The island of Malta is a little known success story in the call-centre outsourcing sector.
Which country does the following description make you think of?
Thanks to its location, this country has been an important trading post as far back as the Phoenicians; it gained independence from British rule in 1964; and today, it is emerging as a strong competitor in the telecoms outsourcing market.
Did you think of India? India has become well-known as a hub for corporate customer service call centres providing 24-hour support and services at a fraction of the costs in countries such as the UK. But in fact, the country described above is not India, but Malta.
Malta is tiny in comparison to India. With only 400,000 people, Malta has a fast-growing information communication technology (ICT) outsourcing market that is poised to rival some of the most promising and established offshore centres. And one key market driving this growth is its call-centre based telecommunications services.
A peculiar mix of history, culture, geography and politics has conspired to foster the island's ambitions of competing with the top outsourcing call centre locations elsewhere in the world. Indeed, the Carthaginians, Romans, Arabs and crusading Knights of St. John in ancient times, to the French and British in more modern ones, all saw the economic potential of this country's proximity to both the gateway of Europe, as well as North Africa. Now HSBC, La Redoute, Reader's Digest, Lufthansa and Microsoft among others all rely on Malta's particular blend of culture, geography and skill sets.
The country has a long tradition of international trade, business, manufacturing and services. Under the rule of Carthage during the second and third centuries BC it became an important centre for the production and export of fine cloths and fabrics. More recently, Malta was the Royal Navy's Mediterranean homeport for more than two centuries. This multicultural trade and industry heritage is fuelling lofty business development ambitions, underpinned by a modern internal infrastructure.
Dennis Vella is head of relationship management and internationalisation for Malta Enterprise - the government's trade and investment agency. He said his country's existing economy, infrastructure and people make telecommunications an ideal growth industry to target. "Our economy is a diversified one based on export and trade," said Vella. "We attract financial services, heavy industry and manufacturing and maritime companies, as well as ICT service providers and tourists."
Nearly half (49 per cent) of Malta's manufacturing exports consist of specialist electronics equipment like diodes, transistors and semiconductor devices. ST Electronics is just one international manufacturer running large operational and research and development facilities in the country. "Over 3,500 companies manufacture, trade or maintain operations in Malta," added Vella.
Malta is working hard to foster foreign business investment, having joined the European Union (EU) in May 2004. There are no restrictions on the repatriation of profits, and legislation, such as the Business Promotion Act, offers investment tax credits, allowances and interest rate subsidies as part of a package of incentives with which to court foreign investment. And its business environment and company law, education, accountancy and legal systems have all evolved from British and EU standards.
The legacy of colonial rule has also left Malta with many operational advantages over other top offshoring call centre locations worldwide. Language, skills and education play a big part in making the country competitive in terms of cost of labour. "The cost of labour is not cheaper that most North African countries or Asia, but it is certainly cheaper than the rest of Europe," Vella said. "And English is taught as standard in primary school, while children also learn Italian, German and French, in addition to our native Maltese."
The country's modern linguistic skills are matched by progressive social change, as Patricia Cassola, public relations manager for Malta-based backup and performance optimisation software utilities vendor, Uniblue remarked, drawing on her own personal experiences. She married a Maltese man a few years ago after living and working in both the USA and Sweden. "Malta is really growing in the areas of customer service, support, IT development and sales and marketing," she said. "And there are a lot of new, young people entering the job market, leaving university with their degrees and as many as seven languages."
The next generation of employees are joined by others capitalising on social and demographic shifts in order to meet the demand for specialist contact centres from foreign investors. "IT is really pushed as a hot subject in education and work," said Cassola. "And since we have joined the EU, lots of people are looking to work for more opportunities and to broaden their horizons. For instance, a few years ago it would've been very difficult, socially and practically, to work and have young children as there was no childcare. But that's starting to change and a lot of women are going to work after having kids."
David Walsh, chief executive of Crimsonwing, said locating his company's main hub in Malta, in addition to headquarters in the UK and offices in the Netherlands, has brought a lot of benefits to the business. "We went for a 'nearshore' outsourcing location for our solution centre before nearshore even existed as a concept because we were attracted in that proximity it offered to our customers," he said.
