Six Indian cities--Bangalore, Delhi NCR, Mumbai, Chennai, Hyderabad, Pune--are among the 8 top global destinations for outsourcing of services along with the Philippines’ Manila NCR and Ireland’s Dublin city. This has been revealed in the 4th Global Services-Tholons Top 50 emerging outsourcing destinations survey. The study is jointly done by Global Services from CyberMedia and Tholons, a services globalization advisory firm.
The Next 10 Outsourcing Destinations considered to be ‘Top 10 Aspirants’ from a total of 68 destinations is dominated by China’s Shanghai, Beijing and Shenzhen, Vietnam’s Ho Chi Minh City and Hanoi, Poland’s Krakow, Argentina’s Buenos Aires, Egypt’s Cairo and Brazil’s Sao Paulo.
Commenting on the study, Global Services Editor Ed Nair said, “With global outsourcing activity growing every year, the ‘emerging’ destinations are vying for a piece of the action. Though India and Philippines were the ones to occupy the pole positions first, many other countries are innovating to find a niche for themselves. The dynamics between these destinations is ultimately determined by a host of factors, which forms the basis of this study. Also, in many ways, this study is a study in globalization at its most granular level.”
India continues to top the list with revenues of US$40 billion in IT-BPO export services in 2008. Indian IT-BPO export services posted 35% year on year growth rates in the last five years. The Philippines increased outsourcing revenues by 25% from US$4.8 bn in 2007 to US$6 billion in 2008 while increasing industry employment by 33% to an estimated 400,000 employees.
Interestingly India’s FDI inflows posted the largest increase globally at 46% in 2008 -- from US$25 billion to US$46 billion even as global FDI flows decreased from US$1.9 trillion to US$1.7 trillion and several developing economies struggled to acquire investments from client nations.
Avinash Vashistha, CEO of Tholons says, “For a CIO today, finding a Center of Excellence is more than just lower cost. It must consider location, risk mitigation for business, cultural affinity and scalability of the skilled workforce.”
“The service providers need to think through their offerings so as to differentiate as the competitive advantage is rapidly vanishing due to cut throat competition and market saturation,” adds Vashishtha.
Compared to the previous year’s rankings, this year’s study reveals minimal shifts in rankings because of the overall slowdown in the pace of outsourcing activity in the face of global recession.
The study available on Global Services website also analyzes the way buyers of services (or client nations) look at offshore nations and lists the Top 5 and the Next 5 Offshore Nations
While the Top 5 are considered as mature or established outsourcing nations, the Next 5 are great alternatives for specific types of processes and are seen as destinations with considerable near-term potential.
The study also identified top 5 destinations by function and these are:
Business Analytics (Delhi NCR, Mumbai, Bangalore, Chennai, Krakow),
Finance and Accounting (Mumbai, Bangalore, Manila NCR, Krakow, Shanghai),
Human Resources (Prague, Bucharest, Bangalore, Makati City, Budapest),
Legal Services (Manila NCR, Mumbai, Chennai)
Contact Center English (Delhi NCR, Manila NCR, Dublin, Mumbai, Bangalore),
Contact Center Multilingual (Mexico City, Cairo, Krakow, Buenos Aires, Dalian)
Product Development (Bangalore, Moscow, Chennai, Shanghai, Ho Chi Minh City),
ADM (Bangalore, Mumbai, Hyderabad, Chennai, Dublin),
Testing (Bangalore, Chennai, Hyderabad, Ho Chi Minh City, Toronto, Shanghai),
Engineering Services (Bangalore, Chennai, Pune, St. Petersburg, Guangzhou),
R&D (St. Petersburg, Bangalore, Moscow, Shanghai, Dublin),
Animation / Game Development (Shanghai, Beijing, Moscow, Sao Paulo),
Healthcare Services (Hyderabad, Bangalore, Warsaw, Prague, St. Petersburg, Mumbai) and
Infrastructure Management Services (Bangalore, Dublin, Kuala Lumpur, Delhi NCR, Toronto).
Seven Chinese cities--Shanghai, Beijing, Shenzhen, Dalian, Guangzhou, Chengdu and Tianjin--and six Indian cities--Chandigarh, Kolkata, Coimbatore, Jaipur, Bhubaneswar, Thiruvananthapuram—make it to the list of next 60 outsourcing destinations.
The study has also identified the recent convergence of specific service delivery locations. The report discusses convergence of these centers from two vantage points - delivery centers as a part of their respective countries and delivery centers expanding beyond their geographical boundaries. The coming together or convergence of cities in a country as one common value proposition to the client is highlighted in the section, “Offshore Nations: Top 5 & Next 5.” The mitigating of geographical boundaries by cities and formation of city clusters is also discussed in the subsequent section “Cities as Clusters”.
India, Philippines, Ireland, China and Brazil among Top 5 Offshore Nations:
Established offshore nations with a high degree of maturity and record of successful delivery capabilities are categorized as the Top 5 Offshore Nations. These countries typically have Centers of Excellence across multiple outsourcing segments and rank highly in a number of location assessment scenarios. These five countries offer the strongest value propositions to clients based on the Location Assessment Platform and are considered as prime locations when considering specific outsourced processes. These emerged destinations will most often also have the unique advantage of scale and capacity as compared to smaller or emerging locations.
Canada, Russia, Mexico, Vietnam, Poland among Top 5 Emerging Nations
The difference between the Top 5 and the Next 5 offshore nations is most pronounced in the service level maturity. In terms of potential, the Next 5 are not far behind, however this potential is considered to be still unrealized due to specific inhibiting factors. It also must be stated that the service level maturity has been taken into consideration from the client point of view, as client nations look at offshore nations in a distinct manner. This has been taken into consideration when categorizing locations. This client perception may change or alter over time, but takes significant effort and time on a destination’s operational front. Successful service delivery is the most significant factor in altering client perception.
The global outsourcing landscape has evolved significantly in the last five years, earmarked by increasing complexity and wide-scale expansion in terms of both locations and outsourced processes. In this period, it was observed that there were concise differences between client perception of offshore destinations and actual location assessment results. Thus, it has become even more important to understand the client’s viewpoint and location assessment from their respective standpoints.
To determine delivery and consumption trends for global outsourcing services in specific destinations, surveys and interviews with tier-1 and tier-2 providers and service buyers were conducted. The data gathering methodologies were also applied to determine market and labor sizes as well as expansion strategies of tier-1 and tier-2 providers.