offshore outsourcing

Peculiarities of Outsourcing Among Countries


The offshore outsourcing industry started in India and this country is still considered the world leader in this sphere. Although India provides a large, relatively skilled, English-speaking pool of specialists the experts predict growth of rates and higher costs in the near future. Even now, it is noticeable that India has serious competitors as Malaysia, Philippines and Eastern Europe.

Many factors influence gaining and dropping in rating of outsourcing popularity among countries. This popularity is rated by Tholons Advisory organization yearly. Mostly, economic and political problems affect the popularity of regions. Unstable situations in the countries force customers to search for new locations. This year, three regions become the most promising destinations. They are Southeast Asia, South America and Eastern Europe.

East and South Asia

This is a huge region covering China, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. According to the Tholons 2013 Top 100 Outsourcing Destinations report, the countries of this region set the top positions. The Philippines, Malaysia and Indonesia may be considered the favorites among the southeastern countries proposing IT services.

Indonesia having quite low percentage of highly educated workers, still stays the best cost saver because of the lowest salaries. The high-skilled developers are rare there, but junior developers are the most cost attractive for businesses.

Two significant directions are presented by Malaysia and the Philippines. Malaysia is perfect for those who look for the combination of a good professional level, language proficiency and moderate prices. Kuala Lumpur due to oil and gas investment becomes a growing business center.

The most popular sphere at the Philippines is call center services, however they are willingly enlarge their scope of expertise and due to strong English speaking skills and awareness of Western business culture these islands become an interesting player for IT offshore outsource market.

Asian countries have their very specific traditions and mind style that can be a bit uncommon for western civilization, but the costs effectiveness is a huge plus.

Eastern Europe

Slavic culture has much in common with U.S. and West European cultures. So mutual understanding between customers and offshore developers is established without problems. Besides, the Bologna system of education, alphabetical writing (unlike Asian hieroglyphs and Arabic ligature), and common traditions give more confidence that outsourced employees from Eastern Europe and customers from the West are on the same page.

This year Krakow, Poland, became the tenth city in the 2013 Top 100 Outsourcing Destinations Rankings. Polish developers work for the best technology firms including Google, Motorola, and IBM that created their research centers in the country. English or German are the second languages studied and spoken in Poland.

The other important destinations of this region are Ukraine and Czech Republic.

In Ukraine, IT business is on the road of increase and many Western companies hunter for Ukrainian talents. The biggest Ukraine’s investors are Mittal Steel, GE, KPMG, Delloitte, Kraft Foods, Siemens, Ericsson, Johnson & Johnson, Samsung and Hewlett-Packard. Ukrainian rates are actually lower than in Poland as Ukraine still have not entered EU and thus the prices for outsourcing staff are not so high comparing to the other Schengen Zone countries while the level of services and qualification of employees is competitive. Ukraine is the second in rating of countries with the highest percent of university graduates next to Canada. Unlike other post-Soviet countries, visa to Ukraine is not required for short-term business trips.
Czech Republic is one more location for sourcing businesses in Eastern Europe. Its highly qualified professionals, political stability, and low rates (however, higher than in Asia) as well as comfortable location look attractive for customers, especially from the closest neighbors like Germany.

Latin and South America

In previous years, the leaders of this region were Argentina, Brazil and Mexico. However, this year they drop by several points in the worldwide rating of IT countries.

Mexico that could boast its “nearshore” location to the United States experience the decline of popularity. There were some cases of violence that influenced decrease of investors’ interest. Moreover, Mexico lacks English-speaking skills, especially among its programmers.

Argentina loses its positions maybe because of the shift of attention to the Asian countries that are actively promoting their services in the IT market. Although Argentinian salaries higher than those paid in Indonesia, the Philippines, Pakistan, and India this country maintains a highly skilled workforce of software developers. Quite big segment of IT services in Argentina is oriented to Spanish businesses.
On the contrary, Colombia and Uruguay moved forward in the region. These countries supported by the government and local stakeholders have become very attractive providers for their nearest neighbors.

The conclusion

More and more countries emerge on the IT outsourcing arena proposing their technical brains to the world. The biggest outsourcing areas today are East and South Asia, Eastern Europe, Latin and South America.

Each region has its own peculiarities that can be considered as advantages or disadvantages depending on the customer priorities. Many factors influence the decision as for the choice of location for outsourcing. Among them are level of salaries, percent of educated population, political stability, economic situation, English proficiency, remoteness from the customer.

Although India is the leading nation for supplying outsourcing services, Malaysia, Philippines, Poland, Ukraine, and Colombia are increasing their competitive abilities conquering attraction of customers. And this is the indicator of movement and new perspectives for the innovations.

by Svitla Team

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