Top 10 outsourcing destinations

The recent slowdown, which is said to be the worst after Great Depression of 1930s, has boosted outsourcing industry. The need to cut costs has become ever more critical after the slowdown which ravaged several big businesses.

Despite political backlash in several European countries and the US, outsourcing has emerged as a pragmatic business strategy. So, which are the most favourable destinations for outsourcing? The countries that global corporations, boarding the outsourcing bus, think of sending their work to.

Gartner has released a list of 10 top locations for outsourcing. While traditional heavyweights, India and China, continue to lead the list, there are number of countries that are emerging as credible alternatives.

The 10 criteria on which the ranking is based include: language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, globalisation and legal maturity, and data and intellectual property security and privacy.

India

Although India continues to grow in terms of IT services being exported, its relative share of the overall worldwide total has declined as a result.

The country is also starting to face some challenges including wage inflation, local attrition rates, geopolitical issues and financial irregularities, which are opening opportunities for other countries that are also improving their capabilities to target local service demands of more-mature regional Asian clients.

China

Giving tough competition to India, China ranks high on parameters like infrastructure and government support. However, it has not been ranked very strongly on language and cultural compatibility parameter.

The country offers a large talent pool of skilled workers who can reportedly handle both basic jobs such as processing insurance claims and mortgage loans, to more technically advanced information technology jobs.

One big selling point for China is its low cost. Compared to India, pricing for this labor is said to be as much as 30% less. According to Chinese government statistics, in 2009, China's outsourcing market grew by 25% to reach $25 billion in revenues.

However, its disadvantages versus India include: One, India's natural advantage with English-language. Two, India is regarded less risky when it comes to IP protection than China.

Australia

As an outsourcing destination, Australia scores high on infrastructure, language, political and economic environment, cultural compatibility, globalisation and legal maturity, data and intellectual property, security and privacy.

However, being a mature markets Australia, offers limited cost savings.

New Zealand

New Zealand too scores high on infrastructure. And just like Australia, country gets high marks for language and cultural compatibility. Other factors that make it a top outsourcing destination are political and economic environment, globalisation and legal maturity, data and intellectual property, security and privacy.

Again, similar to Australia, New Zealand too offers limited cost benefits.

Singapore

Another mature market, Singapore too offers limited cost savings. However, the country offers several other benefits like excellent infrastructure, political and economic stability and cultural compatibility.

Factors like globalisation, legal maturity, intellectual property, security and privacy of data make Singapore an ideal outsourcing destination.

Malaysia

According to the report, Malaysia is mong the countries that have continued to strengthen their position against leading outsourcing alternatives.

During the last year, Malaysia invested considerably to promote outsourcing and leveraged increased demand for lower-cost services.

Indonesia

Indonesia is a new entrant into the top 10 list this year due to its expanding business environment targeting both offshore IT and business services, its large labour pool and its well-established industry base in mining and manufacturing involving prominent multinational companies.

According to the report, this was largely due to Indonesia’s noticeable progress in addressing offshore opportunities rather than just Pakistan's drop in performance. However, political instability remains a key factor for companies seeking outsourcing destinations.

Vietnam and Indonesia are the only two countries which have received not very high ranking on infrastructure parameter. The country also scored low on language and cultural compatibility parameter.

The Philippines

The report ranks the Philippines for the cost savings it offers. However, the country is rated not very high for its political and economic environment.

According to the report, while low cost is an important factor, the political and economic environment remains a concern for many companies when moving business to offshore locations.

Thailand

Another country that gets good marks on costs parameter is Thailand. The country is rated high for offering good cost benefits to companies outsourcing work to Thailand. Thailand also scores high on infrastructure parameter.

However, like the Philippines and Indonesia, Thailand too is rated less favourably for political and economic environment. Thailand was also ranked low on language and cultural compatibility.

Vietnam

Vietnam is the only country to receive an excellent rating on cost parameter. However, it received ratings of fair or poor on every other criterion.

Vietnam was ranked worst on data and intellectual property, security and privacy parameters. The country was also not ranked high on other parameters like infrastructure and language and cultural compatibility.