Czech Republic Develops Sophisticated Ecosystem for Efficient Management and Automation of Services, Says Joe Appleton of ABSL

May 16, 2024

The Association of Business Service Leaders (ABSL) was established in the Czech Republic ten years ago and currently represents over 100 member companies. How do these business service centers adapt to changes like digital transformation and sustainability to stay competitive, innovative, and resilient? There are some questions for Joe Appleton, Managing Director of ABSL.

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(The interview was shortened and edited using ChatGPT)

Ivana Karhanová: Joe, welcome.

Joe Appleton: Thank you, Ivana. Good morning.

Ivana Karhanová: As the Managing Director of ABSL, could you tell us about the key priorities for these Czech business service centers, especially regarding innovation, skills, talent, and global market integration?

Joe Appleton: Certainly. Based on our 2024 survey, the roughly 400 business service centers in the Czech Republic prioritize talent acquisition, digital innovation, and delivering business value. They’re seeking the best global talent, not just locally, to transform from cost centers to value-driven entities that enhance customer growth and market share. Additionally, they focus on leveraging new digital technologies to streamline and automate processes.

Ivana Karhanová: When you mention seeking global talent, it implies that Czech business service centers are recruiting skilled workers worldwide.

Joe Appleton: Exactly. The sector has significantly evolved since its inception around 20 years ago. Initially, we primarily hired from local and regional sources, including Czech and Slovak universities. However, today, nearly 40% of our workforce, which is close to 80,000 people, consists of expatriates. While many employees are from the EU, reflecting our European focus, we’re increasingly hiring from as far as the Far East, the Middle East, the US, and the UK. Our talent search is truly global.

Ivana Karhanová: From your perspective, what are the main differences between Czech business service centers and those in countries like the USA or India?

Joe Appleton: Business services is a global industry employing millions worldwide. Despite being a smaller player, the Czech Republic has developed a niche due to its 20-year history in the sector. This maturity provides a sophisticated ecosystem capable of efficiently managing, transitioning, and automating services. The Czech Republic often serves as a brain and coordination hub, potentially relocating services to more cost-effective regions as needed. We continue to grow at 10% annually, adding about 20,000 roles each year. This growth stems from a track record of innovation and adding significant value.

Ivana Karhanová: You’ve mentioned innovation and adding value. With 86% of centers focusing on accelerating digital transformation, can you specify what aspects they are digitalizing?

Joe Appleton: The primary focus is on digitalizing process-based transactions, which are fundamental to service centers. Initially, this involved implementing robotics, and now increasingly AI, to streamline processes, reduce time spent, and minimize the human element. This allows us to reallocate human resources to areas where they can add more value, especially in customer interactions. The use of technology is expanding across all service elements.

Ivana Karhanová: Aside from talent shortages, what other challenges do these centers face?

Joe Appleton: I think the number one focus on what we’ve got a lot better at over the last five years or so is winning the work to a very competitive environment like the Czech Republic, because any investor who comes here can see, wow, this place is doing really well. You only need to walk through the streets of Kaleen, and you can see that you are in a in a very well developed tech talent hub.

Ivana Karhanová: So how do you encourage investors to come work with them to really get the best value out of coming here? Or some investors just don’t fit this mix anymore?

Joe Appleton: I think that is a real priority that the centres have taken on is how to win the work here, how to convince their companies or their clients that this is a great place to do it, if not all of the work, but certainly to coordinate it, drive it, transform it, and then, if necessary, send the work elsewhere where it can be done more cheaply and more quickly.

Ivana Karhanová: Joe, you mentioned earlier that 80% of the centers plan to reduce operational costs through greater process automation. Can you elaborate on which costs are primarily affected?

Joe Appleton: The primary cost reduction comes from the human element, which constitutes about 90% of a service center’s cost base. Only about 10% pertains to office locations and environments. Automation reduces reliance on human labor. Despite concerns about jobs being replaced by robots, we’ve actually seen growth. The adoption of robotics creates specialists in that field who then optimize these technologies further across various roles, increasing the demand for technology professionals.

