India is still the number one country for business process outsourcing, followed by China and Malaysia, according to A.T. Kearney’s Global Services Location Index. In its latest Index, the consultancy explores the best value for money, talented and business friendly locations for outsourcing services, allowing companies to reduce costs for often repetitive and costly services.
A.T. Kearney recently released its latest analysis of the global outsourcing market. The 2016 version of its Global Services Location Index, titled ‘On the Eve of Disruption’, explores the top contenders in the outsourcing market and analyses what sets them apart. For this year’s ranking, the consulting firm examined the offshoring landscape in 55 countries around the globe, and ranks the top destinations for global offshoring.
The index is made up from three categories and 38 sub-indices. Financial attractiveness accounts for 40% of the total weight of the index, and is a contribution of wages, infrastructure costs, as well as tax, corruption and exchange rate costs. Skills and availability constitutes 30% of the total. This relates to the estimated size of the IT and BPO (business process outsourcing) sector, the level of available talent, the level of educational achievement and language proficiency. The final 30% comes from the respective business environment, with economic risk, political risk, IP protection among others factored into the index.
India remains the top player in the outsourcing field. The country scores highly in terms of financial attractiveness and has a strong skills base. Its business environment remains relatively weak however. India has become highly attractive for R&D outsourcing in recent years, with five Chinese handset manufacturers announcing plans to establish R&D centres in the country, which is expected to become the world’s second largest buyer of handsets. China comes in at number two, providing a pool of highly educated graduates, a relatively low cost profile and a good business environment. The recent currency drop is expected to see the country become an even stronger candidate. Malaysia follows in at number three, also unchanged since last year. The country provides cheap employees and a strong business environment, however, its pool of candidates is considerably lower than that of China and India.
The top 20 remains relatively stable on last year. Brazil has moved up four spots since last year, while Mexico has seen its proposition drop four places on last year. The US comes in at number 15, with a very poor cost profile, yet strong performances in people skills and availability as well as business environment. Egypt, and its highly educated population, remains a strong contender due to costs, however, the political turmoil in recent years has seen its business environment score influence its overall score with a decrease of six spots.
The top 40
The following 20 is a mix of risers and droppers. Turkey has managed to increase its position by 18 places on the back of steady improvements to compensation costs, infrastructure costs, and labour force availability. The Ukraine too has, following years of uncertainty, managed to improve its profile by 17 spots on last year. Mauritius managed to increase its score slightly and jumped six spots.
The biggest droppers in this group include Lithuania which fell 12 spots to 27, Estonia that dropped 11 spots to number 33, Jordan that dropped 15 spots to 35, Tunisia dropping 10 spots to 38 and the UAE dropping 18 spots 37.