Business Process Outsourcing and Digitalization in Albania: Challenges, Opportunities, and Strategic Directions

Abstract

The rapid expansion of Business Process Outsourcing (BPO) has transformed the global services economy, and Albania is emerging as a competitive nearshoring destination in the Western Balkans. This study examines the intersection of BPO and digitalisation in Albania, exploring how technological innovation, artificial intelligence (AI), and cloud-based automation are reshaping service delivery, labour productivity, and competitiveness. This study is explicitly framed as a deskbased policy and analytical study relying exclusively on secondary data, without primary data collection based on secondary data from OECD, World Bank, IBM, and European Commission reports (2023-2025). Findings indicate that Albania’s BPO sector benefits from low labour costs, multilingual human capital, and favourable fiscal policies, yet faces challenges related to technological capability, digital infrastructure, and talent retention. Through a PEST analytical framework, this study identifies the macro-environmental factors influencing BPO development and proposes strategic directions for enhancing digital readiness and regional integration. The study further expands its comparative analysis to include other Western Balkan economies, Kosovo, North Macedonia, and Montenegro, providing a broader perspective on Albania’s position within the regional outsourcing ecosystem. This research contributes to the academic and policy discourse on digital transformation by presenting an integrated model aligning BPO growth with sustainable innovation and regional competitiveness.