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Outsource magazine: thought-leadership and outsourcing strategy | August 18, 2017

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Newly emerging offshore centres move centre-stage

Newly emerging offshore centres move centre-stage
Daniel Sasaki

A consistent theme at outsourcing conferences and the topic of discussion at seminars and web forums is the rise of China and India as outsourcing powerhouses. However, while the outsourcing giants of each country are likely to play a bigger role in the international outsourcing sector for decades to come, there are an emerging group of countries whose outsourcing firms are also beginning to make their presence felt and compete more aggressively for business. For the UK’s small and medium-sized businesses looking for the most competitively priced offer this could be a very welcome trend.

Since the first AT Kearney Global Services Location Index in 2003, the offshoring industry has shown to have grown significantly and the geography of offshore delivery has expanded to include a large number of countries specialising in different parts of the service-production ecosystem.

Thanks to their deep talent pools and cost advantages, India, and China remain the undisputed leaders for offshore services. But each country has issues. For China it is lack of English language skills, business immaturity, IP protection concerns, and lack of managerial talent. For India several of the big outsourcing groups have been on acquisition drives and need to bed down their new purchases while some spikes in wage inflation are also having an impact.

According to a 2011 study published by Gartner Inc., companies now have greater choice than ever before, with emerging nations such as Mauritius, Colombia, Turkey and Sri Lanka taking considerable measures to consolidate or grow their positions as leading offshore locations by placing significant emphasis on IT and business process services to drive economic growth. These measures also include government initiatives to improve the English language capability in the education system, setting up policies to better protect data, intellectual property (IP) and privacy, and improving the country’s infrastructure.

South Africa and Panama are two very promising players in IT, business processes and especially call centre operations. Although unable to compete with India and China with their massive workforces, they are ideal candidates for outsourcing call centre operations due to good English language skills and established resource pools of English-speaking people, aligning it with countries such as the UK.

South Africa has attracted many top international call centre outsourcers, including Aegis BPO, IBM, and Deloitte, and earlier this year, US online retail giant Amazon said it would expand its call centre operations in Cape Town, creating 1,400 jobs by the end of next year. On the other hand, Panama’s proximity to the US, similar time zone and US dollar currency has made it an attractive option for American firms such as AT&T, Dell, and Visa.

From the Middle East and South America, countries such as Egypt and Mexico lead the pack.  According to a recent London School of Economics study, Egypt has a good cultural connection with the West, strong language skills, good positioning as a partner with other offshore leaders like India, and convenience for European businesses. Mexico, in particular, is having a surge in IT outsourcing though the increasing violence in the country is partly hampering this growth.

Elsewhere in Europe, Baltic States such as Estonia, Lithuania, and Latvia are gaining in popularity despite strict austerity programmes, a consequence of the economic crisis. Strong people skills have allowed these countries to develop small but strong business processes markets. Barclays recently opened an IT centre in Vilnius and Western Union has also announced plans to establish a regional service centre in Lithuania.

It is clear that businesses are presented with a growing menu of outsourcing options as emerging countries are developing both domestically and internationally. Criteria such as a country’s language skills, cultural compatibility, global and legal maturity, labour pool, infrastructure and so on must obviously be thoroughly considered in relation to a business’s individual requirements, but even though some countries are not as strong as the big players for certain categories, CEOs may well find providers – global and local – whose capabilities mitigate some of the risks and provide a unique set of advantages that are better tailored towards their company’s needs.

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