As we move into 2025, Europe continues to be exposed to dramatic changes, with trade slowing and geopolitics fracturing the region — all while technological change is accelerating. Meanwhile, several key industries, such as the automotive industry, are undergoing their own structural changes that are further increasing volatile dynamics.
Given the uncertain times we live in, adapting your sourcing strategies by revisiting location strategies is even more relevant and pertinent these days; these measures are taken up owing to the prevailing economic situation forcing enterprises to prioritize cost optimization and resilient strategies. In previous research and a blog, we wrote about a plethora of factors that companies should consider to choose their European nearshore destinations to help streamline operations and reduce cost.
While we at Forrester are neither economists nor political analysts, it’s our intention to nudge our clients to keep their antennas in extended animation to anticipate and take proactive decisions against any current or future geopolitical tsunami.
Some of the countries/locations I cover as part of my research on European nearshore strategies are particularly exposed to these developments. Here are some practical tips on how technology decision-makers should adapt their nearshore location strategies to these new realities:
- Lesson from the pandemic: Don’t be caught flat-footed; be resilient. The pandemic was an eye-opener to a lot of our clients, and that “wait and watch” strategy won’t fly; instead, proactively consider and implement resilient solutions. What this means is you should be alerted in real time on any location-impacting events or happenings, such as new labor laws, looming risks, general elections in countries, expansion of Schengen states, new memberships in NATO, new memberships in the EU, and global geopolitical turmoil. Use technology to stay aware of your risks as well as risks from your supplier ecosystems in real time: For example, leverage modules of supplier value management suites or best of breed.
- The EU has zero tolerance for noncompliance with regulations/laws. Europe has seen a plethora of regulations enacted recently. Most of these regulations came into place during the past two years and are here to stay (and evolve). Europe may have earned the nickname “Regulated Europe,” but these laws mean business. Regulations such as the Corporate Sustainability Reporting Directive all have a carrot-and-stick angle and even extend to small- and medium-sized businesses. Tech execs are urged to stay abreast of the applicable laws and follow them diligently as they take stock of their existing location strategies or evaluate newer locations.
- Keep a close watch on what’s happening in the US and China. Almost every country is dependent on the US and China for trade or other reasons. The political and economic events in these countries individually and interdependently have various levels of impact on trade and business in the rest of the world. Tech execs need to be nimble and agile to commune in the board rooms and revisit strategies at short notice, as changing circumstances require them to adapt and respond quickly. As stated before, a “wait and watch” approach won’t help you, but it will help competition get past you. A blog from my colleague George Lawrie provides ample variables to ponder.
- European nearshore locations need your complete attention. There are pros and cons for European-headquartered organizations: The EU border-free zone is being expanded, which could ease free movement of staff for agile scrum collaboration workshops, for example. Six new western Balkan countries are accelerating their momentum to join the EU, which is likely to drive political stability and freedom to work. But be mindful of the flip side: Countries with political instability that exhibit acrimonious relationships with the EU, or countries with unnecessary affinities to trade-embargoed countries, unfriendly labor laws, and currency collapse, need to be on your watch list. The old common-sense law applies here: “You are the captain of the ship; bring back the ship safely if you see it navigate into troubled waters.”
In 2025, I will continue my research on nearshore locations, extending my coverage to also include Latin America and Far East Asia. Watch this space!
