More Competition for Offshore Jobs, Increasing Complexity for Companies

AT Kearney, a global management firm finds in their new study, the Offshore Location Attractive Index that countries are competing to establish themselves as offshore destinations now offer a broad spectrum of assets besides low-cost labor.

Large population countries such as India and China, and to a lesser extent, Russia, Brazil and the Philippines offer vast pools of educated workers. While small and highly developed such as Singapore, New Jersey and Ireland offer excellent infrastructure, education systems and business friendly low-risk environments made them attractive offshoring locations as well.

Highlights of the 2004 Offshore Location Attractive Index

India tops the index by a wide margin, not only for cost advantages, but also for the depth and breadth of offshoring experiences and people skills. While China ranked second in the index with similar combination of low-cost and high volume of skills.

Malaysia ranks third, with its low cost, good infrastructure and attractive business environment with very strong government support has potential to be a top choice destination for location offshore services. Of prominence is the government’s Multimedia Super Corridor, which also have a very low political risk and with an objective to position Malaysia as a hub for services and technology innovation. This has resulted in numerous companies location some of their global and regional operations in Malaysia.

While Czech Republic in the 4th place offers European clients low costs, good language skills and cultural similarities, competitive infrastructure and a stable political and economic environment. It is well positioned for companies that have a growing interest in regional or near-shore outsourcing in Europe.

Fifth place went to Singapore. Though not considered to be a low-cost location, this country remains a favored destination for regional service functions due to its excellent education and language skills, superior infrastructure and pro-business tax and regulatory environment.

Next on the top 10 offshore location list is the Philippines, reflecting the continuing attractiveness of emerging Asia as offshore destination that also provides experienced and talented low-cost labor. “While much smaller than China and India, the Philippines has widespread English language skills, a cultural affinity for U.S. and promising HR capabilities. This country has more students enrolled in the tertiary level than most European countries.” Mr. Joon L. Ooi said, Managing Director of A.T. Kearney’s practive in Malaysia. In fact, it has more students than any other country in the index except China, India, Russia and Brazil.

Recent estimates indicate that the Philippines graduates about 15,000 technology students annually. In addition, the U.S. military presence in the Philippines during the last century means that much of the population can speak English, which poses fewer problems for U.S. callers than British-influenced accents.

Poland and Hungary also score highly, reflecting growing interest in offshoring among European companies. Brazil and Chile lead the pack in Latin America. Higher income locations like Canada and New Zealand continue to perform well with high education levels, infrastructure qualtiy and business-friendly environments.

“Offshoring today is about much more than labor arbitrage,” said Andrea Bierce, a vice president in A.T. Kearney’s financial institutions practice in New York and a co-leader of the study. To compete, countries concerned about exporting jobs should address the factors that they can affect on their own shores. These countries should raise educational standards, invest in research, provide more extensive training, and promote their ICT industries at both state and national levels. They should reinforce the cultures of innovation and experimentation that create new technologies, processes and products. Clearly, the offshore challenge calls for realistic self-appraisal and action.