Crimsonwing is a software development and IT consultancy specialising in e-commerce and business application software with products from partners Intershop, Cisco and Microsoft Dynamics. It counts UK supermarket Morrisons, Barclays Bank and Toyota as customers and operates with a 140-strong Malta workforce. Technical staff in the solution centre have Microsoft .NET, Java, BizTalk and C++ programming skills, and language is key when 90 per cent of the business is conducted over the phone.
Walsh said communications with customers are vital for the outsourced business model to work and is an area that plays to Malta's advantages. "A lot of customers are looking at Malta as an outsourcing location at the moment. Before, it was very much about outsourcing to India, but after doing it for a couple of years many decide they want to invest in their own offshore centre. They want to know, 'where is it, can I fly there, what languages are spoken and what technical skills do the working population have?'. It takes ten hours to fly to Chennai and three to Valetta [Malta's capital city]. There's five hours time difference between the UK and India, whereas Malta is in the European time zone," he said.
He reinforced the official government line about labour costs, saying they are around a third of those in the UK, adding that the customer service ethos is just as good, "if not better", than UK standards. Meanwhile, his company has been able to operate cost-effectively after having enjoyed initial accelerated government financial incentives.
The Maltese government's jewel in its investment crown fuels its commercial ambitions. In April 2007, it signed final agreements with a joint venture company promoted by Dubai Holding members, TECOM Investments and SAMA Dubai to build a US$300m (£147.6m), state-of-the-art ICT park, called SmartCity Malta. This facility will be the first European outpost for SmartCity, as the 358,000 square metre complex will transform the Ricasoli Industrial Estate site based on the successful models of Dubai Internet City and Dubai Media City. At today's prices, the facility is projected to contribute €534m (£383.9m) to Malta's gross domestic product (GDP), making it the single greatest contributor to the country's economy as a result of direct foreign investment. It is expected to generate 4 per cent growth in the local job market and the government will retain a 9 per cent stake in the project.
Ahmad bin Byat, executive chairman of TECOM Investments, underlined the value of advantages derived directly from Malta's strategic positioning between Europe, the Middle East and Africa. "Malta was our choice for this project as it is very similar to Dubai in several respects. In terms of strategic location, size, connectivity, access to key markets and high tourism orientation - both Malta and Dubai share a natural affinity," said bin Byat.
Peter Ryan, call centre outsourcing and offshoring analyst for research firm Datamonitor, also pointed out that Libya is geographically the closest country on the African continent to Malta. This, combined with its official policy of neutrality, put it a step ahead of the rest of the world in normalising political and commercial relations with Libya's controversial leader, Colonel al-Gaddafi. "Malta has the only northern trade access to Libya," said Ryan, which is key given the fact that this fourth largest African country by area also has one of the highest GDP per person on the continent by virtue of its large petroleum reserves.
"It also opens up another opportunity from the point of view of its Arabic heritage. Some companies see opportunity operating contact centres in Malta, where it is relatively diminishing in places like Qatar and the UAE [United Arab Emirates]. Here, the Maltese have established great ties too with the opening of SmartCity Malta."
Having visited the country himself recently, Ryan said he was struck by "the level of professionalism and realistic approach" to its telecommunications ambitions. "They also have a very progressive approach to incentives," he added, observing that "they are not positioning themselves as the next big thing, only for investment. And they won't let political ambition get in the way of sustainable growth".
He also draws attention to the country's close EU and particularly UK ties, adding his endorsement to the population's language skills. "Lots of young people are graduating into a what is still a relatively new entrant in the EU, but we're not seeing a run on available talent and we are not seeing the workforce leaving in droves, like some countries in Eastern Europe. Malta is attracting people into the ICT industry who want to stay there," he said.
"The one caveat I would add is one of scalability and that it will suffer price inflation like more mature call centres markets have," concluded Ryan. "But if it is careful not to grow too quickly and in terms of its ICT, financial services and commercial acumen, I would say it's on the right side of the nearshore-offshore debate."