Ivana Karhanová: With such an emphasis on automation and digital tools impacting every aspect of operations, from customer interactions to employer branding, how are service centers managing to stay ahead in becoming digital experts for their clients?

Joe Appleton: Digital tools and AI are being utilized in all operational facets. Service centers are positioning themselves as digital leaders, not only within their own operations but across their clients’ global networks. This expertise is applied beyond their service areas, enhancing their role as digital advisors. As for talent, we’re always in pursuit. Although we’ll never have a surplus of skilled workers graduating from universities, our strong expat community acts as a magnet for more international talent. The best recruitment resources are our own employees, who attract others through their positive testimonials about working here. We also focus on developing digital expertise in-house, transforming finance experts into automation finance experts, for example. This proactive approach in career development continues to attract more professionals.

Ivana Karhanová: Considering the ongoing demand and expansion in digital expertise, do you think the market will ever reach a point of saturation?

Joe Appleton: It’s unlikely that we’ll see market saturation anytime soon. The continual evolution in digital technologies and the corresponding need for skilled professionals means we’re always looking for more talent. Our sector thrives on this dynamic growth and the opportunities it presents. We aim to keep expanding, not to settle for a “saturated” market where demand ceases. And you know, a key element to this success story is the attractiveness of the Czech Republic as a place to do business, live, and work. If you’re going to bring in 80,000 expatriates, you need to provide them with a good quality of life. They need to feel safe and have access to high-level services. For example, cities like Brno are powered significantly by the services sector, housing more than 30% of our centers, which enhances its appeal for attracting top talent.

Ivana Karhanová: ABSL also runs the Fusion Digital program to educate these individuals. What was the initial purpose of this program?

Joe Appleton: The board of directors at ABSL, who run some of the biggest service centers, highlighted the need for a digital acceleration program. They wanted a fast, effective way to bring leaders up to speed on what digital can mean for the services sector. It’s not about traditional education methods; it’s about real-time learning from the best practices and advancements in the field, engaging directly with tech experts and award-winning centers. We’ve garnered significant support from top industry players like Microsoft and Deloitte to provide a cutting-edge learning experience.

Ivana Karhanová: Is this program offered for free, or is there a fee involved?

Joe Appleton: There is a fee. Providing high-level digital expertise involves significant resources and collaboration with top-tier partners. We’re very proud that this is the first program of its kind in the region, uniquely designed to cultivate digitally minded leaders who are equipped to leverage digital technology in all aspects of their operations. Since its launch a few weeks ago, the feedback has been overwhelmingly positive, and we’re excited about its potential to develop hundreds of digital leaders in this country.

Ivana Karhanová: Business service centers are often viewed merely as cost centers. Do you think this perception is changing? Are clients beginning to recognize the real added value?

Joe Appleton: Absolutely. A decade ago, most centers primarily focused on cost and efficiency, and they excelled in that role during their first ten years. However, as the business landscape evolves and operating costs in developing countries rise, these centers have had to demonstrate additional value beyond cost savings. They’ve started to focus on building business, expanding market share, and transforming and digitalizing global supply chains, potentially saving or even generating billions of dollars. This shift has repositioned them from cost centers to value creators, a change evidenced by our annual Diamond Awards, where we recognize projects that significantly add value for clients.

Ivana Karhanová: With the evolving role of these centers, how is the demand for their services changing?

Joe Appleton: The demand continues to grow. Many companies in Europe have yet to establish service centers, while others could expand their existing ones significantly. The sector is projected to grow by about 10% annually. Unlike locations like India or Manila, where the workforce is vast and every piece of work is critical, we can afford to be selective, choosing projects that best fit our ecosystem. This strategy has not only helped us win work but also excel in execution, often exceeding client expectations and securing repeat business.

Ivana Karhanová: Joe, thank you for sharing your insights on the future of business service centers and how ABSL is navigating these changes. It’s been an enlightening conversation.

Joe Appleton: Thank you very much, Ivana.