The 2002 hit French movie L'Auberge Espagnole captured the zeitgeist of con- temporary Barcelona. In the film, a group of college students from all over Europe share an apartment (and occasionally each others' beds) as they bond over beer and music. But it's all a bit of a fantasy. In the real Barcelona, those kids would more likely board commuter trains every morning bound for office parks in the suburbs. There, they'd plop down in front of PC screens, strap on headsets, and spend the day fielding inquiries from callers around the Continent.
After a slow start, Europe is finally jumping on the outsourcing bandwagon. Consultancy TPI of Woodlands, Tex., figures that European companies awarded $41 billion in outsourcing contracts in 2004, nearly twice the level of two years earlier. One of the hottest nearby destinations for the work is Spain, where thousands of young Europeans flock every year in search of sun and sangria -- and jobs. Some 50,000 people from virtually every European country work in more than 2,000 Spanish call centers and so-called shared service centers, which handle functions such as tech support, accounting, and personnel administration. London-based researcher Datamonitor PLC says the industry will add 30,000 jobs over the next two years.
Spain's appeal is easy to fathom. Wages for service-center workers are about 30% lower than in northern Europe, and social charges add just 35% to the cost per employee, vs. up to 50% in France and Germany. But that's not the only reason multinationals such as Avis (CD), Hewlett-Packard and Citigroup (C) have set up shop in Spain. In a business where employee turnover is the most persistent problem, quality of life makes a crucial difference in attracting and retaining talent. "Instead of sitting in ten inches of snow in Poland, wouldn't you rather be sitting in ten inches of warm sand in Barcelona?" asks Stephen A. Koutros, a partner at TPI.
To be sure, Spain is not the only country parlaying good weather and exciting nightlife into booming call-center business. Despite higher costs, the southern French university towns of Toulouse and Montpellier host service centers for companies such as Dell Inc. (DELL) and Freescale Semiconductor Inc. (FSL) of Austin, Tex. Italy's largest call-center operator, Gruppo COS, has operations in Palermo, Naples, and Tunisia. At the same time, Eastern Europe is drumming up business with wages that are a fraction of those in the west. And India remains, by far, the world leader in outsourcing.
Still, Spain offers potent advantages, especially for European companies looking to "nearshore" work close to home. Because it's part of the European Union, people from anywhere in the EU can work there without visas or permits. Spanish facilities can handle sensitive banking and medical transactions that aren't allowed to be sent outside the EU. Those factors, plus a good education system, top-notch telecom infrastructure, and excellent transportation, earned Spain the top ranking among European countries in consultancy A.T. Kearney Inc.'s (EDS) 2004 Offshore Location Attractiveness Index.
Such qualities prompted Dallas-based Affiliated Computer Services Inc. (ACS) to hang a shingle in Barcelona three years ago. The $5-billion-a-year company specializes in tech support and back-office outsourcing and has about 1,000 employees in Europe, half of them in the Catalan capital. Most of its Barcelona staffers, who hail from 38 countries and speak 14 languages, provide service to General Motors Europe (GM). On one floor of ACS' nondescript glass office building, a team of 300 handles finance functions such as accounts receivable, tax payments, and a remarkable $50 billion a year in accounts payable. Brian Stones, head of ACS' European business, reckons the company has cut GM's accounting costs by 80%. GM won't confirm the figure, but the Barcelona center "has led to a significant improvement in administrative cost efficiency for GM in Europe," says corporate communications manager Marc Kempe.
Across the hall, another 150 ACS staffers administer GM's European human resources. They do everything from managing Internet self-service programs to fielding calls from GM's 77,000 workers and 35,000 retirees around Europe with questions about benefits or paychecks. Grouped in teams according to their language, the ACS employees, whose average age is 27, speak to callers in their native tongues. That's crucial for a successful call-center operation, says Gianluca Tramacere, an outsourcing analyst with researcher Gartner near London. "As soon as callers pick out an accent, they get resentful."
Barcelona may draw lots of young European job seekers, but ACS still recruits aggressively to find the right talent. Consider Ria Rosechakowski, a 25-year-old German who runs a team developing online training tools for GM. She posted her résumé on the Internet a year ago, and an hour later an ACS manager called her for an interview. Five days later she moved to Barcelona and started work. ACS is also adept at unearthing special skills. Armin Höfer, a 34-year-old German with a degree in tax law, moved to Barcelona five years ago with his Spanish wife and went to work in the tax-compliance group serving GM in Germany. "Where else could I find a job that uses my specific skills and language?" he says. To keep workers loyal, ACS puts on beach parties and sponsors sports leagues for its staff.
For all its allure, Spain must contend with rising wages, which have climbed 36% at the national level since 1998. That's what dampened growth in the Irish service-center industry. "Calling places like Barcelona 'hot spots' has positive connotations, but it also suggests hype and increasing salaries," says René Buck, principal of Buck Consultants International, a Dutch firm that advises clients on outsourcing and site selection. Buck tries to steer clients to less-discovered places. These days many of those are in Eastern Europe ("Forget India, Let's go to Bulgaria," BW Mar. 10, 2004).
For now, Spain's outsourcing trend shows no sign of letting up. French information-technology services company Teamlog, for instance, is expanding a 120-person European help center for Hewlett-Packard outside Barcelona. Bayer (BAY), Nestlé (NSRGY), and Sara Lee (SLE) handle accounting and legal functions there. Eric Lemeilleur, who runs Teamlog's operation in Barcelona, concedes with a laugh that "most employees here know L'Auberge Espagnole by heart." All that beer and free love are paying off for Spain's economy.
By Andy Reinhardt in Barcelona, with Carlta Vitzthum in Madrid