By Kathleen A. Martin

GLOBAL CONSULTANCY firm Tholons, Inc. has cited talent pools as a major challenge to the Southeast Asian countries’ business process outsourcing (BPO) industry but said it foresees niche specializations of the sector to continue to grow.

This, as 12 cities from the Southeast Asian region, including five from the Philippines, made it to Tholons’ Top 100 outsourcing destinations.

The five Philippine cities are Manila (4th), Cebu (9th), Davao (69th), Sta. Rosa (86th), and Iloilo (92nd).

“Addressing talent pool shortages will be the most critical issue in the Southeast Asian region’s IT (information and technology)-BPO industry as a whole. These should be immediately addressed to further drive the growth of the services outsourcing industry,” the firm said in its 2012 Tholons Top 100 Outsourcing Destinations: Southeast Asia executive summary released yesterday.

“This is especially significant as widespread cost-cutting measures brought upon by the recession in the US and UK markets are being pursued, which in turn, are driving up the demand for outsourcing,” the document read.

Tholons said BPO firms are experiencing difficulty in hiring and retaining “capable employees,” thus, resulting in higher attrition rates and an increase in hiring and retention costs.

“[Such] has resulted in greater initiatives by service providers to train fresh graduates or reskill lateral hires themselves, an exercise becoming increasingly common albeit more costly,” Tholons said.

Already, Tholons noted an initiative for skills development currently being undertaken in Manila is needed to increase the country’s talent supply.

“The Technical Education and Skills Development Authority (TESDA) of the Philippines, for example, has been continuously providing Finishing Courses for Call Center Agents targeted to near-hires in the Contact Support space,” the document read.

Despite the region’s foreseen supply problems, Tholons said niche specializations offered are expected to grow.

“Tholons sees that the region’s current niche specializations will continue to grow and pave the way for the development of higher-value services in Southeast Asia,” the document read.

Tholons said that in 2011, Southeast Asian countries have been steadily building their own outsourcing identities.

The Philippines has continued to be the premier contact support services destination, while Singapore and Malaysia have become financial and accounting outsourcing and back-office process outsourcing pillars, Tholons said.

Vietnam and Indonesia, meanwhile, have established themselves as strong providers of IT services, Tholons said.

“As confidence and maturity builds, process and delivery innovation will thrive as well. Tholons sees this as necessitating Southeast Asia’s smooth transition up the services value chain,” the document read.

The local BPO sector is expected to have booked $11 billion in revenues in 2011, then to grow by at least 20% from this number by yearend, the Business Processing Association of the Philippines previously said.

By 2016, the sector is expected to deliver $25 billion in revenues, after recording $9 billion in revenues in 2010. —

Source: BWorld Online

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.

AS we approach the next decade, countries like Vietnam are at the dawn of their new horizon. Over the last few years, Vietnam has emerged as an alternative destination for outsourced IT work and BPO. Traditionally known as an exporter of basic commodities and cheap manufactured goods as well as a popular tourist destination, Vietnam has been investing in its technology sectors, where the IT industry is one of the fastest growing industries in the country.

Vietnam is a densely-populated developing country that in the last 30 years has had to recover from the ravages of war, the loss of financial support from the old Soviet Bloc, and the rigidities of a centrally-planned economy. Vietnamese authorities have reaffirmed their commitment to economic liberalization and international integration. They have moved to implement the structural reforms needed to modernize the economy and to produce more competitive export-driven industries.

Back in 2006 Bill Gates was quoted while visiting the Hanoi University of Technology, “In no sense should Vietnam specialise in manufacturing. It should also focus on outsourcing. There’s an opportunity to do call centers.”

A number of people seemed to have acted on Gates’ advice. Since 2006, a number of IT outsourcing and BPO organisations, such as Source Perfect and Officience have established operations in Vietnam. Many world leading ICT companies have invested or outsourced to Vietnam including: Intel, Microsoft, Nortel, Alcatel-Lucent, IBM, Juniper Networks, Oracle, Fujitsu, NTT, Hitachi, Toshiba, NEC.1

However, as in many emerging markets, the general IT and outsourcing industry in Vietnam remains highly fragmented. The country currently has around 10,000 firms licensed to provide IT services but only about one-third of these firms are actually operating. 2

Vietnam is putting considerable effort into modernization and expansion of its telecommunication system. All provincial exchanges are digitalized and connected to Hanoi, Da Nang, and Ho Chi Minh City by fiber-optic cable or microwave radio relay networks; main lines have been substantially increased, and the use of mobile telephones is growing rapidly.

