Techno Finance and Executive Diary...

Wednesday, November 01, 2006

Attractive locations for "offshoring"

While India, China and Southeast Asia continue to dominate A.T. Kearney's annual ranking of the most attractive locations for "offshoring" of service activities such as IT, business processes and call centers, the United States ranks surprisingly well in a new version of the index released today.

Additional findings from this year's Index include:
• India remains the best offshore location by a wide margin, although wage inflation and the emergence of lower-cost countries decreased its overall lead.
• Improved infrastructure and relevant people skills have increased the attractiveness of China as a low-cost option for servicing Asian markets.
• Thailand jumped from 13th to 6th in this year's Index and Southeast Asian countries now make up four of the top six locations on the Index.
• Offshore attractiveness in Europe continues to migrate eastward as Bulgaria, Slovakia and Romania all enter the Index for the first time.
• The Middle East and Africa appear to be the next frontier in offshoring as countries such as Egypt, Jordan, United Arab Emirates and Ghana perform well.

Highlights: Global Services Location Index

Beyond the interest in the relative rankings of these "on-shore" locations, the Index remains dominated by lower-cost countries. The complete results can be viewed at www.atkearney.com.

India and China: still dominating

India still leads by a wide margin. The gap between India and the second-ranked country, China, is larger than the gap between the next nine countries combined. Nevertheless, India's lead has shrunk slightly compared to past years. This is mainly due to a slight reduction in India's financial attractiveness, the result of wage inflation in India and the emergence of new even lower-cost contenders such as Ghana and Vietnam.

China maintains its second place ranking and partially closes the gap with India, thanks largely to continued improvement in its infrastructure quality and the availability of relevant people skills. For example, the number of development centers in China with CMM or CMMI certifications (an industry standard for rating the process-quality of IT development centers) showed the largest increase of any country in the Index, jumping from 108 in 2004 to more than 277 in 2005. For a growing number of Asian and Western multinationals, China remains the best choice for serving their growing operations throughout the East Asia region - the logical location for IT and back-office support and call centers for China itself, but also a low-cost option for servicing established markets in Japan, Korea, Taiwan, Hong Kong and Singapore.

ASEAN: still rising

As a region, Southeast Asia is the biggest winner in this year's Index. Malaysia maintains its 3rd position Singapore stays at 5th, the Philippines rises from 6th to 4th, Thailand jumps from 13th to 6th, and Indonesia leaps into the Index at 13th. Even Vietnam, at 26th in this year's Index, sees its ranking rise from 20th to 16th position among the original 25 countries included in both the 2004 and 2005 Indices.

In Malaysia and Singapore, government promotion policies continue to pay off. Given its high-wage levels, Singapore has deliberately positioned itself as a safe location for sensitive high-end activities, with a particular emphasis on business continuity, IP protection and data privacy. Malaysia has augmented continued investment in world-class infrastructure along the Multimedia Super-Corridor, with further incentives for corporations choosing to locate in Malaysia and additional policies to open up the labor pool and deepen English language and technical skills throughout the population.
The Philippines, despite continuing political instability and infrastructure weaknesses, continues to benefit from the global exposure and English language skills of its workforce. Thailand enjoys the biggest rise in this year's Index. This seems to be due largely to improvements in educational outputs, plus some improvements in infrastructure quality and the overall business environment. While still challenged by weak English-language capabilities, Thailand has the potential to emerge as key low-cost challenger to the Philippines in South East Asia.

About The Global Services Location Index

1. India
2. China
3. Malaysia
4. Philippines
5. Singapore
6. Thailand
7. Czech
8. Chile
9. Canada
10. Brazil

Posted by "CPerformance" :: 12:36 AM :: ---------------oOo---------------