Professor of Sales Management: Outsource? Think nearshoring!

“There is great potential in nearshoring for companies in the Nordic–Baltic countries to maintain their competitiveness and actually turn it one of the region’s strengths”, says Petri Parvinen, Professor of Sales Management at Aalto University School of Economics.

Petri Parvinen was among the guest speakers at the Baltic Sea Development Forum Summit in Turku in early June 2014. The NIB newsletter inquired about his views on the business benefits of Nordic–Baltic cooperation and the region’s overall edge in the global marketplace.

“We have witnessed a rapid increment of knowledge-intensive fields such as IT, health and social services, which are huge players in these countries’ economies. These sectors require talented people with the right skills, but why not utilise nearby countries to provide the services? Why outsource to India, when you have people capable of doing it much closer to home?” asks Professor Parvinen.

Nearshoring, in contrast to outsourcing, means the business of moving production, research or business processes, for instance, to countries that are somewhat lower in cost and very close, instead of very cheap but distantly located. The wages in the “traditional” outsourcing countries such as China and India are increasing, and leading companies have noticed that. So instead of focusing on cheap labour, the skills of the employees and their geographical location are becoming more significant factors.

“If you think about the Nordic–Baltic region, in nearby countries you have an educated workforce able to provide traditionally outsourced services such as telesales or back-office services. It may not be as cheap as countries further afield, but the benefits come in other forms: cultural similarity, the same time zones, multilingual employees and a familiar regulatory environment. In the long run, these are likely to turn out to be more cost-effective factors than just the price of the employee. Especially the Baltic countries and Poland are very appealing countries at the moment to start a business”, says Professor Parvinen.

In terms of the Nordic–Baltic region’s general competitiveness, Professor Parvinen also emphasises internationalising and a growth-minded attitude in the people running the businesses.

“Only certain kinds of people are really able to found and successfully run companies, and also to make them grow. Furthermore, the traditional industries in this region, very typically medium-sized family-owned companies, have to be renewed. That’s where the great potential lies. So, instead of doing the traditional change of generation, where the business is transferred to a descendant, and continuing business as usual, we need to get these young people to put these companies on a new track and aim to expand.”

“Hence, you need a pool of talented people who are able to internationalise companies and turn them into global success stories. If 1% growth is the ‘new normal’ (see also here), we need to be globally competitive and sell our services to countries where purchasing power is increasing at the moment.”

Professor Parvinen sees that already the Nordic–Baltic countries hold several aspects that can spark more development in the region, and that cooperation between the countries can play a significant role in making business growth happen.

“The Nordic–Baltic countries have several capabilities to create new success stories. There are talented people with a high standard of education, which as such is an excellent export item. Then there are already sectors that are global leaders, such as biotech, pharmaceuticals and food packaging, and more global growth can be built around those with the right entrepreneurial mindset.”

“By collaborating, the Nordic–Baltic countries could together support companies in becoming lucrative regional growth stories. This can be done by fostering knowledge-intensive sectors, promoting nearshoring, and simply making it easier to start a company and, once it’s up and running, boost its expansion”, says Professor Parvinen.