In Beato, a district in eastern Lisbon, lies a building that has undergone several transformations: once a 17th-century convent, it was taken over by the Portuguese military in 1897 only to be left abandoned by the turn of the millennium. Last year, it metamorphosed into the frontispiece of a new hub for technology companies.
UK-headquartered IT services company Claranet’s Portugal subsidiary now occupies three floors of the freshly renovated building, which forms part of the Hub Criativo do Beato. It has been elegantly redesigned to have a central garden area and a hollowed-out roof, letting in an abundance of natural light. Both Claranet’s employees and clients can roam freely around the glassy open-plan office space and book meeting rooms, mirroring a start-up working environment.
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“We try not to be complacent with success,” remarks António Miguel Ferreira, managing director of Claranet for Iberia and Latin America.
“We need to fight against the ‘sins’ of [being] a big company,” he says, from his office on the top floor of the converted convent. “We need to provide a good service and to stay competitive in the market as if we were a start-up.”
Mr Ferreira joined the company in 2005 as the Portugal head, and has overseen several acquisitions that have enabled the country to grow its market share. As an IT services provider, Claranet has its biggest revenues coming from the Portuguese market and accounts for roughly 7% of the country’s IT market, according to government figures.
Similar conditions that have enabled Portuguese start-up successes have also facilitated the growth of the wider business services sector across the country.
“It’s been very attractive in the past few years for companies to either nearshore or come to Portugal to set up business services operations,” Mr Ferreira notes.
Due to the availability of talent, good universities, strong language skills and lower operating costs, Portugal has emerged as a key destination for business services. The average number of greenfield business services projects in the 2020s is already three times higher than it was in the 2010s, according to fDi Markets.
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In 2022, Portugal witnessed the biggest growth in greenfield FDI business services projects in the EU, according to fDi Markets.
‘Innovative mindset’
German carmaker Mercedes-Benz’s digital customer service subsidiary, Mercedes-Benz.io, set up operations in Portugal in 2017 and has grown to roughly 450 employees across two locations in Lisbon and Braga.
“There’s an innovative mindset here in Portugal,” says Silvia Bechmann, CEO and managing director of the subsidiary, referring to the agility and “start-up mentality” of its employees.
Ms Bechmann is keen to stress that multinationals coming to Portugal should be in the country for the talent base, not merely to reduce costs.
“What I have observed in Portugal is that you’re only going to succeed if [your employees] feel connected to the company and they feel they have a purpose,” she says. “If a company’s aim is just to reduce costs, it won’t succeed.”
Gone are the days when Portugal was simply a home for business process outsourcing, as foreign businesses are now coming to tap into and nurture the talent base. Mercedes-Benz.io has partnerships with several universities in Portugal such as the University of Minho in Braga.
Ecosystem building
Northern Ireland-based FinTru, a financial regulation services company, expanded to the northern city of Porto in 2022 to establish a global client delivery centre.
Telmo Fernandes, site lead at FinTru in Porto, says that the company is “building an ecosystem out of Porto” through training schemes that provide both fresh graduates and those wanting to change career paths a point of entry into the company.
“We came here because growth is available. Even with recent graduates moving to other countries, [Portugal] is creating more talent that we can absorb,” he says. “And given its smaller size, we can have a bigger impact in Porto than Lisbon.”
FinTru has added more than 190 employees in a little over a year. “Portugal is in a sweet spot in terms of competitiveness and quality of talent. I don’t see a lot of other markets where this [growth] would have been possible,” Mr Fernandes adds.
“I'm not saying it’s easy, or that a foreign company can come to Portugal and there are graduates everywhere. As a business, you have to develop a strategy and of course it is challenging, but it is not complex.”
In 2022, US pharmaceutical company Amgen invested €100m in a capability centre in Portugal, to take advantage of local skill sets and hire international talent so as to manage the company’s global productivity.
“We’ve gone from having roughly 35 people for 30 years to 310 people in the space of two years,” says Daniel Campanha, general manager of the Amgen Capability Centre Portugal.
Now, working across competencies like data and analytics, cyber security, finance, regulatory affairs and human resources, Amgen’s capability centre is a key node in its global operations.
What goes on in the centre in Portugal is complementary to what happens in the company’s centres elsewhere in the world. For example, one team in Portugal focused on marketing materials is a team of five and manages a team of almost 200 people in India, Mr Campanha explains.
Talent and taxes
As Portugal’s labour costs are beneath those in more advanced economies in Europe, one major concern cited by several companies fDi has spoken with is that this talent base everyone is interested in is at risk of leaving to go elsewhere. Average hourly wages in Portugal stand at below €20, compared with an EU average of around €30.50.
It is not only talent that may leave Portugal, but also domestic companies themselves, according to Mr Ferreira. He remarks that homegrown businesses are at risk of decamping to other jurisdictions in search of more favourable corporate tax rates. In Portugal, corporate income tax stands at 21%.
Of the seven Portuguese start-ups that have achieved unicorn status, two have retained headquarters in Portugal.
“If I go back to the mid-1990s, this was also a start-up,” Mr Ferreira says, referring to Esoterica, the company he founded and Portugal’s first internet service provider. Esoterica was subsequently acquired by another company and then by Claranet in 2005, to become a full subsidiary of the UK IT services company.
“We’ve come from five people to 1000 people, but we’re still here to serve the customer,” Mr Ferreira says, stressing the virtues of keeping the company’s self-importance in check. “We need to stay humble.”
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This article is part of the Special Report:
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