The Dutch electronics giant Philips shocked its Irish staff earlier this year when it announced it would close its Leopardstown shared-services centre and transfer all the jobs to Poland.

The Dublin centre employed 150 skilled accountants who worked to centralise the financial processes for its European consumer electronics division. Its Irish-based staff, many of whom spoke several foreign languages, earned an average of €30,000 per year. Clearly, they do not represent the type of worker that IDA Ireland has previously warned was at risk of losing their jobs.

For Philips it came down to an equation including the cost of doing business and performance.

"There was a process to select a suitable location for the centre, which looked at several locations in central Europe," says Mr Bogdan Rogala, Philips's Polish chief executive and country representative. "There was a substantial difference in wages between Ireland and Poland and that was an important factor."

Average wages in the town of Lodz, where Philips has established its new shared-services centre, are between €6,000 and €6,500 per year. This is very similar to the five-to-one ratio advantage in terms of cost-effectiveness that Hungary and the Czech Republic enjoy over EU states such as Ireland, says Mr Rogala.

Philips has been so impressed by its Lodz shared-services operation, which first opened in August 2003, that it is now centralising nearly all its five accounting divisions at the centre. Its Lodz operation is expected to employ up to 500 staff in a few years.

But cheap labour was not the only reason that Philips chose to relocate from Dublin to Lodz, Poland's second city. The telecoms, banking and insurance infrastructure in the main cities are pretty well developed, according to Mr Rogala.

Crucially, there are also sufficient third-level graduates with the right accounting and language skills to work at the centre.

"We have a good education system in Poland and the people are very flexible and open to change. In the last 10 years the number of students has doubled, so there are currently about 1.7 million students at colleges."

Strong foreign language skills in Poland, and throughout central Europe, are an important factor that makes it a favourable location to centralise European shared-service operations.

Philips is also no stranger to Poland and was one of the first foreign investors in the state back in 1923, when it opened a factory manufacturing lights. It was also one of the first foreign investors to move back into Poland following the fall of communism. It has invested €400 million in Poland and now employs 6,600 staff at several locations.

"Poland is one of the key markets in Europe with 12 million households and 40 million people," says Mr Rogala. "These countries will grow and the buying power of the people will grow... Poland was the first of the accession states that we moved into."

But shifting operations is not an easy process and Philips recently disclosed that it would retain 20 Irish staff at its Dublin office for a transition period.

A spokesman for Philips Ireland said there had been a delay in starting the Polish operation.

Mr Rogala would not comment on the reasons for the retention of some staff in Dublin but admits that Ireland has a much longer experience of these shared-services operations.

"But Polish people are very flexible and open to change," he says. "By choosing the right people we can be introduced to the work very quickly."