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India still world's No. 1 destination for outsourcing

Last updated on: December 22, 2010 06:28 IST

India still world's No. 1 destination for outsourcing

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India is still the world's favourite destination for offshore outsourcing, but attractive cost structures in the Philippines, Vietnam and Indonesia and the rapid growth of the business in China are posing tough competition, according to a new study by Gartner Inc.

In the study, the IT research and advisory firm identified the Top 30 countries around the world for globally sourced activities in 2010-11, rating them on the basis of 10 criteria.

Many organisations that choose to move IT services to lower-cost countries are daunted by the task of determining which country, or countries, would best suit their requirement.

Gartner conducted an analysis of these countries to assess their capabilities and potential as offshore services locations, it said. India retained its position as the most successful country among global offshore locations, as per the Gartner study.

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Image: College students in Delhi.
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It scored well across all 10 criteria - language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy.

While its cost-competitiveness is being challenged due to the rising rupee, this is compensated by its strength in other areas, as per Gartner's study.

India is already the most successful country amongst the offshore locations. With the rising rupee, its cost competitiveness is being challenged, but this is compensated by its strength in other areas.

"Clients continue to seek a portfolio of offshore countries and with India again experiencing increasing labour costs and attrition, this is creating opportunities for other offshore locations to target the services needs of more-mature Asian clients," said Gartner Research Vice-President Ian Marriott.

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China

China improved its scores for political and economic environment from good to very good, and culture compatibility from fair to good.

Contributing to the increased rating for China is its rising global political and economic leverage, especially in the wake of the recent global economic crisis.

China experienced a steady positive growth rate, spurred by a $583.9 billion stimulus package, in 2009.

The Shanghai 2010 World Expo has helped increase cultural awareness within China, which has helped the growth of the business in the country, according to the study.

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Image: China improves rating.
Photographs: Reuters.
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Philippines

Gartner's scores for the Philippines remain largely unchanged, although its rating for global and legal maturity fell from good to fair.

Gartner continues to see foreign companies being attracted to the Philippine's young, experienced labour pool specialising in contact centres and finance and accounting (F&A) business process outsourcing (BPO), complemented by its good language and cultural compatibility with western economies.

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Indonesia

It has improved costs from very good to excellent, and labour pool from poor to fair.

Based on several surveys that Gartner analysed, Indonesia continues to offer amongst the cheapest labour costs for IT and business process skills in the region.

Indonesia has consistently increased its global competitiveness in its IT skills, lowered its unemployment rate and increased the number of qualified engineers.

As a result, it is also attracting an increasing number of vendors providing offshore services out of Indonesia.

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Image: A woman protesting against outsourcing at a rally in front of Japan's embassy in Jakarta.
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Malaysia

Malaysia has improved its government support and infrastructure from good to very good.

In Malaysia's 2010 budget, the government introduced green IT initiatives to encourage green technology adoption.

The Malaysian government is also investing in high speed broadband (HSBB), and 1.3 million homes and premises are expected to access HSBB services by 2012.

It is becoming a regional center of excellence for service desk, remote infrastructure monitoring and support as well as shared services center for logistics.

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Image: Kuala Lumpur.

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Vietnam

Vietnam has improved its labour pool and culture compatibility ratings from fair to good.

Its labour pool continues to be attractive due to the size of its young workforce.

The Vietnamese government has created a priority list in 2010 to train 40 percent of its workforce in selected fields including IT.

From a culture compatibility improvement perspective, Vietnam now has a sizeable expatriate community fromJapan, South Korea, Taiwan, Malaysia, Singapore, Thailand and France.

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Image: Ho Chi Minh City.

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Sri Lanka

Gartner previously rated Sri Lanka in the Top 30 locations in 2007. Sri Lanka has improved its scoring for government support, infrastructure and political and economic environment.

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Thailand

Thailand's rating has not significantly changed across the 10 criteria, although Gartner has seen Thailand's desire to improve its policies around the areas of 'data/IP/security and privacy and education.

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Bangladesh

Bangladesh is rated very good in terms of costs.The country has a huge pool of talented ICT professionals.

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Image: Dhaka.

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