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.

Fayssal Daoud, Chairman of Circuit Holding, an Egyptian engineering and integrating automation systems consultancy, speaking on the opening day of PALME 2010, held last week in Dubai, United Arab Emirates the Middle East’s only trade event dedicated to professional lighting, audio, music, entertainment, audio visual and systems integration industry, explained how companies can maximise profit margins by employing specialist contractors when undertaking projects.

“What you pay can be minimised as you only pay for what you use. If you count, for example, the cost of one outsourced working hour, you will find it comes in very low compared to a permanently hired project manager’s. Because during a slow economy, when you don’t have a lot of business, certain functions – depending on industry and nature of work – have a lot of down time, sitting there not working a full day. Therefore, it makes financial, as well as common, sense to outsource select jobs,” said Daoud during his presentation entitled, “Crisis-proof business models for system integrators.”

“We have been trying to push the concept of outsourcing since the downturn took hold because it’s a very attractive business model, both in the current situation and will be for years to come. It has been very successful in the IT world and I see many parallels in the automation and AV system integration industry.

“During the boom times, there were lots of projects to sustain the number of companies in the market but as the recession hit there were less to go round, therefore we recommend companies to specialise in one area and own that rather than trying to pitch for work across the board.

“Some $2 Trillion worth of projects is under way in the six GGC countries (Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates, and Oman) but the heyday for high-end luxury apartments and hospitality sectors are gone. As a result, we will see more investment in education and healthcare. There is a lot of room in the GCC for these sectors due to the fact spending in the MENA region is just 2-4 per cent of the GDP compared to 8-14 per cent in Europe and North America.”

The second week of May is INSIGHTS’ Middle East “Voice of the Customer” Week 2010. Dubai’s customer interaction specialist invites all companies in the region to be in with the latest information and trends of Customer Service and Customer Care. The Middle East “Voice of the Customer” Week 2010 comprises seminars led by industry experts, exhibits, and opportunities to expand networks with industry players.

Also included in the event is the Middle East Call Centre Show, the Middle East Call Centre Gala Awards Dinner, and a regional outsourcing forum. Specialised and informative workshops on Customer Experience Management strategies, best Customer Interactions, increasing Customer Advocacy, and creating Customer Feedback plans are also provided.

Dominick Keenaghan, president of INSIGHT, explained, “Increasingly, service now trumps price as the main reason somebody purchases from one company over another. Unfortunately however, there is a large disconnect between customers’ perceptions of their experiences and the perspective of the companies that deliver those experiences. One recent survey had 80% of companies believing they provided a “superior” experience yet when the customers were asked the figure sunk to a miserly 8%. Closing this gap is obviously a priority and regional experiences with poorly designed products, archaic and siloed processes, excessive charging, unempowered and ill-prepared staff and so on confirm that there is much to be done.”

He continued, “When markets are growing, the desertion of good customers is less noticed but when markets contract like at present, retaining existing customers and creating customer advocates are essential tactics for survival. Unfortunately very few organizations measure (or even know how to measure) the revenue lost from defecting customers and, increasingly, the loss of potential revenue due to bad and minimal referrals. When someone actually does the analysis, it is a very nasty wake-up call for the senior decision makers.”

The purpose of the event is to show how much power customers really have in determining a business’ success. It is also a chance for companies to learn how to quickly cut down their losses while improving their knowledge on making instant and effective improvements.

For more information, contact Dominick at insights@emirates.net.ae