Key sectors

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Business services

Business services amount to nearly 17% of the services sector turnover in Estonia. The predominant sub-sector is consultancy and advisory that comprises 12% of turnover in the services sector. This is followed by legal and accounting services with 3% and human resources services with 2%.

Breakdown of Estonian services sector in 2008 by turnover

Source: Statistics Estonia
* selective grouping of statistical data has been done to indicate the market structure (consultancy and advisory sector includes also IT consultancy and computer programming activities)

Enterprises in the sector are generally local small-scale companies; there are also a number of subsidiaries of international corporations. In many cases, especially in auditing, consulting and legal services, the existence of international networking is an important selling factor for companies. According to Äripäev's (a business daily newspaper) database, there were approximately 5,300 enterprises in the business services sector in Estonia and 2,900 people were forecast to be employed in the sector in 2009.

Examples of companies in the sector: Powerhouse (public relations), Arvato Services Estonia (call center), Rimess (auditing and accounting), Advokaadibüroo Sorainen (law office), Glikman & Partnerid (law office), Advokaadibüroo Luiga Mody Hääl Borenius (law office), Hill and Knowlton (PR), Mercuri International Eesti (advisory) and many more.

Main advantages and strengths of Estonia in the business services sector

Well-developed infrastructure supporting the development of business services

Highly developed telecommunications infrastructure. Estonia has a highly developed telecommunications infrastructure. Estonia is a leading country in Internet and cell phone usage. Estonia is ranked fifth in the world in mobile phone subscribers, surpassing such countries as the UK, Singapore, the Netherlands and Switzerland, as well as several CEE countries.
High digital infrastructure level. Estonian companies have had impressive success in the application of new technologies in some fields (e.g. banking and government) and in the development of intelligent user-friendly interfaces (e.g. in the fields of mobile telecommunications and e-health applications). Estonia has been one of the top countries in terms of accessibility of public e-services.
Excellent internet coverage. 69% of the population uses the Internet and 86% use Internet banking (spring 2008); there are over 800 public Internet access points and over 1,200 free Wi-Fi Internet zones around the country;
Electronic ID-card and ID related services make it possible to affirm and validate different documents easily and quickly.

Multilingual and educated labour force, with low labour costs, creates a competitive advantage for companies

Educated labour force. There are several universities providing financial and legal study programs. In 2008 nearly one-third of all bachelor degree graduates specialised in the area of business administration, law, or mathematics and statistics.
Skilled and cost-efficient labour force. The labour force is skilled and labour costs are lower than in Western Europe; the monthly gross salary in the business services sector was 1,020 EUR in 2007.
Multilingual labour force. Estonia is ranked among the top countries in the world in language skills, according to the IMD yearbook.
Scandinavian work culture, combined with Eastern European knowledge. Estonia's work culture is highly valued because of the employees' good language skills, punctuality, ability to meet deadlines, and for the local knowledge of Eastern Europe developments.

Transparent government policy and increasing need for business services

Transparent government policy. IMD World Competitiveness Yearbook 2008 ranked Estonia 14^th in transparency, which surpasses the rankings of such countries as France, Canada and the UK.
Increasing advisory culture. Business services achieve greater operational efficiency, combined with increased customer satisfaction. Working in Estonia enables companies to be more efficient and to focus on their main activities. The Boston Consulting Group's research has revealed that shared services centers clearly ensure lower companies costs; e.g. in accounting up to 35%, call centers 25%, and IT functions 20%.

Cost reduction potential with shared services centre, %

Source: The Boston Consulting Group, 2005

Most important location criteria for companies operating in the business services sector

Source: Ernst & Young European Invetment monitors 2009

Most attractive sub-sectors / business functions and examples of foreign investors

International investment trends in the CEE region indicate that the most prominent investment sectors are sales and marketing, accounting for 74% of FDI projects in the business services sector in Central and Eastern Europe over the past five years, followed by contact centers and shared services centers.

The most attractive business functions and sub-sectors are:

Sub-sector / business function	Description	Example of companies in the market	Activity description
Sales and marketing (audit, legal services, advisory)	Enterprises are generally small and a common form is the partnership, especially in legal services. The majority of enterprises are owned by local shareholders. Foreign investments in local companies are generally initiated from expansion of the parent company and from the desire to be present in the local market and to get information from the local market. Outsourcing is gaining popularity in Estonia, as companies want to focus more on their main activities. Software consultations are showing the fastest growth.	Mercuri International Eesti (FI)	Consulting and training company providing services all over the world. Operating in Estonia since 1990.
		Hill & Knowlton Eesti AS (FI)	PR, marketing research and consultation services provider. Part of the international Hill and Knowlton network (71 offices in 40 countries, established in 1927 in the USA),
		HansaWorld Estonia AS (FI)	HansaWorld is an international company offering business software (HansaRaama) and consultation services (CRM, ERP).
Contact centers	Contact centers are generally small and medium size enterprises. Contact centerres in Estonia are valued for their good languages skills, high knowledge of technological solutions, geographical location, Wwestern business culture and competitive labour costs. Local contact centers provide different services, including hotel and ticket bookings, catalogue services, and sales of different products (magazines, insurance and, bank services).	Arvato Services Estonia OÜ (DE)	Call center and contact management services company, operating in Estonia since 2006. Providing services in English, German, French, Estonian, Latvian, Lithuanian, Russian, Finnish, Italian and Mandarin. Main clients: Vodafone Deutschland, XBOX Eastern Europe, Air China and Microsoft CEE. Approximately 250 people employed in 2008.
		Transcom Eesti OÜ (SE)	Call center, operating in Estonia since 2000. Expanded its operations in 2007 through business transfer of Ellos Eesti. The average number of employees in 2007 was 320.
		Runway International OÜ (NO)	Runway International delivers contact center services for multinational companies seeking to serve the Baltic, Scandinavian and Northern European markets. It provides mystery shopping, market research, cross and up selling, a technical help desk function, booking and reservations etc. Its clients include Hurtigruten, Norwegian Airlines, EPSI, Genpact, TimeFrame and Hermelin, Cinamon. Operating in Estonia since 2003 and employing around 40 people.
		Anthill Customer Services Estonia OÜ (SE)	Anthill Customer Services is a call center offering services for international companies in the telecom, IT and catalogue sales sectors. The company operates in six different countries, employing over 700 people. In Estonia the company has been active since 1994 and there are around 100 employees.
Shared services centers	Shared services centers in Estonia generally provide accounting, IT support, PR and recruitment services. Outsourcing is gaining popularity in Estonia, as companies focus more on their main activities and outsource other services from professionals. .	Varamiespalvelu-VMP-Group OÜ (FI)	Company offering labour force rent, recruitment services and personnel management. Operating in Estonia since 2003. In 2007 employed 467 people.
		Leinonen (FI)	Company offering accounting services in the Baltic Sea area (Finland, the Baltic states, Russia and Poland) as well as in Bulgaria.
		Nordic Gaming (MT)	Nordic Gaming offers betting for different sport games and online poker, as well as many other web-based gambling games.

Sources of additional information

Doing Business in Estonia 2010

Overview of The World Bank's report on Estonia's business environment.
http://www.doingbusiness.org/ExploreEconomies/?economyid=65

IMD World Competitiveness Yearbook 2008

Rankings in different sectors throughout the world (e.g. transparency, mobile subscribers, education, GDP etc.)

Estonian Bar Association

Organization representing legal services in the private and public sectors and defending the professional rights of attorneys.
http://www.advokatuur.ee/

Baltic Business Services Center

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