March 6, 2012: The present global services market is characterized by counterbalancing trends. On one hand, organizations are resorting to offshoring in an effort to cut cost and on the other hand policymakers say that off shoring has led to increased unemployment in their countries and that it has made the economic condition in their countries worse. Even though the effects of slowdown are evident in the global services market, the practice of offshoring is not going to cease.
According to the A T Kearney’s Global Services 2011 index, the top three countries have been able to maintain their position since the introduction of the index. The countries are India, China and Malaysia and are ranked 1st, 2nd and 3rd respectively in the index. The large talent pool and the cost advantage are the factors in favor of the top three countries.
The index indicates that North America is the biggest client market for outsourcing services and will maintain its position for a long time. In 2010, the United States was at the top in terms of Information Technology offshore spending, with a share of 63 per cent. The tier 2 cities in the US offer great potential as outsourcing locations and enjoy the 18th position in the index.
The proximity of Latin American countries to the United States services market makes it a favorable destination for offshoring. With the increase in the number of English speaking population in the Latin America, there will be increase in the outsourcing of services to such destinations. Brazil is now recognized as a good performer in IT, while Mexico is now turning into a favorite Business Process Outsourcing destination.
The financial crisis in Europe has made the countries outside the euro zone favorable destinations. Counties such as Estonia, Latvia, and Lithuania have become favorite destinations in the domain of Business Process Outsourcing (BPO) and voice support.
UK has improved its ranking and now holds the 16th position and is a major customer outsourcing market. Other major customer markets in the region are Germany and France.
The Middle East and North African regions have recently become favorite destinations for companies to outsource their services. Egypt is ranked 4th in the index and first in the region followed by United Arab Emirates with 15th position and 2nd in the region.
Asia remains the hottest offshoring destination with India, China and Malaysia holding the first three positions. Asian countries dominate the top ten in the list with Indonesia, Thailand, Vietnam and Philippines securing 5th, 7th, 8th and 9th positions respectively.
The outsourcing industry will face difficulties for a short duration and will enjoy benefits in the long term as the economy improves.