Leader Talks: ABSL's Joe Appleton on how business services are powering the Czech economy

ABSL’s conference this November in Brno will celebrate the organization’s tenth birthday and highlight the sector’s contribution to Czech economic success.

William Nattrass

Written by William Nattrass Published on 09.10.2023 17:04:00 (updated on 09.10.2023) Reading time: 13 minutes

The Czech business service sector is one of the nation’s great modern success stories. Czechia has become a favorite base for international businesses, providing the unbeatable combination of a capable and multicultural workforce, a welcoming regulatory environment, and cost efficiency.

Prague is the center of the nation’s business services sector, but the industry is also vital for other cities throughout the country. As the Association of Business Service Leaders (ABSL) celebrates its 10th birthday, its annual conference will take place on Nov. 1-2 in Brno. With a rich lineup of events and speakers set to draw in leaders and professionals from across the nation, the conference is a tribute to the transformation of Czechia’s second-largest city brought about by business services.

Expats.cz sat down with Joe Appleton, ABSL’s Managing Director, to discuss the astonishing growth of the sector over the past ten years, and what lies in store in the decade ahead. We also collected insights (see highlighted boxes) from the conference presenters who gave us a short sneak peek into the topics they'll be discussing.

ABSL Joe Appleton Leader Talks 01

It’s ABSL’s tenth birthday; how would you assess change in the Czech business services sector over the past ten years?

Growth and innovation. Ten years ago, when we built ABSL, 50,000 people were working in the sector. We passed 100,000 within a couple of years and we’re now well on the way to reach 200,000 people by next year. That’s four times the initial size; it’s phenomenal growth. No other business sector in the country has built anything like this capability. The centers first came to Prague but now they’re also in Brno, Ostrava, Hradec Králové, Liberec; every major Czech city has levels of business service capability.

Then, there’s the innovation. If you look at what the centers were doing ten years ago and what they’re doing today, it’s almost unrecognizable. The tasks have changed completely. They used to do very mundane, simple tasks, copying invoices from one screen to another, entering data into systems, and so on. They don’t do such things anymore. Now, they look at all of the data they’ve collected, analyze it, report on it, spot trends, and identify areas to improve and innovate. This has led to an increase in the value of the centers and in the salaries they pay their people.

You have a double whammy of a much bigger sector that is also providing much more value. It’s been the driving engine behind areas such as Karlín and Chodov in Prague, while the whole city of Brno is based on the success of business services.

Does Czechia still appeal to multinational companies? Czechia remains an appealing destination for business service operations due to its skilled workforce, business-friendly environment, and quality of life. Although it faces increasing competition, especially from Poland, Czechia offers safety and a strategic central European location. It maintains competitive labor costs and lower taxation compared to Western EU countries. The collaboration with universities, which fosters innovation, and the local language skills create an ideal environment for business growth. Czechia is well-equipped to provide these advantages and more, making it a favorable choice for companies seeking a conducive business environment. -Tereza Kavan Klimešová, Deloitte Tax & Legal Partner, Leader of Global Employee Mobility Services

How has ABSL supported this development?

In various ways. We’ve gone from about 200 centers back in 2013 to approaching 500 centers today. We have directly brought in many of those centers, dealing with investors, showing them the sector, giving them the confidence that this is the right place to be.

Once they come here and become members of the association, we benchmark their operations, show them areas where they can improve, and connect them with other centers so they can learn together. It’s a very fast-moving environment, and businesses want to learn what more they can do for their customers, clients and employees. We act as a kind of accelerator helping them to do so.

We recognize best practices when we see really good operations. These are the winners of the ABSL Diamonds; their successful projects are recognized and shared so others can learn and do the same.

We also do a lot in the educational space. Over the last five years, we’ve built some of the most successful leadership education programs for our sector, including our new flagship MBA program. We’ve educated close to 200 leaders from across the sector to help them drive their centers to the next stage of development.

On top of that, we lobby with the government and with ministries, universities and educational bodies to make sure that we have policies in place that are friendly to this type of business. The bigger we get, the stronger we get, so the more successful we become at this. A recent example was the government’s intention to increase taxation on benefits given by employers in the country, which would have a very significant impact on us because our employers are very generous with benefits for their people. We pushed back very strongly and we were part of the eventual decision when the government decided not to go ahead with the change.

