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India still dominates the global offshoring business services market, but hyper-competitiveness, rapid inflation, physical distance from North America and a still slowly-developing infrastructure mean that it is not the ideal location for every captive or third-party service customers’ needs.
Buyers concerned about geographic or cultural proximity in addition to labour costs are increasingly evaluating the merits of other developing countries for their service needs.
Buyers concerned about geographic or cultural proximity in addition to labour costs are increasingly evaluating the merits of other developing countries for their service needs.
Interesting New and Emerging Offshore Locations
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The result? A recent survey by Duke University indicates that India’s share of the global sourcing market may be decreasing for the first time in over ten years. China, Eastern Europe and Brazil are leading the charge, but there are also a number of smaller countries creating attractive climates for different types of service and customer needs.
If you are considering setting up an offshore captive or evaluating proposed delivery locations from an external provider and want to explore less-mainstream options, here are three interesting new and emerging locations you might not be aware of which could be uniquely suited to your situation.
If you are considering setting up an offshore captive or evaluating proposed delivery locations from an external provider and want to explore less-mainstream options, here are three interesting new and emerging locations you might not be aware of which could be uniquely suited to your situation.
Columbia
When you think of attractive locations for business, Columbia is unfortunately not usually the first place to come to mind. Or maybe even the tenth. Decades of economic uncertainty, powerful drug cartels and high crime rates have created a public image challenge that is (putting it mildly difficult to overcome. But in recent years, with a stabilizing government and improving security, Columbia is quickly emerging as a relatively attractive location for business services outsourcing.
As outsourcing customers and service providers continue to mature, the attractiveness for delivering some services from “nearshore” locations is increasing. South American outsource centers operate in the same time zone as North America, have access to a growing population of educated workers and a broad range of language skills, and offer arbitrage benefits similar to many other locations.
According to Alsbridge and Nearshore Americas, Columbian BPO and ITO services have grown 42% and 12% respectively in the past 3 years, reaching over $1 billion in 2009. Well-known providers including Accenture, IBM and EDS, and European firms such as Unisono, Emergia and Transcom, have set up operations there. And emerging are home-grown service providers such as InterSoft and Colgabar.
What led to such a display of confidence in the country? One factor is timing. While Columbia has been stabilizing, Brazil and Mexico have gradually become viewed as more dangerous and risky than in years past. The government of Columbia also appears to have recognized the window of opportunity and is continuing to increase tax and other incentives for foreign investors.
Another is Columbia’s relative size and maturity. The country is only the 4th-largest economy in South America, but its 45 million population is the 3rd-largest in the Latin/South American region. The result is a cost base which is lowest in the region both in wages and infrastructure. And, despite past economic challenges, their inflation has been more controlled than in other developing regions such as Asia.
While the risks associated with this developing country should not be downplayed, Columbia has quickly emerged as a viable contender for North America’s services requirements. When evaluating locations, particularly for BPO services, be sure to add Columbia to your list for consideration.
As outsourcing customers and service providers continue to mature, the attractiveness for delivering some services from “nearshore” locations is increasing. South American outsource centers operate in the same time zone as North America, have access to a growing population of educated workers and a broad range of language skills, and offer arbitrage benefits similar to many other locations.
According to Alsbridge and Nearshore Americas, Columbian BPO and ITO services have grown 42% and 12% respectively in the past 3 years, reaching over $1 billion in 2009. Well-known providers including Accenture, IBM and EDS, and European firms such as Unisono, Emergia and Transcom, have set up operations there. And emerging are home-grown service providers such as InterSoft and Colgabar.
What led to such a display of confidence in the country? One factor is timing. While Columbia has been stabilizing, Brazil and Mexico have gradually become viewed as more dangerous and risky than in years past. The government of Columbia also appears to have recognized the window of opportunity and is continuing to increase tax and other incentives for foreign investors.
Another is Columbia’s relative size and maturity. The country is only the 4th-largest economy in South America, but its 45 million population is the 3rd-largest in the Latin/South American region. The result is a cost base which is lowest in the region both in wages and infrastructure. And, despite past economic challenges, their inflation has been more controlled than in other developing regions such as Asia.
While the risks associated with this developing country should not be downplayed, Columbia has quickly emerged as a viable contender for North America’s services requirements. When evaluating locations, particularly for BPO services, be sure to add Columbia to your list for consideration.
Egypt
Until recently considered a “secret” for outsourcing insiders, Africa is slowly becoming a very competitive alternative for offshored services. Within this vast untapped market, Egypt has emerged as a leader with a 13th-placed ranking on A.T. Kearney’s recent ranking of global offshore countries and achieving Gartner Group “top 30” rating two years in a row.
What led Egypt to become so highly regarded? An interest in “nearshored” services from European countries is emerging (similar to the trend in North America), so relatively close time-zone alignment is one factor. A second natural advantage is Egypt’s geographic position in northern Africa, making it closer to customers in Western Europe than the more developed advanced location of South Africa.
Although its labour pool is small compared to India or China, Egypt is one of the most populous, developed and diversified countries in either North Africa or the Middle East. They have a larger pool of fluent or accent-neutral English speakers than many neighbouring countries and offer language services in French, German and Spanish. This makes it a good choice for both European captives and third-party service providers looking for lower-cost language support services.
