Eight New Countries Moved into the Top 30
Gartner, Inc. has identified the Top 30 countries for globally sourced activities in 2010-2011, each one rated according to 10 criteria*, and found that eight new countries have made their debut in the Top 30. Many organizations that choose to move IT services to lower-cost countries are daunted by the task of determining which country or countries would best host their operations.
“This year the Top 30 countries are exclusively emerging nations,” said Ian Marriott, research vice president at Gartner.” As the pace of change is slower in developed countries we have chosen to focus on those locations that are still maturing and developing, domestically and internationally.”
Nine countries from Asia/Pacific were represented in the 30 leading countries, compared with 10 in previous years. These included the undisputed leader in offshore services — India — and the greatest challenger in terms of potential scale — China.
Gartner's Top 30 locations for offshore services in 2010, by region, are:
Seven developed countries have moved out of the Top 30 this year - Australia, Canada, Ireland, Israel, New Zealand, Singapore and Spain. However, they should still be considered important in the context of nearshore locations whose maturity — albeit with somewhat lower cost advantage — offers significant benefits for organizations seeking a balanced portfolio of countries from which services are delivered. In addition, Uruguay has also been displaced — not because it has been performing worse over the past year, but because this dynamic market has seen other countries making more noticeable progress.
In the past 12 months, Gartner has seen considerable efforts from many countries to consolidate or grow their positions as leading locations for offshore services. Emerging nations have placed significant emphasis on IT and business process services providing a vehicle for their economic growth, as many potential trading partners are moving from recession to tentative growth. The result of this is that eight new countries have moved into the Top 30 — five for the first time - Bangladesh, Bulgaria, Colombia, Mauritius and Peru — along with three re-entrants - Panama, Sri Lanka and Turkey.
This year, eight countries from Latin America appeared in the final list of 30 compared with seven from the Americas as a whole in previous years. “This indicates the progress being made in this region, and these countries are becoming an attractive proposition for the largest buying market for offshore services — the United States,” said Mr. Marriott.
In the past, a lack of government support for offshore initiatives has restricted development by countries in the Americas. Currently Mexico and Chile are rated “very good” for government support, with Brazil and Costa Rica meriting a “good” rating. Mexico leads the ratings for labor pool with a “very good” score, and is followed by Brazil and Chile — both with “good” ratings. The region performed creditably in terms of infrastructure, with Brazil and Chile rated “best” and Argentina and Colombia “worst”. In the educational system category, Chile, Mexico and Costa Rica were the highest ranked countries with a rating of “good” while Panama scored lowest with a “poor” rating.
In the key evaluation criterion of cost, Mexico was the only country in the region to score “very good”; all others were rated “good”, although for Argentina this was a step down from last year's score of “very good”. In the rating for political and economic environment, Brazil was clearly the top performing nation with a rating of “excellent”, moving up from “very good” last year. Data and intellectual property security and privacy continued to be a weakness in the region, with Mexico the only country to exceed a rating of “fair”.
Government support for promoting their countries as offshore service locations was strong in India, China and Malaysia, although Indonesia continues to be considered poor for government support. The combination of skills, existing scale and future scalability gave India a labor pool advantage over other countries in the region; Vietnam improved its position in this category, joining China, Malaysia and the Philippines on a rating of “good”, and Indonesia managed to improve its comparative rating from “poor” to “fair”. China and Malaysia continued to improve their positions and were both rated highly for infrastructure, while Bangladesh fared worst with a rating of “poor”. China, India, Malaysia and the Philippines again led the rankings for educational system.
On cost, there was an overall change of leader in the region, with Vietnam moving down to “very good” and Indonesia moving up to “excellent”, which is the top score across all the countries Gartner analyzed. All other countries in the region were rated “very good” for cost, with the exception of Malaysia, which was rated “good”. Overall, the cost dimension for the Asia/Pacific region continues to offer an advantage over the Americas and EMEA. In the remaining categories however, the region is noticeably weaker - the political and economic environment remains a concern for many companies when moving work to offshore locations, and global and legal maturity is still an area of weakness for the region, with only India and Malaysia reaching a rating of “good”. The category of data and intellectual property security and privacy was a particular weakness in this region, with India the only country to achieve a rating of “good” and no fewer than six nations scoring “poor”.
This year’s final list of 30 countries included 13 from EMEA - a mix of European Union (EU) members some European nations that remain outside the EU and three African countries. Of these countries only Egypt achieved a rating higher than “good” for government support, reflecting the amount of focus still needed to create an environment that will support the drive of these nations to become a part of organizations' global delivery models. However, South Africa did improve its rating from “fair” to “good”. The labor pool ratings in EMEA were also indicative of some limitations, either in quality or in the scale of appropriate resources, as no country achieved a rating higher than “good”.
In comparative terms across the Top 30 countries, Gartner observed some deterioration in the scores for educational systems in EMEA in 2010. Russia slipped back this year from “very good” to “good”, while Hungary and Romania moved from “good” to “fair”. Furthermore, last year's leaders on cost attractiveness — Egypt, Slovakia and the Ukraine — all slipped back from ratings of “very good” to “good”, while Russia moved back from “good” to “fair”, indicating the cost pressures now being exerted by a combination of the economic downturn and increased demand on somewhat limited resources.
“Sourcing managers and service providers should use the various ratings to help determine which locations are right for their individual organizations,” said Mr. Marriott. “In this increasingly dynamic global environment, multinational providers will continue to extend their footprint in different geographies, carrying with them their expertise and maturity, while local providers will strive to become offshore providers, searching for opportunities and niches they can explore. Even though some countries are rated poorly for some categories, clients may find individual providers — global and local — whose capabilities mitigate some of the risks.”
Additional information is available in the report entitled “Gartner’s 30 Leading Locations for Offshore Services, 2010-2011”. The report is available on Gartner's website at http://www.gartner.com/resId=1491316.
Notes to editors:
*The top 30 countries for offshore services were rated according to 10 criteria that will help determine which locations are right for individual organizations. The 10 criteria were: language, government support, labor pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy. The rating scale was “poor”, “fair”, “good”, “very good” and “excellent”.
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