The role of multinationals in an emerging start-up community
Start-ups are often seen as the opposite of corporations: young, small and dynamic. However, multinational corporations can play an active part in the development of a start-up ecosystem by providing experience, mentorship and resources that would otherwise not be available to those just starting out. We look at the example of Krakow, in which multinationals have a strong and established presence, and their role in building Krakow’s start-up ecosystem
Since the end of communism, multinational corporations have played an increasingly large role in Poland’s economy, and are especially concentrated in Krakow. The city is host to scores of multinationals, ranging from tech giants such as IBM, Motorola, ABB, Sabre, Google and Cisco to corporations from completely unrelated industries such as Shell, HSBC or Philip Morris. Currently, about one in seven of the city’s total working population is employed in multinationals in the advanced business services and technology industries — that’s close to 40,000 people.
To get an insider’s view of the history and role of multinationals in the Krakow economy, I talked to two experts who have seen their rise from the start. Both Ramon Tancinco and Andrew Hallam are foreigners who now call Krakow home. Although they have very different backgrounds — Ramon in engineering and sales, Andrew in broadcast journalism and business — they have both been involved in building businesses and associations in the city from the ground up.
One association to unite them all
Andrew Hallam is the General Secretary of ASPIRE, the Association of IT & Business Process Services Companies in Poland. “Unless you establish some sort of formal structure, you can never become more than a network” — this was Andrew’s reasoning behind the formation of ASPIRE, which brings together “major players in the region to pursue a common strategy in promoting and developing opportunity in IT & Business Process Services,” according to their website.
The association formally launched in 2008, as Krakow was in a full outsourcing boom. As one of the founding members of the organization and the main catalyst for its formation, Andrew brought together heads of multinationals in Krakow to be able to “speak with one voice to government, educational institutions and other stakeholders”. I spoke to Andrew about the association as well as the role its members, which now number 150, play in the local ecosystem.
According to Andrew, one of the benefits that multinationals give indirectly is wealth, which is creating a young, creative middle class in Krakow. “The industry [ASPIRE represents] is creating jobs for nearly 40,000 young people with an average age of 29, who are earning 70% above the average wage at a time when Poland is still under transition. When people have disposable income and see the possibility of career progression, that breeds confidence,” Andrew explains. “They spend money, experiment with new technology, which generates more money in the city.”
The new Silicon Valley?
What drew all of these multinational corporations to Krakow in the first place? Andrew explains why he thinks so many companies have chosen Krakow over Warsaw: “You can go to Warsaw, but Warsaw is like an aspiring London. Or you can go to Krakow, which is like an aspiring Silicon Valley. Your choice is capital city that’s wanting to catch up with the world’s other capital cities, or city-region, which is catching up with a location like Silicon Valley.”
In fact, Andrew stresses the importance of thinking locally, in terms of cities, rather than nationally when it comes to global corporations. “I personally believe — and I think Krakow is evidence of this — that cities will become more and more powerful within the global economy.” While the old model of outsourcing was to choose locations mainly based on costs, the new model, according to Andrew, is to improve the quality and efficiency of the work being done in a place by investing in its development — and Krakow is the ideal setting for this.
“Krakow has many of the qualities of a capital city without capital city costs,” Andrew continued. “Qualities that places like Poznań and Wrocław or Brno or other non-capital cities don’t have. Part of that is due to its size, its universities and its attractiveness in terms of its culture and as a tourism location; it’s also the hub for southern Poland in terms of people coming in and going out. All of these things go into the mix of why the industry has developed here, but it’s much more fortuitous than that even. BP decided to put its head office for Poland in Krakow. BP then outsourced its finance to PwC, and so the first outsourcing office in Poland was born. If BP had done what most companies do and established its head office in Warsaw, then it might have been a different story.”
