By Mark Atterby – Senior Staff Writer

A range of countries are aggressively competing for a slice of the global BPO market, which is expected to grow at an annual rate of 5.4 percent to $93.4 billion in 2015, according to analyst Ovum. As India becomes more expensive, the Philippines, , Africa and Latin America are rolling out the welcome mat for outsourced business processes at the low to mid-point of the value chain.

Providers, industry groups and governments at all levels will ally to develop incentives to attract BPO jobs. Lures will include breaks on taxes and fees, as well as free or low-cost courses to improve residents’ business English skills and technological know-how. New locations in South America, Africa and Asia Pacific have emerged where providers have developed global delivery networks to address requirements centred on language skills, time zone proximity, and cultural sensitivity.

BPO is among key sectors the South African government has identified to grow the economy and create jobs. In 2009, South African BPO sector was estimated to be directly employing more than 60,000 people and accounting for a further 75,000 indirect ones. Time zone wise, South Africa is ideal for Europe.

Over the last couple of years a number of UK companies have repaticated projects out of India over quality of service issues. South Africa provides ideal positioning to Europe in terms of time zones and is being promoted as a destination that claims to offer quality had very affordable rates.

Yusuf Timolfrom the South African High Commissioner in London, said in a recent news article that there were huge opportunities for capturing India-based BPO work in 2012 and beyond. “South Africa is well positioned to fill this void as we are able to provide quality at an affordable price.” In 2009, the South African government launched an R1.1bn support programme to enhance the competitiveness of the BPO sector.

English-Spanish language skills, a young, highly skilled BPO workforce, cultural similarities and a good time-zone fit with north America is making Latin America a very attractive outsourcing destination for North American companies. Brazil, Mexico and Argentina have been showing signs of becoming serious contenders as key outsourcing destinations in recent years

Closer to home the Philippines has become a major destination for BPO operations.

The Philippines Government works extensively in offering investors incentives and opportunities. The Philippine government launched a range of fiscal and non-fiscal incentives to attract BPO investors as part of the 2007 Investment Priorities Plan. This plan has helped turn the Philippines into a growing BPO powerhouse.

Since 2007 the BPO industry in the Philippines, according to figures from McKinsey Quarterly, the BPO industry has experienced 46% annual growth and is now valued at over $US 6 billion. The BPO Association of the Philippines estimates that over 600,000 are employed in the BPO industry. 17,000 service the Australian market.

The Philippines is a convenient location for Australian organisations. It fits relatively well into Australia’s time zone and it is not that far to travel to. A highly skilled and motivated workforce that has very competent English skills is available. And it’s in expansive compared to Australia.

According to a recent study by CB Richard Ellis, the Philippines is one of the most cost-effective outsourcing destinations in Asia. Comparing 15 central business districts in Asia Manila was ranked second cheapest with lease rates of $US 19.1per square foot/annum, next to Jakarta’s $16.3. This compares to Sydney CBD, which ranges form $450 to $1,100 depending on building and location.

The Philippines government has developed special economic zones in various cities across the Philippines and are being put in place to serve as central hubs of activity, where the agricultural, industrial, commercial, and recreational aspects of everyday life can work together. Enterprises operating within these zones are offered substantial tax cuts to invest and grow their business.

It seems everyone wants a slice of the BPO pie. The competition between the new and emerging destinations shall fuel the future growth and evolution of the industry. As existing locations become overheated and the availability of sufficient talent dries up, the emergence and development of new destinations will be eagerly fostered by governments looking to give their citizens access to jobs.

By Mark Atterby, Senior Writer

There are a number of reports and indexes produced each year highlighting the top countries as outsourcing destinations for IT and BPO. As one would expect India tops all of these lists. The runner-ups tend to include China, Malaysia and Philippines. In fact Asia Pacific countries, where even North Korea has been trying to get in on the act, dominate most of the lists.

After that there are quite a number of countries jostling for their position in the sun. Some such as Egypt and Pakistan, who were positioned as threats to India, have to tended to fade off the outsourcing radar due to instability.

In its report 10 Leading Locations for Offshore Services in Asia Pacific and Japan for 2010, Gartner analysed countries as offshore services locations using criteria such as language, infrastructure, education, cost, cultural compatibility, legal maturity, and security. The ranking of each country in the AT Kearney Global Services Location Index (GSLI) is composed of a weighted combination of relative scores on 43 measurements, which are grouped into three categories: financial attractiveness, people skills and availability, and business environment.