Do you think the coming decade could hold the same sort of growth for the sector?

I think there is potential for similar growth, but it will take a different form. It will be much more technologically driven, not necessarily about headcount. I can see the headcount continuing to rise in the single-figure percentages; in some previous years, we grew at 15-20 percent.

There’s a natural shift towards technology-driven, digital services, which means headcounts don’t need to keep going up. You can work with less, using robots, AI and other tools. I’d be confident for a quarter of a million in the sector a few years in the future.

Illustrative image of Cloud computing: iStock - Jian Fan

What are the biggest opportunities and threats currently facing the sector?

The biggest factor, on both counts, is technology and digitization. If you haven’t incorporated technological innovation into all the elements of your organization, if you’re not innovating with the tools that are out there, you’re missing the capability that future work will come in on. It's not coming for cheap labor in “the East” anymore; we’re not in that category, we left it many years ago. It’s coming for the levels of innovation and digital expertise.

It’s an incredible opportunity, because of the huge amount of global work that could come here. The challenge is to be able to win it, to be ready for it, to have the teams with the right capabilities. Business as usual is never enough; you need to be constantly upgrading technology and solutions. People in typical positions such as accountants and HR partners need to add this toolkit to what they’re doing on a daily basis, on an hour-by-hour basis.

The centers who do all this very well are the ones that are thriving and bringing more work here. Those who are not so good at it tend to stabilize, and potentially risk losing work and business to other locations or other providers.

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What lessons have been learned in the sector from the turbulence of recent years?

“Crisis is an opportunity.” This is a phrase I’ve heard so many times, but recent years have proven the truth of it. More work flowed here during the Covid crisis and the Ukraine situation; more people flowed here, and they stayed here in stronger numbers. Centers became far more resilient and gained a reputation with their global customers for being reliable, safe, innovative places that were able to respond to challenges. Czechia gained a reputation for being trustworthy during a crisis. This is a good reputation to have.

Are people worried about the changes that may be coming to business service centers as a result of this rapid technological change?

Yes, and my advice for them – and for their leaders – is this: If you’re at the forefront of it, you don’t have anything to worry about. That’s where all the advantages are. But if you’re not, you open up an opportunity for someone else, and then you’re in a losing position.

Czechia's 500 centers are still relatively small in the global picture, so there’s always work out there to be won. As long as you’re upskilling yourselves technologically, bringing in the right sorts of people, and keeping and developing them, then you’ll be at the forefront. And a country like Czechia, which has established a reputation for engineering quality in the physical space over the centuries, is also a great place to do it in a digital space too.

How can ABSL help businesses identify such opportunities?

Many of our members are digital providers who are experts with these tools, so we bring them into the network, promote them, introduce them to members, show off their great projects, and say to other members: “Come on, you need a piece of this.”

At our upcoming conference, we’ll be launching a digital innovation program called Fusion Digital. It’s designed to accelerate leaders’ digital capabilities so that they know how centers can create a whole culture of digitization, looking for opportunities, making their business case, winning projects, and then delivering on them. We also encourage collaboration with providers including Czech start-ups, bringing them into contact with opportunities for global contracts through our members.

Hiring trends at international companies in Czechia: Business services cannot do without English and other languages. Proficiency in foreign languages, especially English, is paramount. As there is a severe lack of candidates with knowledge of German, French, or Scandinavian languages, candidates with such language skills can earn up to 15 percent more than similarly placed colleagues. Tech expertise is also sought after, including roles in R&D, SAP consultancy, and IT security. Additionally, there's a growing need for individuals with data analytics and BI skills. Adaptability and a willingness to learn are considered crucial, as the industry is evolving towards more skilled and creative work, moving away from routine tasks. -Eliška Smržová, Grafton Recruitment)

Would you say the current focus on technology provides a particular opportunity for the representation of expats within the sector to grow?

In the last couple of years, the technological side of business has driven up the expat numbers. A relatively small country like Czechia, even with its great technical universities, is not able to create the tens of thousands of tech heads that are required quickly in the marketplace.