Andrew stresses that as a tourist-friendly and university city, Krakow is in a unique position when it comes to attracting talented individuals both from within Poland and from abroad. “Originally, the value proposition for Krakow in terms of services was English — people spoke English — very soon it became pan-European. If you look at it today, there are 35 languages served from Krakow, and so many centers have consolidated their back office services in one location, which is Krakow. They’re able to serve the U.S., the UK, Germany and France but also Spain and Portugal, Holland, Greece, Scandinavia, etc., from here.”
Ramon also agrees about Krakow’s unique position, so much so that in a TEDxKraków Talk in 2011, he said that Krakow could become Europe’s Silicon Valley. Four years later, he still thinks the city is on that path: “When I look at where things are at today, if I look at the four foundations I talked about [in my TEDx Talk] — universities, multinationals, serial entrepreneurs and VCs — the university piece is there and I think it will continue to be there. I think the one element that is changing there in terms of the raw talent is that we’re actually attracting people from across Poland. Same with multinationals — the multinational piece is actually accelerating, because you have a site like Cisco that didn’t exist two and a half years ago, and now it’s 850 people. You have GE, which didn’t exist two years ago, and now they’re expanding to 200 people. These two elements [universities and multinationals] are growing organically very quickly.”
Ramon Tancinco of Cisco at the Innovation Swarm / photo by Bartosz Pawlik
However, there’s always the threat that multinationals will move on to the next, cheaper location. Andrew is not worried about this, though, because in addition to the earlier-mentioned qualities that make Krakow unique, there’s also the maturity of the market. “What Krakow has is like a proof of concept. It showed that it can do this, then it showed it can do that, now it’s showing it can do this other thing, and when that happens — and it’s taken a long time to get to this point — companies start wanting to invest in the location. It’s not just a place on the map where things are cheaper, it becomes a place that you want to participate in developing its capability, because you see your future in this place.”
Concentrating talent for corporations and start-ups
Andrew spoke about what Krakow can offer multinationals — but what can multinationals offer Krakow? For that, I turned to Ramon Tancinco, who opened the Cisco Global Services Center in Krakow back in 2007, and serves as its Director of Information Technology Services. At the moment, the company employs some 850 staff, about 35% of which come from outside of Poland. While providing jobs is certainly valuable, Ramon stresses that it’s the types of jobs that Cisco provides that really makes a difference.
“Before Cisco, there were no other companies in Krakow doing network engineering, so as a result of becoming so big, we’ve concentrated an enormous amount of talent around network engineering,” Ramon explains. “By definition, that has changed the landscape of what’s going on here. As a result, this yields opportunities for other people to leverage that. We’re building relations with universities in the region and we’re educating the next wave of future IT employees, whether they’re at Cisco or anywhere else. Maybe they’ll go create start-up companies. But they’ll have a very clear understanding of networking technology, as an example. If Cisco didn’t exist, they wouldn’t have brought that level of skill to the table. We send our best engineers to go talk to them about what’s cutting edge.”
This is particularly important given Poland’s recent history. “The challenge, especially coming out of communism,” Ramon continued, “is that the country was isolated from the world for so long, that to think that someone will pop out and figure out a cutting edge solution is just naive. The reality is that you have to be exposed to be able to imagine what’s possible. What multinationals in general but certainly what Cisco tries to do is expose people to what’s possible, to what is the cutting edge, which then opens up their minds around possibilities. Ideally we’d love them to come to Cisco, but ultimately if they create a start-up company that we can partner with — because it’s not just about acquisitions — this is a healthy environment. That’s a big thing that we bring to the table, a concentration of resources as well as the ability to inculcate the next generation of superstars.”
A global perspective for Polish start-ups
The essence of multinational corporations is that they span multiple nations. That means that by definition, people who work at multinationals need to think globally, and Andrew sees this as a big advantage. “Our motto at ASPIRE is ‘Act local, win global’. These companies every day are operating within the global economy, and so they’re helping us to think globally and not parochially.”
Thinking and selling to only the local market is a problem many Polish start-ups have, and the presence of multinationals can help widen perspectives. “Having this critical mass of multinationals in our midst is helping us after years and years of being closed off to have that broader perspective,” Andrew stresses.
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Originally published at www.web.gov.pl.