Global Services Locations
Global Services Locations
|When choosing a location for outsourcing more and more clients are moving away from cost considerations and looking for the right talent, services and policy environment, says AT Kearney Study
Wednesday, April 11, 2007:
Cost arbitrage is no longer the key selling point for most locations that are in the outsourcing race. What gets the clients are a combination of value added services, quality of skilled people, cost considerations. The recent AT Kearney Study on the Global Service Location Index, shows that talent and policy environment increasingly define competitive landscape.
Talking about the location trends, Paul Laudicina, Managing Officer and Chairman, A.T. Kearney says, "What is most striking about the results of this year's Global Services Location Index is how the relative cost advantage of the leading offshore destinations declined almost universally, while their scores for people skills and business environment rose significantly. These findings reinforce the message that corporations making global location decisions should focus less on short-term cost considerations, and more on long-term projections of talent supply and operating conditions."
According to the study, India still remained as the number one destination for outsourcing, while China was a close second. Interestingly countries like Sri Lanka and Pakistan have made their entry in the complete listing. The index reveals that both countries offer many of the same advantages as India, with similar labour costs, widespread use of English, strong education systems and increasingly open and well-regulated business environments. However, both countries have only recently woken up to the enormous opportunity of the offshore services sector and therefore lack India’s breadth and depth of experience. Both countries are also disadvantaged by their relatively smaller population-base and obvious concerns over internal security.|
Other nations like Bulgaria, Romania, Estonia and Latvia are fast emerging as preferred destinations for many outsourcing clients since they are relatively low-cost European location that has largely untapped educated and skilled talent pool as well as a pro-business policy environment.
Check out the listing of top 10 global locations for outsourcing as per the recent AT Kearney Global Services Locations Index.
Despite concerns about overheating, wage inflation and service levels, the country still offers an unbeatable mix of low costs, deep technical and language skills, mature vendors and supportive government policies. While double digit growth may have led to inflation and average increase in cost by 20 percent, this has been matched by increase in skill and value added services. India maintains a strong lead in terms of language skills and vendor maturity.
While the compensation package in the country may have increased by 30 percent, but the skill sets offered by the country make it the second most attractive nation. China has been catching up in several areas, growing university enrolment by more than 25%, and almost doubling the number of firms with CMMI and ISO quality certifications.
Significant declines in telecom costs signals lower operating costs. Along with this is the slower growth rates that have moderated wage inflation. Malaysia have also improved its quality indicators increasing its CMM certified companies as well as improving the number of companies with ISO 27001 certification.
Despite lower number of English educated people and low economic stability, its low infrastructure costs make this an attractive location for many outsourcing companies.
Despite currency appreciation, strong sector growth and corresponding wage inflation aggravated by high non-wage labour costs imposed by the government, this country has begun to leverage the traditional strengths of its indigenous IT sector, rapidly expanding university enrolment and quality certifications.
Like Thailand and Malaysia, lower telecom cost and cheaper labour cost have put Indonesia in this listing. However the country will need to improve its quality of skilled people available to remain an attractive destination for many outsourcing companies.
The country has been seeing a significant sector growth and some increases in graduation rates and company certifications. Along with this, Chile continues to benefit from the best business environment and tax structure in the Latin American region.
While the country has dropped by several points as the preferred location due to impressive growth in the outsourcing sector and currency appreciation in US dollar terms, it still remain attractive due to the low wage option it provide as compared to India. Also the country’s affinity to American culture and better time difference makes this a preferred location for outsourcing clients.
This year Bulgaria replaces the Czech Republic as the only country from the Central and Eastern European region in the top 10. The country has seen a big jump in its business environment score, as it completes preparations to join the European Union in 2007.
The country leverages from its proximity to the US. Like Chile it has also seen significant sector growth and increase in graduation rates and company certifications.