Slashing company costs in the East

By Anna McLauchlin

Date: 21/04/05

Much heat and light has been generated in European political circles over the movement of European companies eastwards to take advantage of cheaper labour and a more business-friendly environment. The global express and logistics company DHL, in which Deutsche Post has a controlling stake, has had a bruising political battle in Belgium over the issue of night flights in and out of Brussels.

But in the Czech Republic, DHL has found a much warmer welcome from the political environment.

It has set up a state-of-the-art information technology (IT) centre in a run-down suburb of Prague. The DHL Information Services Center is all glass and steel. What it lacks in charm it makes up for in whizz-bang technology. The security is top-notch; employees can only enter the most secure unit via a biometric palm reader.

In a room that looks like something out of an American spy film, IT specialists survey DHL's logistic problems coming in from all over the globe on a ten-foot-high computer screen. To their side is a video conference unit with which they routinely liaise with counterparts in the company's two other IT centres in Kuala Lumpur and Scottsdale, New Mexico. "People got used to it right away and it saves the company thousands of euro in travel costs," says office manager Ján Misovic.

In 2003, DHL decided to slash its IT costs by centralising its helpdesks for Europe, Africa and the Middle East in the Czech Republic.

The plan was to close down the 18 existing help-centres, thereby reducing IT personnel by 75%. In addition, the staff would be employed locally which, in a country where the average wage is at least 50% below that of Western Europe, means huge cost savings.

The centre currently houses around 700 employees, about 450 of whom are from the Czech Republic with the rest imported from the various other centres. Within three years the neighbouring building, currently a skeleton, will be finished and DHL hopes to move in and expand to its target capacity of 1500.

Thanks to Czech government incentives especially for IT centres, DHL also got cut-price land and construction, partial tax relief for up to ten years and financial support for creating new jobs and training employees.

In terms of competitiveness and bottom line profit, it doesn't get much better. But there is one big hiccup which goes to the heart of the EU's professed agenda to create growth and jobs.

"It's getting harder to find local workers," says Misovic. "We've already eaten up most of the skilled staff, so our human resources department is carefully working with the other players to divide up employees so that we don't destroy the market."

DHL also trawls the universities to snap up graduates for training schemes. The other solution has been to employ workers from Slovakia and Poland, but as these markets are also drying up the company has had to fall back on employees from Western Europe, which wipes out the financial advantage of hiring locally.

As a result, the centralisation project which has moved so quickly up until now may slow down.

Misovic says that the company is still saving money. "The peak of the need is behind us now, and in any case the main object was to reduce the number of personnel," he says. But he admits: "1500 skilled workers is a pretty significant number and it's not that easy to find."

Article reports on the relocation of global express and logistics company DHL's European Information Services Centre to Prague, attracted by good investment conditions.