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Outsourcing - Part 1

CIO's global outsourcing series
Gartner's top 30 countries for IT services

Gartner's top 30 countries for IT services

It is no surprise to learn from the gurus at Gartner that India, as undisputed champ, and China, as greatest challenger, remain the leaders for offshore IT and business process outsourcing services.

Still no surprise that many other countries such as Malaysia, Poland, and Chile are investing heavily to become credible alternatives. But it says much about how global IT outsourcing has changed that Gartner claims the destinations now just outside the IT offshoring club are Pakistan and North Korea. In his latest book, Obama’s Wars, legendary investigative journalist Bob Woodward describes Pakistan as the most dangerous country in the world. And North Korea?

In its report 10 Leading Locations for Offshore Services in Asia Pacific and Japan for 2010, Gartner analysed countries as offshore services locations using criteria such as language, infrastructure, education, cost, cultural compatibility, legal maturity, and security. All the countries on the Asia-Pacific list, including Australia and New Zealand, make Gartner’s global top 30 offshore locations for 2010.

India continues to grow its IT services exports, but its share of the worldwide total has declined, and wage pressures, geopolitical troubles and financial scandals are creating opportunities for other countries.

Meanwhile, currency fluctuations against the US dollar have made some countries less compelling. As the Australian dollar hovers close to parity with the greenback, for example, Australian demand for offshore services should increase. But it will also make Australia less attractive as an outsourcing destination.

Management consultants AT Kearney rank the most attractive offshoring destinations for many business activities — IT services and support, contact centres, and back-office functions — in an ongoing research project called the Global Services Location Index, or GSLI.

The firm’s latest GSLI reveals a dramatic shift in the geography of outsourcing destinations, due to diminishing cost advantages in some countries, and improved skills in others.

The Middle East and North Africa is emerging as a major offshoring region because of its large, well-educated population and its proximity to Europe. Countries in Latin America and the Caribbean continue to capitalise on their closeness to the United States as nearshore destinations. There are also onshoring trends to lower cost cities within the US, UK, France and Germany — big western democracies facing political pressure to keep jobs at home.

Thanks to emerging technologies such as cloud computing, service providers are offering more outcome-based pricing. While clients believe pricing for infrastructure services is competitive in the early years of an agreement, adjustments over the life of a contract struggle to keep pace with the market. More CIOs are looking to ensure competitive pricing for the life of their agreements.

CIOs are also seeking more vertical expertise from outsourcers. Service providers, traditionally hired to improve efficiency and reduce costs, are being asked to also identify and solve inefficiencies in clients’ internal environments. Clients are leaving the bulk of their original scope with incumbent outsourcers, but they are carving out some portions and awarding them to other providers in a multi-sourcing, best-of-breed approach.

AT Kearney GSLI 2009

The AT Kearney Global Services Location Index. The GSLI analyses and ranks the top 50 countries worldwide to determine the best destinations for providing outsourcing activities, including IT services and support, contact centres, and back-office functions. Each country’s rank is composed of a weighted combination of relative scores on 43 measurements, which are grouped into three categories: Financial attractiveness, people skills and availability, and business environment.
Blue - No significant moment
Green - Significant movement up the index
Red - Significant movement down the index
* - based on lower-cost locations in each country

Read Part 2 of CIO's Global Outsourcing series about how clients and incumbent vendors are renegotiating outsourcing deals before they expire.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

More about: AT Kearney, Gartner, SLI-Consulting
References show all

Comments

1

Jerry E Durant

Mon 24/01/2011 - 14:45

Don't believe all that you read, regardless of the name that is associated with it. The question IS NOT where they are on the list but where they are in terms of growth momentum. You can look at factors until the cows come home and you can create a list that would show the smallest of countries having a play.

For buyers it is about risk reduced service delivery. Just because you buy from a lead country does not insure the results that you demand.

2

N. Reese Bagwell

Mon 24/01/2011 - 16:45

Spot on article! The vast majority of successful first movers and best in class stellar performers in their respective business industries have found that the definitive answer to success in cost reduction and quality performance enhancement in their respective business models has been accomplished through outsourcing their non-core competencies. The key, these companies have found, is that they outsource their non-core competencies such as their back office work (A/P, A/R, Customer Service, Internet and telephony response-inbound, inbound/outbound sales, procurement, H/R, etc.) so that they can more effectively maximize their focus on their core competencies. They have achieved major benefits not only in capital cost savings but also in flexibility, scalability and even consultative improvements from experienced and reputable outsourcing providers. Moreover, most of these companies are also pleasantly surprised to discover that the quality of the outsourced services is not compromised but, rather, that quality and efficiency levels of these outsourced services are, in fact, enhanced- a benefit that inures to the benefit of their client/customers.

3

Goyello

Mon 24/01/2011 - 23:25

In Outsourcing there is not only about cost reduction. We think that in many cases the most important is the quality of service outsourced. In that case you shouldn't think where you can find the cheapest solution, but the best solution to keep your customers most satisfied. We have outsourced many of IT projects and we know how important in this area is highly skilled staff which is able to satisfy even the highest expectations. We know that in Poland there are a lot of highly skilled and talented developers.

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