March 31, 2016 11:28 am | Updated 4 years ago.
By Arup Gupta
There are three factors which make a location attractive for the offshoring business process – financial attractiveness, people skills and availability, and business environment. AT Kearny has used these three dimensions to calculate a Global Services Location Index to rank the most favored offshoring outsourcing destinations in the world.
Rankings of the Top Ten Offshoring destinations 2016
|Country||Rank||Financial Attractiveness||People Skills & Availability||Business Environment||Total Score|
Source: 2016 AT Kearny Global Services Location Index
India continues its undisputed lead as the most preferred Off-shoring location, buoyed primarily by its skilled workforce. In the coming years, this leadership might get threatened with Robotic Process Automation (RPA) increasingly seen as a disrupter of the people-centric Off-shoring industry. However, it is possible that India might turn the tide with the startups taking root in India especially in hubs like Pune and Bangalore and the government bringing in the enabling legislation for encouraging startups. Bangalore, Pune, and Hyderabad might even give a tough fight to the global innovation hubs like San Francisco, Berlin, Tel Aviv and Seoul, which are most likely to be the springboards of the RPA revolution.
China is closing in on India, and it will not be a surprise if it overtakes India in the next couple of years. With Yuan devaluing against the dollar, the financial attractiveness of China will surely jump up. Also with the huge investment made by the Chinese government into skilling its workforce should also prove to be a winner in the short and medium run. However having said that, with China gradually going up the value chain, it is likely that China will soon become the net customer of off-shoring services. Countries like Indonesia with a large Chinese-speaking population would tend to gain.
Malaysia continues to put in a great all round performance. It has pushed towards making infrastructure available with new tech parks being set up exclusively to cater to the offshore and BPO industry.
Traditionally a strong performer and second only to India in offshore volumes, over the years the Philippines has shored itself up the value chain. Off-shoring operations are now spreading into the 2 and 3 tier cities giving considerable cost advantages. Big names like Accenture, Convergys and Sutherland are expanding operations in the country.
The devaluation of currency has pushed Brazil up the pecking order, despite relatively less experience in Off-shoring and BPO industry.
Mexico is a rising star with much to recommend for itself as a favored destination for offshore work. Its proximity to the United States provides US companies’ near-shore operations. It has a well-developed telecom infrastructure, a large pool of talented IT professionals, increasing proficiency in the English language and ability to garner offshore work from other Latin American countries. Mexico is recently seeing big investments by large clients to setup off-shoring infrastructure for back office work including Citi Group, Huawei etc.
A late entrant into the Off-shoring market, Chile has taken giant strides and may soon become industry’s giant slayer. Chile’s success comes from its willingness to invest heavily in its ITO and BPO industries. The surplus from the recent copper boom gave Chile the wherewithal to offer incentives for locating off-shoring facilities. Chile also spends heavily in R&D and is trying position itself on the high end of the off-shoring market. Businesses are attracted by the high literacy rate (96%), and the fact that it is in the same time zone as New York and the eastern US. Chile also has an extremely well-developed telecom infrastructure and has been ranked as the most e-ready market.
Indonesia has provided a good business environment for the outsourcing industry including the simplification of investment and taxation procedure. However, it will have a difficult time holding against stiff competition for the offshore market pie. The dampers are the low skill level of the workforce despite having achieved high literacy levels and low level of technological readiness. With China slated to become a large off-shoring customer, Indonesia will have a comparative advantage due to a large section of the population able to speak Chinese.
With a large overseas returned population, who have imbibed the culture and language gives Poland a huge advantage. The root of the outsourcing industry is well entrenched with a number of outsourcing hubs spread across the country. However, rising labor cost can be a major hindrance unless Poland rises up on the value added scale.