Jonathan Appleton (ABSL) says the Czech business services sector has grown both in volume and in sophistication over the past 20 years. As MD of the Association of Business Services Leaders in the Czech Republic, he’s spearheading the upcoming conference in Prague that begins Nov. 8, focusing on resilience. It’s a key target group for office developers, given the size of its real estate footprint. And how ABSL members approach the return (or not) to the office will have a major impact on the local market. ThePrime is a media partner of the conference.
Why should real estate professionals pay careful attention to the Business Services sector you represent?
Karlín would not exist without the business services sector, neither would all the new developments in Chodov or any of the other major office development zones like Pankrac. If our members in the sector weren’t not present in this city, they simply would not have been built. We’ve helped fill up much of the first-class real estate space in Prague, in Brno and increasingly in Ostrava as well. Look at Tieto. When they moved into Ostrava, they immediately created a business service center with 2000-plus people.
Business Services Centers (BSCs) have transformed the landscape of the country’s real estate market. In all, we’re approaching 200,000 people and are well on track to achieve this by 2025. If you do a quick calculation on 10 sqm per person, that’s two million square meters of prime office space. Almost all of the shiny new buildings that have gone up around the country host at least one or even multiple business service centers, or else they’re anchor tenants. I’m talking about companies like MSD, Siemens, Infosys. Companies with really international profiles that can fill a whole building.
In other words, shared service centers impact not just the real estate sector, but the wider economy.
Our sector has had an enormous impact on the building of quality real estate, which has then driven the neighborhoods around these centers. Because the people working in them, building their careers there are generally in well paid positions. That drives the restaurants, the pubs and flat rentals in the vicinity. By our calculations, at least 5% of the country’s GDP comes from the activities of our sector. By that I mean not just the salaries, but the impact into the surrounding areas. And we’re continuing to expand with this year’s numbers approaching 15% growth. Much of that comes from existing centers who continue to win more work, because the global downturn is countercyclical for us. We get more work because corporations identify our sector as a way to achieve savings. What they can achieve through their global networks through the activities of these centers is many multiples of what they have to pay to keep the center here.
The let’s face it, the wave of flexible working that came as a result of Covid devastated many parts of the economy. But not us. We just continued work as normal. The revenues that were lost in the auto industry, threatened the very future of it continuing here. There was so much productivity lost in the economy. BSC productivity wasn’t impacted and the share of GDP if anything rose, even though 95% of our people went to work from home. For them, office space became an alternative. And that’s when negotiations really began between the companies and the owners of real estate to decide what to do about it?
If you go back 10 or 20 years in our sector, the location and what you offer your people was far less important than it has become now. Today, how you’re able to transform your working environment to embrace the best uses of technologies is a real a driver of success. You have to embrace the flow between work-from-home and work in the company’s space. Offices are no longer a big set of desks with people knowing exactly where to sit. It flows today. People come in to use it as a communal space.
Even the terminology people are using has changed. “Offices” almost doesn’t fit anymore. They’re talking about digital hubs now, they talk about innovation centers. These aren’t just buzzwords. They’re actually changing the company’s philosophy about how they engage with their people in a physical location. And I think it’s really exciting. And shared service centers are absolutely leading the way in this.
We often rate a company’s worth to the economy by its ability to add value. How do companies in BSCs add value? Going from production to research in a single facility.
It’s exactly the same. Higher value takes place around the accumulation of data. It’s the ability to analyze and produce responses in business that add far greater value than just the processing or the doing. So, if you’ve been processing every invoice in your company for 20 years you have probably not just transformed the process of how that happens through the use of robots and artificial intelligence, but all of that technology has given you insights. You see the flows, you see where the expensive bottle necks are in your company. You see where huge global efficiencies could be driven that can save millions. That’s added value that comes from the understanding the complexity and being in an advisory position for your company to be able to step into report, to show, to improve and then transform. At many of these centers, the people working in them are transformation professionals. They take a look at how something’s working and suggest how it could be better, how to redesign the process. And they’re doing this on a global scale. They can also identify areas of revenue and what we call top line improvements where they’re actually driving and building the business. So, it’s gone way beyond invoice processing into actually opening up new channels of business. It’s moved beyond where they were 20 years ago, in the same way that your auto factory in Mlada Boleslav radically transformed itself.
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