GBS maturity as an indicator of a country‘s economic development – the case of Lithuania

This article was originally published on Focus on Business

Author: Justas Sankauskas, Investment Advisor for Business services & ICT at Invest Lithuania

A good indicator of a country’s economic health is its effectiveness in attracting not only significant but also sophisticated, foreign investment projects. The kinds of investments made, and the trust in the local talent and infrastructure that those investments reflect, are as good a barometer as any of where that country is in its journey towards economic development.

To illustrate this, let’s take two examples. A company may choose one location for the development of its customer service operations, establishing a business services center to cover this. Here, the company’s priority might be lower costs, aligned with a secure pipeline of available talent. Meanwhile, another company may instead be looking to establish an R&D center. Here talent, a secure educational infrastructure, and strong governmental incentives might be key. Broadly speaking, we may expect that an economically developing country with a less mature and sophisticated GBS sector might be more attractive for the first case. Whilst in the latter case, we may deduce that a more economically developed country with a more mature sector would be chosen.

Taking Lithuania as our example, to which this article is dedicated, we can see that its current Global Business Services ecosystem falls somewhere between these two scenarios. Vilnius and Kaunas are in the TOP3 least saturated major cities in the region when it comes to Global Business Services talent. On the broader economic scale, Lithuania is ramping up investment in innovation. The Ministry of Economy and Innovation has implemented measures totalling almost EUR 1 billion by the end of 2023. Around EUR 365 million of that sum has been earmarked for business, innovation, and investment, EUR 320 million for the digitization of the state and business, and EUR 268 million for the greener economy.

The combination of an unsaturated labor market and continuous development is what allows it to offer a raft of opportunities and strategically beneficial flexibility to potential investors. First of all, it has reached a level of maturity. This is most clearly evidenced by the examples of companies that once began with customer operations hubs, but have moved on to more sophisticated roles. Let’s have a look at a couple of concrete examples of Global Business Services centers currently operating at the highest level of sophistication.

We can start with Transcom, one of the first companies to have actually established a Global Business Services center in Lithuania. Initially set up in Kaunas as a center providing customer service operations, it has now transitioned into being one of the company’s top sites for delivering in-house Robotic Process Automation (RPA) and business analytics services. Indeed, only 15% of its existing operations are now concentrated on basic customer service via the phone. At present, the general strategy for the center is based on concentrating on talent strength and moving towards becoming a center of excellence in the future of Customer Service, CX solutions, and IT. This has been made possible by the abundant relevant talent within the Vilnius-Kaunas catchment area and has been able to smoothly transition to more value-added roles.

Another compelling case is Dexcom, a company which empowers people to take real-time control of health through innovative continuous glucose monitoring (CGM) systems. Headquartered in San Diego, USA, and with operations across Europe, Dexcom has emerged as a leader in diabetes care technology. By listening to the needs of users, caregivers, and providers, Dexcom works to simplify and improve diabetes management around the world. To this end, the company set up customer services operations in Lithuania to offer complex assistance and support to its customers. So, although the function, customer service, may be seen as fairly standard, its execution here through the delivery of sensitive and timely support to people with life-threatening conditions – requires a level of service and empathy that only a truly matured GBS sector can provide.

Meanwhile, as I have mentioned, it is because the country also offers some of the benefits of a developing economy, namely a largely unsaturated talent pool (outcompeting many of its regional neighbors in this regard), that companies are able to source talent and scale operations more quickly. We can also see this balancing act in play (between developing economy and maturity) in the way in which newcomer companies are much more likely to opt for more sophisticated roles straight away.

The reasoning is straightforward: the Lithuanian Global Business Services sector (reflecting the larger economy) is maturing, and with that non-complex roles are becoming more expensive. However, because that maturity has yet to plateau, the sector offers great value for money when it comes to sourcing competitively priced and accessible talent for more sophisticated roles in the current digital economy.

For evidence of this, we need only look to the example of Outokumpu, one of the first manufacturing companies in Lithuania to establish its own competence center. Today, specialists in Vilnius curate production and external processes across Europe and worldwide: the multifunctional center in Lithuania is responsible for nearly 40 functions, including data, intelligent automation, IT systems, process ownership in various business functions, as well as over €1.3 billion in procurement.

It is this malleability, where the sector still has the flexibility and dynamism of its developmental phase, married to the know-how and robustness of a more matured sector, which has made Lithuania’s Global Business Services sector such a uniquely valuable proposition. This, in many ways, has been possible by the country’s ability, because of its size, to be agile and to adapt quickly to recent developments in the global economy, notably the digital economy. With so much to offer, we can expect the Lithuanian Global Business Services sector to continue to post strong year-on-year growth.