But what seems to be propelling Egypt ahead of other North African nations is an unprecedented period of development and investment by the Egyptian government’s Ministry of Communications and Information Technology and the Information Technology Industry Development Agency. Similar to Ireland, this apparently solid government support is creating an environment that appears committed to developing educational institutions, building pools of skilled workers and actively promoting the country’s attributes as a long-term investment.
Packages of incentives and subsidies are being provided to support the information, communications and technology sector, including tariffs on imports, efforts to reduce software piracy, and tax exemptions for companies investing in infrastructures there.
As an example, the Maadi Technology Village just outside Cairo’s city centre is being developed as a world-class location for IT and business services outsourcing. The area is projected to soon house over 30,000 professionals primarily for BPO and call center operations initially and then expand over the next two to three years to support over 100,000 employees for a broader range of services.
What led Egypt to become so highly regarded? An interest in “nearshored” services from European countries is emerging (similar to the trend in North America), so relatively close time-zone alignment is one factor. A second natural advantage is Egypt’s geographic position in northern Africa, making it closer to customers in Western Europe than the more developed advanced location of South Africa.
Although its labour pool is small compared to India or China, Egypt is one of the most populous, developed and diversified countries in either North Africa or the Middle East. They have a larger pool of fluent or accent-neutral English speakers than many neighbouring countries and offer language services in French, German and Spanish. This makes it a good choice for both European captives and third-party service providers looking for lower-cost language support services.
But what seems to be propelling Egypt ahead of other North African nations is an unprecedented period of development and investment by the Egyptian government’s Ministry of Communications and Information Technology and the Information Technology Industry Development Agency. Similar to Ireland, this apparently solid government support is creating an environment that appears committed to developing educational institutions, building pools of skilled workers and actively promoting the country’s attributes as a long-term investment.
Packages of incentives and subsidies are being provided to support the information, communications and technology sector, including tariffs on imports, efforts to reduce software piracy, and tax exemptions for companies investing in infrastructures there.
As an example, the Maadi Technology Village just outside Cairo’s city centre is being developed as a world-class location for IT and business services outsourcing. The area is projected to soon house over 30,000 professionals primarily for BPO and call center operations initially and then expand over the next two to three years to support over 100,000 employees for a broader range of services.
Malaysia
Finally, in the Asia Pacific region, there is the emerging country of Malaysia. Although its neighbour the Philippines has dominated headlines in the English call-centre market particularly for North America, Malaysia has steadily and quietly begun stepping out of its shadow to become a viable alternative for buyers and providers in both the Asia Pacific and global markets.
Malaysia is now directly competing with the Philippines for market share. Outsourcing Malaysia, a group representing the industry’s private sector and the government, has reported that the shared services outsourcing sector in the country is growing at a rate of 30 percent annually. They also estimate that the sector will expand to a sizeable $2 billion in revenue and create over 300,000 jobs by 2012.
This growth was spurred by decades-ago investments made by large companies in the financial service, logistics and energy sectors which has resulted is a significant base of industry domain knowledge. Firms such as DHL, HSBC, and Shell have each established captive facilities in the country to leverage this expertise. In general the country is best known for IT outsourced services, but is growing its BPO capabilities and has a nascent knowledge process outsourcing sector also under development.
What is interesting about Malaysia is that the country lacks “stand out” features like other locations. The entire labour pool is only roughly equal to the number of new hires each year by any one of India’s major outsourcers. Labour costs are also about 15-20% higher than India, and even slightly above the Philippines, Thailand and Vietnam. Malaysia also lacks the strong infrastructure and political stability of Singapore, another location alternative in the region.
But what Malaysia lacks in obvious star power is balanced by the fact that it receives an overall, generally “good” rating on each of the various attributes that are viewed as important to offshore buyers, and it is this consistent “middle-of-the-pack” stance that is enabling the country to quietly enter Gartner’s list of 30 leading offshore locations and similar rankings of other research firms.
Malaysia is now directly competing with the Philippines for market share. Outsourcing Malaysia, a group representing the industry’s private sector and the government, has reported that the shared services outsourcing sector in the country is growing at a rate of 30 percent annually. They also estimate that the sector will expand to a sizeable $2 billion in revenue and create over 300,000 jobs by 2012.
This growth was spurred by decades-ago investments made by large companies in the financial service, logistics and energy sectors which has resulted is a significant base of industry domain knowledge. Firms such as DHL, HSBC, and Shell have each established captive facilities in the country to leverage this expertise. In general the country is best known for IT outsourced services, but is growing its BPO capabilities and has a nascent knowledge process outsourcing sector also under development.
What is interesting about Malaysia is that the country lacks “stand out” features like other locations. The entire labour pool is only roughly equal to the number of new hires each year by any one of India’s major outsourcers. Labour costs are also about 15-20% higher than India, and even slightly above the Philippines, Thailand and Vietnam. Malaysia also lacks the strong infrastructure and political stability of Singapore, another location alternative in the region.
But what Malaysia lacks in obvious star power is balanced by the fact that it receives an overall, generally “good” rating on each of the various attributes that are viewed as important to offshore buyers, and it is this consistent “middle-of-the-pack” stance that is enabling the country to quietly enter Gartner’s list of 30 leading offshore locations and similar rankings of other research firms.