage of companies renting space for BPO activities. According to Paul McGennis of Irish legal firm Byrne Wallace, Ireland has substantial open real estate stock with prices averaging $25 to $40 per square foot in urban areas and $10 to $20 per square foot in suburban areas. For example, he said Irish capital Dublin has 21% real estate vacancy, or about 7.5 million square feet of unoccupied space. Under the British lease system (which Ireland follows), tenants are responsible for repairs.
In addition, McGennis advised that some of the available commercial real estate stock is not “top quality,” and said that ensuring top-quality commercial real estate stock continues to be widely available in years to come is a crucial priority for the country’s real estate market.
Think Outside the BPO Destination Box
The most important lesson a BPO buyer can gain from the Ireland Gateway to Europe expo is not so much that Ireland is a potential BPO destination, but that it’s OK to think outside the traditional destination box containing India, China and the Philippines. Many other nations in Europe, including Scotland as well as Eastern European locales such as Poland and Lithuania, are establishing themselves as global BPO destinations. In addition, previously overlooked regions such as Latin America and Africa/Middle East are stepping up their BPO game.
Especially as levels of education, economic development and technology infrastructure generally rise across the world, viable destination options for BPO buyers will continue growing. Irish eyes are smiling on BPO, but so are Kenyan eyes, Mexican eyes, Polish eyes and many sets of eyes the global BPO market hasn’t even recognized yet.