Still, I don’t see the share of expats going above 50 percent; there will always be a majority of Czechs in the sector. But we have a job to do to make the country as technology-driven and digitally capable as possible. Not just in our sector, but also the public sector, the educational space, the government; the whole country needs to move up its digital agenda.

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How do we need to change our priorities when it comes to educating the future workforce?

First of all, future generations of workers in our sector, and all sectors, are already highly digitally capable; far more so than many of the employers or the people responsible for recruiting them. These people can jump from one tool to another fluidly and easily, and they see the world digitally. They always have. The sooner we can connect with these young people the better.

We need to involve business in educating because in my experience, business moves a lot faster in innovation and it has an awful lot to contribute to young people going through university. We need to build new bridges and challenge universities to open themselves up to such opportunities. We run programs like ABSL Bridges for this very reason.

Coming into the conference in November, we’ll have a very strong focus on education and youth. We’ll have young leaders presenting their research findings on how best to leverage the generational differences within centers.

How would you describe Brno’s business services sector in comparison with Prague?

I’ve been involved in business services across this whole region, not just in Czechia, and Brno is unique. The city has the highest density of people in our sector per capita of anywhere in Europe. It’s remarkable how many centers it has attracted, and how it continues to grow. It’s a small to mid-sized city, but one in six people in Brno work in business services according to our statistics. That’s a workforce approaching 50,000 people.

The sector has transformed the city. That’s why it’s fitting for our ten-year anniversary to be here; it’s one of the best examples of the contribution of business services to this country. It’s what you immediately see in areas of the city such as Spielberk and Vlněna. It’s the energy and innovation that you see out in the street, in the restaurants, bars, and clubs that are full of people working in our sector. And of course, it’s brought in so many expats who would have never found Brno otherwise.

Illustrative image of Brno city scape: iStock - Sanga Park
Illustrative image of Brno city scape: iStock - Sanga Park

Why was Brno so well-placed to reap the benefits of business services?

There are three prominent universities that are well-established in the science and engineering space, which means the city turns out a lot of hungry graduates capable of doing clever stuff. That’s what built it up at the beginning, when there were few expats.

Then there’s the exceptional quality of life in and around Brno. I was lucky enough to be taken in a plane above Brno a few weeks ago for our ten-year birthday party, and the Moravian countryside is just stunning. You have an amazing, dynamic, 24/7 city, but drive out for half an hour into the countryside and there’s this other, more traditional atmosphere.

Then there’s something about Brno people; how hard they work and how much they love where they are, which makes them stay. This means you don’t get a brain-drain to Prague or Bratislava or anywhere else. Put all this together, and you get one of the most successful business service hubs in Europe, if not the world.

We want to say to other cities: you could be like this too. Cities like Olomouc or Ostrava, for example, which have not yet achieved such a scale of success but could do in the future.

What are the main themes of the conference taking place on Nov. 1-2?

Firstly, it’s a celebration of the success of the sector and a promotion of what it has achieved in the last twenty years, and during ten years with ABSL at the helm of this growth. The topics reflect what we have just discussed: the strengths of the sector, how we see the next ten years, what centers should focus on, how they can work with universities, and what we need from the government to ensure that we continue to drive the digital agenda.

We will showcase the success of Brno with visits to ten of the largest and most successful centers in the city. We’ll be hosted at Brno City Hall with a welcome from the Mayor of Brno, showing how much has been achieved and how much they recognize the contribution from our sector.

Representatives from the government will be there, and the Financial Times will run a keynote panel session – this says a lot about the attention that’s being given to the sector in Czechia internationally. Former Presidential candidate and Brno native Danuše Nerudová will give a keynote speech on the first day, talking about challenges in education.

With close to 100 sessions over two days, there’ll be something for all business leaders as well as anyone from education and universities who want to be part of the next ten years of building the sector. Then there’ll be the ABSL Diamonds ceremony, with awards presented to ten projects across the country that have brought new business here and shown us new ways of working

We’ll be celebrating but also recognizing what lies ahead; the challenges that are coming, but most importantly, the opportunities that we want businesses to go out and chase.

This article was written in cooperation with ABSL. Read more about our partner content policies here.

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