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Offshoring OpportunitiesAmid Economic TurbulenceThe A.T. Kearney Global Services Location Index™, 2011
T       he current global services landscape is marked by countervailing       trends. On one hand, firms are responding t...
Figure 1    The A.T. Kearney Global Services Location IndexTM, 2011                                                       ...
rebalancing from deficit to surplus economies                              advanced economies); asymmetrical rates ofare n...
A World of Risks    With a global business environment                     tial differences in how to strike a            ...
sensus to address the nation’s eco-                  shoring and its link in the public                 and elsewhere.†† D...
Highlights of the 2011 Index                                            Baltic states are a dramatic example — Estonia    ...
service sector became more competitive as the                                     the United States accounted for 63 perce...
Figure 3    The United States leads in people skills and availability    People skills and availability scores      United...
ating costs are becoming attractive alternatives, in                            ing nearshoring sentiment, even with the d...
export growth. The triumph of President Luiz                          electricity infrastructure. Argentina (30th) falls  ...
world with relative ease. A major hurdle, however,              now all Colombian school children receive Englishis the le...
had experienced long stretches of growth once            However, he bundled his somewhat reassuring     again became viab...
be noted that currency devaluation is not an                                in recent years as an ideal offshoring locatio...
Index, which features Egypt 4th in the world and           There is significant diversity in the ranks of     the leader i...
Figure 4Vietnam leads in financial attractivenessFinancial attractiveness scores              Vietnam                     ...
What’s Holding Back Thailand and Indonesia?     The Global Services Location                         center in Bangkok, wh...
Figure 5Singapore remains the leader in business environmentBusiness environment scores            Singapore              ...
Authors            Erik Peterson is managing director of the firm’s Global Business Policy Council. Based            in th...
Offshoring opportunities amid_economic_turbulence-gsli_2011
Offshoring opportunities amid_economic_turbulence-gsli_2011
Offshoring opportunities amid_economic_turbulence-gsli_2011
Offshoring opportunities amid_economic_turbulence-gsli_2011
Offshoring opportunities amid_economic_turbulence-gsli_2011
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Offshoring opportunities amid_economic_turbulence-gsli_2011

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  1. 1. Offshoring OpportunitiesAmid Economic TurbulenceThe A.T. Kearney Global Services Location Index™, 2011
  2. 2. T he current global services landscape is marked by countervailing trends. On one hand, firms are responding to intensifying cost- cutting imperatives by moving operations offshore. On the other,politicians are using global services offshoring as an easy scapegoat forcurrent economic woes and high unemployment levels in their homecountries, stoking resentment against globalized firms and their foreignhost countries. Although signs of a slowdown in the growth of globalservices are evident in this environment, don’t expect offshoring to end.In fact, the global services industry’s full potential is ready to be tapped.As we publish the 2011 A.T. Kearney Global In terms of the industry’s broader macro-Services Location Index™, we find that the economic environment, the world in 2003 wasworld of services offshoring has changed dramati- similar to today’s, emerging from an economiccally since we published the first report in 2003.1 slowdown that had begun two years earlier.What was then an emerging phenomenon that At the time, the economy soon returned to health.seemed to have great potential is now a natural Likewise, the hope today is for renewed growth,element of corporate services supply chains. The but the situation is still fragile. The Internationalindustry has grown significantly and in many Monetary Fund (IMF) projects gross domesticcases exceeded expectations from the early days. product (GDP) growth of 2.3 percent in theThe part of the value chain that can be performed United States in 2011— hardly the kind of dyna-offshore has increased in value-add and complex- mism that would propel the global economy. Theity as we continue to see new types of services IMF’s latest projections for global economicbeing handled remotely and across borders. At growth — an estimated 4.8 percent in 2010 andthe same time, the geography of offshore delivery 4.2 percent in 2011— come with the warninghas expanded to include a large number of coun- that “global recovery remains fragile, becausetries specializing in different parts of the service- strong policies to foster internal rebalancing ofproduction ecosystem. demand from public to private sources and external1 The first report was named the A.T. Kearney Offshore Location Attractiveness Index. OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 1
