Leader talks: ABSL’s Jonathan Appleton on the business services sector and Czechia’s road to growth

The business services sector has grown to become one of the most vital parts of the Czech economy. Business services comprise a diverse range of companies serving customers throughout the economy with everything from IT solutions to consultancy work, marketing, and much more.

In November, the Association of Business Service Leaders (ABSL) in Czechia will bring investors, leaders and professionals together in Prague for the “Towards Resilience” conference. The event will shine a light on what’s changed in the industry and how companies can make the most of new opportunities.

Expats.cz sat down with Jonathan Appleton, the Managing Director of ABSL, to talk about the vitality of the Czech business services sector, the evolving expectations of professionals working in Czechia, and the outlook for the industry in turbulent times.

Why is the business services sector enjoying such success despite the difficult economic environment?

I’ve been supporting business services here for twenty years, and the sector grew from the very beginning. Growth started in the early 2000s, first in Prague, as one of the first cities in central and eastern Europe attracting business services as well as international talent.

There are a few things that bring people here. We have a combination of the right jobs and a great quality of life. The kinds of jobs being done in the business services sector now are radically different to what was being done in the early 2000s. Now, it’s IT-driven, it’s digital, it’s far more complex, and it’s multinational.

The sector employs 160 000 people, having started at around 10,000-20,000 twenty years ago. When we started ABSL around a decade ago, there were around 50,000 employees in the sector. Local people and expats  get a good proportion of the best paid jobs in the sector, and foreign talents want to come here from all over the world. 

What can people expect from your “Towards Resilience” conference in November?

This is our ninth annual conference, and having gone digital for the last two years, we’re back with a totally live event on Nov. 8-9. It’s designed for anybody in the business services sector, not just leaders. It’s a practical view into what’s happening across our sector.

With multiple sessions and streams at the Prague Marriott Hotel, there’ll be something for everybody. There’ll also be a gala dinner at Obecní dům, where the ABSL Diamond awards will be presented.

We’d urge anyone working in our sector to come along; free and discounted tickets are available for ABSL members. We also invite anyone who is thinking about working in the sector, or who is considering setting up a business here, to join us and find out more.

Why is “resilience” the theme of the conference?

I was recently at a conference in Lisbon, and an economist said we now need to focus not so much on efficiency, but on resilience. On building resilience into your business models to make sure that you’re able to weather changes which will be with us for some time to come. 

How strong is your connection with your people? How strong is your connection with your global business to keep attracting work? How well connected are you with the surrounding environment? How well do you look after people in terms of physical and mental health, offering them all the flexibility that they need?

Can you outline some of the ways in which companies look after their people?

There’s a lot of competition between employers for attracting, keeping, and developing talent. Everyone tries something different, whether it’s presenting an attractive location or providing benefits such as sports cards, cinemas, free concerts, premium healthcare services, unlimited holidays and so on.

The events of recent years have accelerated innovations in looking after talent. At our conference, businesses will see what others are doing and find out ways to stay competitive.

How are wages in the business services sector responding to inflation?

There have been a variety of responses, and we’ll present full data from our annual survey at the conference. In previous years, inflation in salaries and costs would run at around 2-3 percent year-on-year. Across the sector as a whole, we predict that there will be double that this year, so a conservative estimate is that salaries will have gone up by at least 5 percent and more for certain positions and roles

But this isn’t the only way that companies are responding. They’re also offering more flexibility: work-from-home is still very popular, even though Covid is now seen as less of a priority. Lots of people don’t want to come back to the office to the degree that employers may have been hoping they would.

Is work-from-home here to stay?

Yes. People don’t want to go back to how things were before, and employers don’t want that either. But this is a big theme at the conference: there’s a feeling that there has also been some loss of community, a loss of contact, and a loss of group innovation.

Although we’re all very comfortable with working from home now, it does have some impact on what organizations are able to do. Many of them would like to see more people back in the office. On the other hand, there are many companies out there, especially in the tech sector, who are happy for people to work from anywhere so long as the job gets done.

But employers often want to encourage people back to some extent, while understanding that many people changed their lifestyles or even moved out of the city during Covid. For them, the new flexibility has become as important a consideration as their salary terms.

Do you expect part-time work to become more popular too?

We have lagged behind in terms of flexible approaches to work. Ten years ago, there was virtually no part-time work here, and nothing much offered to mums on maternity leave. In a sector that’s 60 percent female, you’re shooting yourself in the foot if you don’t come up with flexible part-time solutions to bring very capable mums back to work as soon as you can.

Centers have realized this lack and have greatly improved. But we still lag a long way behind what you see in western Europe, and a heavy reliance on full-time employment scares off some people who just don’t want a full-time contract. But there’s pressure for companies to become more flexible, especially since Covid.

Why is the business services sector so appealing for expat workers?

Around 45 percent of our sector are expats. This is a huge number, and by 2025 it will go up to half. Employers are recruiting 10,000-20,000 additional expats every year.

This is partly because you can only do so much with a relatively small local population in which the unemployment rate is extremely low. Also, business centers are international, and work in multiple languages. People who speak European languages as well as English are extremely attractive. 

More than 80 percent of our sector have foreign language capabilities. As well as English, in-demand languages include German, French, Spanish, and Italian. Nordic languages are popular too. Some companies provide higher salaries for those with such language skills.

At the same time, in some areas such as IT, companies are simply looking for skilled workers wherever they can find them. Language capabilities tend to be more important in centers focusing on customer services.

Are there any notable changes in the nationalities present in the foreign workforce?

Our sector has employed thousands of Ukrainian refugees in a wide spread of roles over recent months. Almost all of them are female, often with young kids. Employers stepped in to support them, setting up language schools within their centers, helping them with accommodation, and some even helped them to get here in the first place. Of course, even before the war, there was a very large Ukrainian expat population.

At the same time, Czechia is becoming more popular among people from southern European countries such as Spain, Portugal, Italy, Greece, and increasingly Turkey, which has serious problems with inflation and unemployment. In the last five years we have also seen large numbers of arrivals from the Indian subcontinent and from the Middle East, especially in the tech sector. 

There are more Americans too; they might not get paid as much as in Silicon Valley, but they don’t need that much to have a great life here. And after Brexit, we saw a flow of work from the UK, as centers which depended on European language speakers found it more difficult to operate there when Europeans left the UK.

Is the global economic turmoil accelerating a shift to a services-oriented economy?

Absolutely. This is why we promote the sector so much to the government. It’s an extremely profitable sector that brings a huge amount into the economy: just look at its impact on areas such as Karlín, Holešovice, and Špilberk in Brno, as well as the transformation of Ostrava from a steel town into a modern services and technologies city. Business services have transformed the country in the last two decades. This only happened because of the EU, which brought the work here in the first place, and brought the investment to create the infrastructure and facilities that we needed.

The situation is very different for traditional sectors such as the automotive industry, which struggled over the past two years. So Czechia really needs to carve out a strategy for itself as a high-value services economy.

Is Czechia catching up with western European nations in business services?

In many ways, we have already caught up, and I’m certain that this trend will continue. Central and Eastern Europe is among the world’s most favored locations for business services, despite the situation in Ukraine.

Across this region, there are well over a million people employed in business services, from Poland and the Baltics, through Hungary and Romania, and all the way down to Bulgaria. The density is higher than in some western European countries, and people in those countries want to find out how we’ve done it here. They want to grow at the rate that we do.