The following article by Invest Lithuania’s Senior Investment Advisor Laura Kavaliauskaitė first appeared in the Outsourcing&More magazine. You can find the original here.
With Global Business Services, growth doesn’t just mean getting bigger. It’s as much about deepening the quality and range of services offered as it is about increasing scale. This is certainly the case with Lithuania. This thriving GBS location is definitely growing in terms of numbers – at the beginning of 2019, the sector consisted of almost 80 centres employing roughly 17,000 specialists, 17% up on the previous year. But (perhaps more importantly) Lithuania is also dramatically diversifying the range of services on offer and the range of sectors covered by its GBS sector. 85% of these centres are multifunctional, and with varying degree of complexity.
Such diversity is good news both for those already in the sector, and those looking to enter it. In terms of recruitment and retention, the fact that a wide range of specialisations is covered means the sector can tap into a wider talent pool. Ranked 3rd in the EU for STEM graduates, Lithuania certainly has plenty to offer for companies beyond the traditional GBS fields of Finance and Accounting, IT and Customer Service. And with foreign investors actively involved in the preparation of university courses, companies can nurture and develop the niche talent they need.
One of the strongest examples of this trend in Lithuania is the growing number of service centres for engineering companies.
In 2005, FESTO became the first international engineering company to set up a centre in Lithuania. Its team in Kaunas – Lithuania’s second largest city and now a hub for engineering service centres – started with just 8 employees. Now it has over 450 staff and a brand new office, with further plans for significant growth. Its story is typical of GBS operations in Lithuania – humble beginnings rapidly developing into major teams who play a fundamental role in company’s global operations.
One telling feature of FESTO’s Lithuanian office is the diversity of the services it provides for the company group. We’re not talking here about centralising a few back office tasks; we’re talking about a range of complex, mission critical functions, including product and CAD management, supply chain operations, didactic, procurement and marketing. The other standout feature in FESTO’s Lithuanian story has been its ability to smoothly scale as and when it needed to. Speaking at the opening of its new office in 2018, Pekka Parikka, General Manager of FESTO Lithuania, noted that “in recent years the number of employees has been increasing by about 20% annually.” From the company’s point of view, the reasons for this growth were self-evident: “Our team in Lithuania makes a significant contribution to the success of the company. Its professionalism helps the company pursue its goals and constantly improve its main processes.”
And in terms of Lithuania as a location for engineering GBS, both elements of FESTO’s success – diversity of functions and impressive scaling – point to the same fundamental strenght: talent.
Following in FESTO’s footsteps were a number of engineering companies from Germany and the Nordic region. And their stories have remarkable parallels to FESTO’s.
In 2012, the global engineering, economics and environmental consultancy COWI set up an Finance-focused service centre in Lithuania – this time in Vilnius, the country’s capital. COWI’s Lithuanian team outperformed its growth targets by more than 20% in its first year. So the Denmark-based firm decided to diversify its operations in Vilnius, adding a design centre to provide marketing and design support to the company group. Meanwhile, in Kaunas the US logistics automation systems provider Dematic was enjoying similar success with its engineering service centre. The centre now focuses on a range of functions from Finance to computer simulation, and is also responsible for the design and commissioning of automatic control systems for mechatronics equipment at customer sites.
Then in March 2017 another huge player arrived on the scene. Outokumpu, Europe’s largest stainless steel producer, with an annual turnover of over €6.8 billion and production facilities in China, Finland, Germany, Mexico, Sweden, the UK and USA, was in town. And it had big ambitions for its new Vilnius service centre.
The Finnish company’s Lithuanian team was tasked with providing master data management, procurement, IT and finance services. And it had to do so in English and range of other European languages. Most importantly, the centre was to be an important cog in a company-wide transformation process that would run all the way to 2020 and beyond. As Daiva Glebiene, Site Manager at Outokumpu Vilnius explained in 2018, at the time of a significant expansion of the centre: “Outokumpu is currently conducting a business transformation program focusing on harmonizing business processes and ways of working and paving the way for Outokumpu’s digital transformation beyond 2020. The Outokumpu Vilnius Business Service center has a continuously growing role in this transformation.”
Outokumpu Vilnius now has over 160 staff and is a core part of this stainless steel giant’s global operations. As this centre has grown, others have arrived, each offering complex services and support to international clients and partners. There’s Schüco, a German supplier of window, door and façade systems, whose Lithuanian team is responsible for producing 2D and 3D drawings, and engineering modelling. There’s TGW, an Austrian-based logistics group, who opened a centre in Kaunas in 2018 and plans to create up to 100 positions for information technology and system automation engineers. And there’s NKT, a leading global power cable manufacturer with annual turnover of over EUR 1bn. They chose Lithuania as the location for their first ever Shared Services centre,. and after building a core team of 70 finance professionals, have also complimented them with the THINKT team responsible for developing IoT processes.
It is talent that has brought major engineering companies to Lithuania. And talent has enabled them to grow and diversify too. So it is no surprise that these international investors are working hard to further develop and deepen Lithuania’s talent pool. FESTO, for example, is working closely with local universities to help them develop and refine their curricula so that the next generation of talents are primed for the demands of 21st century business.
Which means, despite its lengthy track record of successfully established and scaled engineering service centres, Lithuania is far from saturated. In fact, another huge player is on its way. Dana Incorporated, a Fortune 500 listed transport technology supplier, has just announced big plans for a new centre in Vilnius. Supporting Dana’s operations across Europe and providing finance and accounting services, the centre will employ around 100 multi-lingual talents.
Once again, it is the talent on offer in Lithuania that will be the bedrock for success. As Jason Johnson, Vice President of Global Finance and Accounting at Dana, recently commented: “We are confident in the talent and capabilities of the Lithuanian people, and we look forward to a long, successful relationship.” And just like the global engineering companies who are already established here, Dana will be doing its bit to develop even more top talent. The company plans to invest significantly in training and development, and is looking for opportunities to collaborate with local educational institutions.