India ranks the highest for offshoring IT outsourcing
According to a report prepared by global management consulting firm, AT Kearney, India ranks the highest in an index of country attractiveness for offshoring IT outsourcing among 11 countries while China figures at the bottom of the list. The countries including India, Canada, Brazil, Mexico, Philippines, Hungary, Ireland, the Czech Republic, Russia and China, were rated on three factors: cost, environment and people.
India, according to the report, is the top rated country in two of the three major categories: cost and people. India boasts the most highly skilled, lowest cost labour force. This is a powerful combination, particularly when India’s experience in offshore business processing is factored into the mix. Although India is expected to retain its leadership for the foreseeable future, its strong rating may be tempered by increasing labour costs (so far offset by reduction in telecom rates) and geopolitical concerns. In the long run, India is likely to become the location of choice for high-value analytical tasks, while generic commodity processes will move to lower cost environments, such as China .
India is on top of the list with total 7.3 marks (out of 10) with 3.4 marks in cost (out of 4), 1.6 in environment (out of 3) and 2.3 in people (out of 3). While India scored highest in cost and people, Canada has been rated highest for environment.
Canada is number 2 in the list with total 6.2 marks.
The countries like Philippines, Ireland, Australia and China have been rated at number 5, 7, 8 and 11 respectively in the list.
About Philippines, the report says that the country is the prime candidate for offshore business processing due to its cultural affinities with the US and knowledge of of US standards in customer service. “Compared to India, however, the Philippines has a smaller pool of skilled resources and somewhat higher labour costs,” states the report.
For China, AT Kearney says that the large low cost labour pool is the greatest strength of the country. “It is attracting companies with high volume and transaction based processes. Its biggest drawback is its relatively high economic and political risks.”
China’s large and growing domestic economy have attracted companies such as Microsoft, HSBC and Motorola. All three companies, among others, recognise China’s advantage over India in providing Asian language capabilities (including Japanese), adds the report.
AT Kearney report titled, ‘Where to Locate’ is aimed at helping global CIOs and CEOs to select a location to outsource.
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