India Most Attractive Outsourcing Destination: A.T. Kearney

A combination of low cost and skilled manpower availability advantage place India as the most attractive offshoring destination, followed by China and Malaysia, according to management consulting firm, A.T. Kearney.

The recently released Global Services Location Index by A.T. Kearney, analyzes and ranks the top 50 countries worldwide for locating outsourcing activities, broadly based on financial attractiveness, people and skills availability and business environment. The top three positions have been occupied by the trio since the inaugural Global Services Location Index in 2003.

Asia dominates the top ten positions on the Global Services Location Index, with Indonesia (5), Thailand (7), Vietnam(8) and the Philippines (9), figuring among the top 10 outsourcing destinations. The key strength catapulting India to the number one position is its deep and broad skill base, the report cites. In terms of cost advantage, Vietnam ranks as the most financially competitive country in the index.

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On the other hand, currency flux and wage changes have helped boost the rankings of countries that were figured lower on the list earlier due to their costs. These include Baltic States, United Kingdom, Mexico, and the United Arab Emirates.

While the United States is the top customer for outsourcing services, accounting for 63 percent of global IT outsourcing spending, its Tier II locations rank 18th as outsourcing locations, thanks to a combination of talent and accessibility.

In addition to economic changes, the nature of outsourcing itself is in transition. The old model involving multi-year contracts, custom code, and on-site systems integration workers is beginning to give way to a new model in which outsourcers provide standardized software solutions on a per-use basis. The past two years have seen a number of outsourcers building and/or acquiring the capabilities required to survive this shift, in the opening salvo of a coming revolution in outsourcing.

“Regardless of changes in the outsourcing industry business model and other temporary setbacks, we believe the era of globalization of services production has only just begun,” said Erik Peterson, managing director of A.T. Kearney’s Global Business Policy Council. “IT and BPO offshoring are early manifestations of a larger trend that, in the long run, means that more functions can and will be considered for localization in countries outside of which end-customers reside.”

“The headlines about persistent economic volatility may be here for some time, and for the global services industry, the short term will remain rocky as worries about sovereign debt, currencies and joblessness continue to roil the global economy,” said Paul A. Laudicina, A.T. Kearney chairman and managing officer. “But the long-term prospects appear little changed from our first Global Services Location Index. An increasingly interconnected world and increasing demand mean that the global services industry remains on the rise.”