Eastern Europe: Indian Level Wages Make Sourcing Attractive

I consider my wife a somewhat worldly individual (one should never qualify statements involving a spouse, but I often do just in case she ever publicly holds me to it in a business setting). That's why I found her description of visiting the rural countryside in Ukraine a number of years ago so fascinating. In her words, she basically saw families living in the 19th century with no -- or extremely limited -- use of non-animal powered farm or vehicle equipment. Perhaps this explains, in part, why wages in Eastern Europe are as low as India, according to a year-old McKinsey report (subscription required) that Supply Chain Management Review cited.

According to the report, "Eastern Europe is a small player in the world of business process and information technology offshoring, holding a little less than 1 percent of the market ... [but was expected] to triple between 2005 and 2008." Clearly, from a US perspective, Eastern Europe is looking less attractive in the past six months thanks to the decline of the dollar -- even relative to local Eastern European currencies. But still, Eastern Europe's proximity to the West -- not to mention the highly skilled laborers in certain regions that supported the old Soviet military industrial complex -- should make it the next frontier for those organizations that have already gotten all the could out of Poland, Hungary and other central European countries (both from a capacity and savings perspective).

- Jason Busch

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