Service sector outsourcing Data and measurement problems Magdolna Sass Institute of Economics of the Hungarian Academy of Sciences

'What kind of competitiveness for the Visegrad Four?' 22 February, Czechinvest, Prague 2 Categories of the analysis InternalizedExternalized to the firm (outsourcing) Home countryProduction kept in-house at home Outsourcing (at home) Foreign country (offshoring) Intra-firm (captive) offshoring Offshore outsourcing Visegrad countries: appearing more and more on the map of offshore outsourcing and captive offshoring What can be the extent of their involvement? What can be the extent of relocation in business services to these countries?

'What kind of competitiveness for the Visegrad Four?' 22 February, Czechinvest, Prague 3 Which are the relevant data sources? Modes of services trade (GATS-WTO) and related data Mode 1 – cross-border supply (foreign trade) Mode 2 – consumption abroad Mode 3 – commercial presence (FDI) Mode 4 – on-site delivery Mode 2 is not relevant here, mode 4 is not significant (contrary to e.g. India) Other possible sources of data on BPO: national statistics: e.g. number of employees market share and other data by consulting agencies company level data from surveys or other sources

'What kind of competitiveness for the Visegrad Four?' 22 February, Czechinvest, Prague 4 Foreign trade data Categories not detailed enough in practice Connected mainly to offshore outsourcing, but only partly to captive offshoring Data contain services trade connected to offshoring and offshore outsourcing and trade carried out by ‘independent’ companies Available statistics incomplete (different from goods and difficult data collection, many transactions may remain unnoticed, reexport, transfer pricing, lines used for profit repatriation etc.)

'What kind of competitiveness for the Visegrad Four?' 22 February, Czechinvest, Prague 5 Problems with ‘Other services’ trade statistics (containing BPO)

'What kind of competitiveness for the Visegrad Four?' 22 February, Czechinvest, Prague 6 Foreign direct investment data Categories usually not detailed enough Connected mainly to captive offshoring, but not to offshore outsourcing Contains all investments in the sector, those which are connected to captive offshoring can not be separated Data in some cases incomplete and/or distorted (differences with mirror statistics)

'What kind of competitiveness for the Visegrad Four?' 22 February, Czechinvest, Prague 7 Other data Number of projects/companies in the sector: good indicator, though different plant sizes and different plant ownership + confluence of motives/activities is possible Number of employees: difficult to determine, which is connected to offshore outsourcing/captive offshoring, and existing employment categories do not reflect that Market share data: consulting agencies – may be distorted and overestimated (OECD, 2004 or BRADFORD JENSEN and KLETZER, 2005) Company level data: usually good but not always available, questionnaire surveys: difficult to collect for international comparison

'What kind of competitiveness for the Visegrad Four?' 22 February, Czechinvest, Prague 8 Conclusion Many sources of data must be used due to the complexity of the problem and due to the fact that statistics categories do not correspond to the motives/activities affected Quantitative analysis must always be accompanied by qualitative analysis: more qualitative research and ‘field-work’, sector or company case studies and analysis of databases from media reports, company questionnaire surveys, interviews and other sources Our project tries to fulfill these criteria

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