Despite a backlash against outsourcing, India's low costs, skilled workforce and business environment make it No. 1, says AT Kearney
India continues to be the most preferred destination for companies looking to offshore their IT and back-office functions, despite the backlash against outsourcing to the country. It also retains its low-cost advantage and is among the most financially attractive locations when viewed in combination with the business environment it offers and the availability of skilled people, according to global management consultancy AT Kearney.
India has retained its numero uno position even as some other well-established outsourcing hubs dropped in their attractiveness to be replaced by new emerging destinations in AT Kearney's latest ranking of the top outsourcing destinations across the globe. "The top three countries in the 2009 Global Services Location Index (GSLI) remain the same—India, China and Malaysia—but the world's volatile economic environment is reflected in the rest of the rankings," the consultancy pointed out. The study evaluates 50 top countries.
The economic meltdown and appreciation of the local currency against the dollar has taken its toll on Central and Eastern Europe, which were emerging as important offshoring hubs for Western Europe. Overall, nine countries dropped nine or more rankings in the attractiveness index. While the one-time rising stars such as Poland, Czech Republic and Hungary lost out, others in the Southeast Asia and Middle East scored. Egypt, Jordan and Vietnam made it to the top 10 rankings for the first time. UAE, Tunisia and Morocco have also improved their standing, with the noteworthy trend being the Middle East and North Africa emerging as key offshoring regions given their large and educated population and proximity to Europe.
India and Philippines together account for 50% of the world's BPO market, but Philippines, often spoken of as threat to India, is only a 'distant' second, according to the study. "Philippines is more call-centre oriented and we don't necessarily see it growing at the same pace as China and some other South Asian countries. Some of the reasons that has made India number one continue and they will help it tide over the economic downturn faster than any other in the world," said AT Kearney senior partner Saurine Doshi.
Significantly, India is also no longer being viewed only as a competitor but also as an enabler to industry growth in other regions. "Indian companies are some of the gorillas and they are increasing their global footprint as clients look for multi-region support," added Mr. Doshi.
Smaller, tier 2 cities in the US, such as San Antonio, have also emerged as important destinations because of the falling dollar. A combination of rising unemployment and political pressure to create jobs is increasing interest in onshoring possibilities among smaller inland locations, according to AT Kearney. "Similar trends are evident in UK, France and Germany," the consultancy said.