Sourcingline scores each country across dozens of key statistics that fall into three broad areas of Cost Competiveness, Resources & Skills, and Business & Economic Environment. India continues to grow its IT services exports, but its share of the worldwide total has declined, and wage pressures, geopolitical troubles and financial scandals are creating opportunities for other countries.

The Americas and Europe are the largest customers for the Indian outsourcing industry and account for 60% and 31% respectively of IT and BPO exports. The largest vertical sectors are financial services (41%), high-tech/telecom (20%), manufacturing (17%) and retail (8%). In 2009, the IT and BPO export industries employed about 2.2 million people.

Over the last few years, numerous locations have emerged in South America, Africa, Eastern Europe and the Middle East to challenge India’s dominance. Countries like Brazil, Egypt, and Vietnam have emerged as viable destinations. For a while, Egypt was touted as a new India. In 2009, Egypt was ranked fourth by the AT Kearney list before the troubles began. The recent government overthrow has certainly put the clamps down on the level of outsourcing opportunity.

Lead analyst at Ovum, Peter Ryan, said the unrest is putting the country’s outsourcing credentials at risk. “Following recent border violence in Mexico and the 2009 terror attacks in Mumbai, the events in Egypt are certain to make outsourcers and their clients much more risk-averse than any time in recent memory, and are likely to push many companies to choose the more secure, albeit costlier, option of keeping third-party work onshore”.

The Middle East and North Africa have emerged as major off shoring locations due to their large, well-educated population and their closeness to Europe. Likewise countries such as Bulgaria, Hungary and Serbia provide low cost centres for West European enterprises. There are also onshoring trends to lower cost cities within the US, UK, France and Germany — big western democracies facing political pressure to keep jobs at home.

Countries in Latin America and the Caribbean continue to capitalise on their closeness to the United States as nearshore destinations. In addition to cost savings, Latin America offers US companies time zone alignment and geographic proximity, though there are some drawbacks to consider, including language barriers and lack of vendor maturity.

By Gabriel Cogo

Not so long ago, an article was published about the IT professional. He was compared to TV Show “House’s” main character: the doctor itself. The senior IT professional was very good at his job, capable of developing complex systems and solving the most diverse problems. However, he was very poor at communicating with others, wasn’t fond of being around other professionals, and was incapable of transmitting all his technical knowledge to other teammates. A lot has changed since that time.

The new IT professional not only needs to have a proficient technical background, but also has to be capable of participating in multi-department tasks; to be very able in people skills and not only know how to create a system, but also know the client’s processes to ensure the product works both as the client wanted and as the client needed. For the IT industry, this creates a giant gap. Originally the profile of the IT professional was the computer-focused person, that didn’t care to learn much else. This is reinforced by the computer science universities, centering their disciplines on technical concepts, and giving very little attention to teaching how to do business.

In Brazil, most companies complain about the fact they can’t find the right professional for the job, especially as there are hundreds of unemployed workers waiting for a chance. Sometimes it’s not just the qualification that counts, but the ability to handle activities beyond the usual tech process. Now some employers work the other way around by hiring experienced well developed professional from different areas. The only problem is that most of them don’t have any system analysis background, so they have a hard time trying to get in touch with the tech team.
 This means the most sought after professional and therefore the hardest to find, is the professional with the entrepreneurship profile; i.e., with the ability to work in multi-department teams, and with a technical formation. In Brazil, there isn’t one university or organization that can provide this type of training. In my opinion, this is one of the primary things that prevents IT in Brazil from reaching “strategic” status.

This situation can be easily seen in any Brazilian company. In my own experience, generation Y still is a question mark for most Human Resources. On one hand, you have professionals with great learning potential wanting fast growth in the company, but on the other hand they have even greater difficulty committing to a employer and patiently waiting for a salary rise or a promotion. If young top performers don’t get fast recognition for their work, they don’t wait very long before changing jobs. That creates a problem for companies that want to shape their trainees into future managers. With IT, this creates a key issue; finding someone young and giving them the opportunity to take on a strategic place is risky, but without that risk being taken another one can arise: the loss of capable professionals to lead in future decades. What do you think the solution is?

