Diageo, the British drinks group, looked at 19 cities when planning to establish a European business service centre. It chose Budapest for its low costs, good language skills, convenient location and high-quality labour.

Three years later, the centre employs 270 people, speaking 21 languages, in financial and administrative jobs supporting Diageo operations in seven countries. Over the next year the group plans to expand the centre to 500 staff and provide services for several more countries.

. . . Diageo adds that quality is the key to keeping the centre in Hungary in the long run. The group estimates that annual operating costs in Budapest are $23,000 (£12,800) per person. That is less than half the $50,000 annual costs in Dublin – a location often favoured by multinationals before central Europe emerged as an offshore services centre – but costs in Bangalore are lower still, at $12,000.

Hungary therefore has to offer higher-quality services than India to maintain its edge.

Discussion points 1 How does outsourcing help to lower labour costs for UK companies?
2 What are the risks associated with outsourcing?