The Vietnamese government has placed a huge emphasis in promoting IT development within the country. Over recent years Vietnam has greatly opened up the investment environment around technology startups. Incentives include the removal of sales and corporate income taxes for the first four years. These efforts have attracted significant attention from private equity investors.

Since 2000, Vietnam’s Enterprise Law has fostered the creation of over 200,000 registered private domestic enterprises, accounting for around 10 per cent of the economy and a smaller proportion of the labour force. Over time, the Enterprise Law (2005) and Investment Law (2005), which came into effect in 2006, are gradually contributing to an improved business environment and a more ‘level playing field’ in most economic sectors.3
Vietnam has a large and highly educated labour force. Nearly two-thirds of Vietnam’s population of 85 million is under the age of 35 and the country has one of the highest literacy rates in Asia at 90%. Moreover and for the 10 years leading up to the global financial crisis, Vietnam was consistently Asia’s second-fastest growing economy after China with average growth rates of 7.5%.

Vietnam’s low cost workforce has made the country an attractive destination for foreign IT and outsourcing firms. Vietnam salaries in general can be as much as 30% lower than in India.

If it is so cheap in Vietnam, what’s the quality like?

Most of the local operators tend to be both undercapitalised and inefficient. However, to attract investors and international clients, the leading Vietnamese and outsourcing firms are increasingly seeking international certification such as ISO-900 and the Capability Maturity Model (CMM). Generally speaking though, domestic firms do not have the capabilities yet of taking on large-scale IT or outsourcing projects.

The risk of operating in Vietnam should be considered moderate as the country faces few internal or external threats.

While known more for exporting basic commodities and cheap manufacturing, Vietnam’s large and well-educated population combined with a low cost environment makes the country an attractive destination for foreign IT and outsourcing firms. Even though Vietnam’s export orientated economy is vulnerable to external shocks and the perception of widespread corruption may undermine government authority in the future, Vietnam offers a relatively stable operating environment.4

1. http://vietsmall.com/outsourcing/why_vietnam.php
2. Vietnam: Asia’s Newest IT and Outsourcing Tiger. January 28, 2010
3. http://www.dfat.gov.au/geo/vietnam/vietnam_brief.html
4. Vietnam: Asia’s Newest IT and Outsourcing Tiger. January 28, 2010

A survey of the world’s top 100 outsourcing cities has ranked Ho Chi Minh City, Vietnam; at number six in the emerging city’s list.

The Tholons Global Services Top 100: A Study of the Top Outsourcing Cities looked at locations in 49 countries across 10 defined regions. Cities were benchmarked against six broad categories, each with its own weighting. These categories were: skills and scalability, savings, business environment, operational environment, business risk and non-business environment.

LogiGear, the world leader in providing software-testing services to many fortune 500 companies, has operated a Test Centre of Excellence in Ho Chi Minh City since 2005. LogiGear’s Vice President of Sales, Joe Hughes, said Vietnam had proven to be the ideal location to enhance the company’s testing capabilities and efficiency. “We are able to make use of global resources to provide the appropriate mix of onshore management and low-cost offshore resources to drive down costs, while still focusing on the critical importance of faster time-to-market,” he said.

LogiGear CEO Hung Nguyen noted that the company had made significant efforts to lead and implement software-testing education and training programs, both in-house and in partnership with local universities.
“Immediately after being hired, our engineers begin progressive English communication and software testing classes that will eventually incorporate such high-level skills as advanced software testing, project management, training-the-trainer, and working effectively with customers.”

The company has also developed the LogiGear Certified Tester Program (LCTP) at Ho Chi Minh University of Science, which helps add software-testing curriculum to the existing computer science program.

Additionally, LogiGear recently announced plans to translate and release several of its software-testing books into Vietnamese, the first of which is “Testing Applications on the Web” translated and published in September. This book, in addition to teaching an individual how to test on the web, is also designed to help engineers make career decisions about software testing.
“For Vietnam, it is critical to enhance existing high-technology educational programs, which in turn help satisfy the demand for high-quality software-testing resources in the global IT services market,” Nguyen said.

Vietnamese software company IMT Solutions partners with Danish company Conscensia to set up a business process outsourcing centre in Ho Chi Minh City. This partnership increases Conscensia’s advantages as it can provide 24-hour service and develop their client response.

This partnership will also implement the SCRUM Business-to-Business programme, where DKK 910,000 is allotted for a pilot project, technical training for local employees, and improvement of existing facilities. IMT Solutions and Conscensia foresee the creation of 40 new jobs and DKK 1.6 million initial turnover in the coming 12 months.

Training for local employees will include information on HIV/AIDS and Occupational health and Safety protection. A seminar to improve cultural understanding and how to communicate more effectively within international standards will also be given.