When one thinks of outsourcing and offshoring, one automatically thinks of India and the Philippines as the primary and most logical destinations. However over the last few years, many new localities have opened up, with outsourcing operations setting up across a diverse range of geographical locations, including Central and South America, Africa, Eastern Europe and even regional Australia.

Initially, the principal driver for BPO was as a business practice to reduce costs. More recently it is increasingly viewed as an instrument to add value and quality. Rather than off shoring, companies from Australia, US and Western Europe are looking to ‘right shore’ which translates into near shore or on-shoring their outsourcing relationships. For the US, near shoring options include Canada, Central and South America.

To meet these new demands and to compete against competition from areas like the Philippines and South America, Indian outsourcers are looking to invest in delivery centres across the world thus becoming Pan Global. The India BPO market has bred some extremely large players who are cashed up and scouring the planet looking for acquisitions as they look to offer an end-to-end BPO supply chain. According to Deepak Patel CEO, Aditya Birla Minacs, if you are going to be a significant global player, one will have to have a near shore option as well as offshore solutions to offer.

Indian outsourcer, Wipro BPO now has centres in Philippines, Eastern Europe and Australia among others, and plans to tap newer geographies like Japan. During 2010, Aditya Birla Minacs and other Indian outsourcers have been establishing and strengthening their delivery centres in North America.

In a recent interview Wipro BPO’s senior vice-president Ashutosh Vaidya said,  “We have set up 15 overseas delivery centres and parked 3,000 people there to neutralise near shoring by global outsourcing firms like Accenture and CapGemini.”

Australia

Though labour costs are similar to the US and Europe, real estate costs, particularly in regional areas, are significantly less expensive considering the skill level of the workforce and level of infrastructure. Geoff Hill, Manager Economic Development for Latrobe City (Eastern Victoria – Australia) believes that regional areas like Latrobe City can offer great commercial opportunities for Greenfield sites, with existing floor plates ready for fit out and very competitive and workable costs.

Many Australian rural areas have impressive high quality educational facilities and infrastructure, giving outsourcers access to labour resources that are highly educated and skilled. It means organisations in Europe and North America can outsource to a location that is cheaper, yet has all the advantages of being part of an advanced economy with a stable political system. Hill comments, “Regional areas like Latrobe City do not have highly saturated markets, and therefore can offer prospective outsourcers access to a labour force with a low attrition rate.” Needless to say that people in rural and regional areas want to stay in those areas and be close to family and tend to stay as employees for longer. In a full employment economy like Australia, it’s hard to get staff in metropolitan areas and it brings the rural areas into play.

Recently, UK outsourcer Vertex, who employs 10,000 people across 70 locations in the UK, North America, Australia and India, announced the building a new facility in Ballarat (Western Victoria) representing millions of dollars of investment in regional Australia, the new facility will employ 600 people in the next two years. The Victorian Office of Housing Maintenance established a customer care call centre in La Trobe, generating 60 new jobs in the region. “The successful attraction of these organisations will enhance and diversify the local economy and have an enormous positive impact on existing businesses,” said a delighted Hill.

Brazil and South America

Since 2008, Brazil and other South American countries have been getting in on the BPO and outsourcing market. Their proximity to North America make them very desirable as near shoring options. Companies such as IBM, Unisys, HP, EDS, Accenture, Deloitte, Motorola, Intel and Nokia all have offshore centers in Brazil, Guatemala, Chile and Argentina.  Indian outsourcers such as Tata and TCS have also setup delivery centres in South America.

Labour costs in South America are cheaper than in the US or Europe, where on average there is a 30% salary advantage cost over the US. However, labour costs are not as cheap as they are in India or China.

Eastern Europe

According to consulting firm McKinsey, between 2005 and 2007, the BPO industry in Eastern Europe nearly tripled, becoming a favorite location for offshore outsourcing. The region offers low wage levels, is a relatively low risk location for investing, and has a reasonable and reliable level of infrastructure in place.
The other benefit is the region’s geographical and cultural proximity to Western Europe, making the process of setting up offices much easier. There is also fewer language barriers compared with elsewhere, with German and French both being widely spoken.

The industry is becoming a truly global industry, where there is a diverse range of suitable locations offering different benefits and advantages.  And now it’s more a question of finding the right ‘shore’ rather than the cheapest ‘shore.’