  3. 3. Figure 1 The A.T. Kearney Global Services Location IndexTM, 2011 Financial People skills Business Rank Country attractiveness and availability environment Total score 1 India 3.11 2.76 1.14 7.01 2 China 2.62 2.55 1.31 6.49 3 Malaysia 2.78 1.38 1.83 5.99 4 Egypt 3.10 1.36 1.35 5.81 5 Indonesia 3.24 1.53 1.01 5.78 6 Mexico 2.68 1.60 1.44 5.72 7 Thailand 3.05 1.38 1.29 5.72 8 Vietnam 3.27 1.19 1.24 5.69 9 Philippines 3.18 1.31 1.16 5.65 10 Chile 2.44 1.27 1.82 5.52 11 Estonia 2.31 0.95 2.24 5.51 12 Brazil 2.02 2.07 1.38 5.48 13 Latvia 2.56 0.93 1.96 5.46 14 Lithuania 2.48 0.93 2.02 5.43 15 United Arab Emirates 2.41 0.94 2.05 5.41 16 United Kingdom 0.91 2.26 2.23 5.41 17 Bulgaria 2.82 0.88 1.67 5.37 18 United States 0.45 2.88 2.01 5.35 19 Costa Rica 2.84 0.94 1.56 5.34 20 Russia 2.48 1.79 1.07 5.34 21 Sri Lanka 3.20 0.95 1.11 5.26 22 Jordan 2.97 0.77 1.49 5.23 23 Tunisia 3.05 0.81 1.37 5.23 24 Poland 2.14 1.27 1.81 5.23 25 Romania 2.54 1.03 1.65 5.21 26 Germany 0.76 2.17 2.27 5.20 27 Ghana 3.21 0.69 1.28 5.18 28 Pakistan 3.23 1.16 0.76 5.15 29 Senegal 3.23 0.78 1.11 5.12 30 Argentina 2.45 1.58 1.09 5.12 31 Hungary 2.05 1.24 1.82 5.11 32 Singapore 1.00 1.66 2.40 5.06 33 Jamaica 2.81 0.86 1.34 5.01 34 Panama 2.77 0.72 1.49 4.98 35 Czech Republic 1.81 1.14 2.03 4.98 36 Mauritius 2.41 0.87 1.70 4.98 37 Morocco 2.83 0.87 1.26 4.96 38 Ukraine 2.86 1.07 1.02 4.95 39 Canada 0.56 2.14 2.25 4.95 40 Slovakia 2.33 0.93 1.65 4.91 41 Uruguay 2.42 0.91 1.42 4.75 42 Spain 0.81 2.06 1.88 4.75 43 Colombia 2.34 1.20 1.18 4.72 44 France 0.38 2.12 2.11 4.61 45 South Africa 2.27 0.93 1.37 4.57 46 Australia 0.51 1.80 2.13 4.44 47 Israel 1.45 1.35 1.64 4.44 48 Turkey 1.87 1.29 1.17 4.33 49 Ireland 0.42 1.74 2.08 4.24 50 Portugal 1.21 1.09 1.85 4.15 Note: The weight distribution for the three categories is 40:30:30. Financial attractiveness is rated on a scale of 0 to 4, and the categories for people skills and availability, and business environment are on a scale of 0 to 3. Source: A.T. Kearney Global Services Location IndexTM, 20112 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  4. 4. rebalancing from deficit to surplus economies advanced economies); asymmetrical rates ofare not yet in place.”2 The IMF’s recent Global recovery between developed and developingFinancial Stability Report offers a similar caveat: worlds; uncertainty about the capacity of the“The global financial system is still in a period of United States to engineer a strong economicsignificant uncertainty and remains the Achilles’ recovery; persistent questions in Europe about itsheel of the economic recovery.”3 fiscal maneuverability (highlighted by the recur- Within this shifting macroeconomic environ- rent sovereign debt and banking crises); concernsment, the Index continues to track the contours of about persistent economic obstacles in Japan; andthe global outsourcing landscape in 50 countries reservations about the capacity of the G20 coun-and their potential across three major categories: tries to formulate unified responses to their variousfinancial attractiveness, people skills and availabil- economic challenges. It is no surprise, therefore,ity, and business environment. We consider 39 that the IMF finds that “downside risks remainmetrics to identify the top countries for delivering elevated” (see sidebar: A World of Risks on page 4).4information technology (IT), business process As the economic environment shifts, theoutsourcing (BPO) and voice services (see appen- picture in the global services industry is growingdix: About the Study on page 19). more complex. Political backlash against offshor- This paper presents an overview of the 2011 ing and talk of “reshoring”— bringing functionsfindings of the Index (see figure 1). We examine and jobs back to home countries—are common-the results for each region and offer guidance for place, and the economic crisis and high unem-choosing the right locations around the globe to ployment rates have made such reshoring in tier-2perform services. In the final analysis, maximizing and tier-3 locations in developed countries morethe benefits of offshoring is vital for success— attractive. Still, huge potential remains for global-regardless of economic conditions. ized services delivery, as new technologies such as cloud computing help it continue to evolve rap-Industry in Transition idly.5 How, then, will the traditional outsourcingAfter the 2008 financial crisis hit, we predicted business model change in the future?an immediate and significant impact for global Offshoring will overcome negative percep-services outsourcing, considering that financial tions. Economic turmoil renewed the negativeservices firms were the biggest customers of ser- perception of offshoring and its perceived impactvices outsourcing and the United States was the on domestic labor markets in developed countries.world’s economic center of gravity. Today, we look In the 2009 Index, however, we pointed to evi-back at an industry that has certainly endured two dence suggesting the contrary—that the sectorslean years. with the fastest employment growth in developed The reality is that the global business environ- countries were actually tradable (or “offshoreable”)ment has been in profound flux for a variety of services.6 In other words, despite growing con-reasons: contrasting—and conflicting—recovery cerns about job losses, these services still grew inand post-recovery strategies (especially among developed countries as economies globalized.2 IMF, World Economic Outlook: Recovery, Risk, and Rebalancing, Washington, D.C.: October 2010.3 IMF, Global Financial Stability Report: Sovereigns, Funding, and Systemic Liquidity, Washington, D.C.: October 2010.4 IMF, World Economic Outlook: Recovery, Risk, and Rebalancing, Washington, D.C.: October 2010.5 See “Software Demand Management” at www.atkearney.com.6 For more information about the 2009 Index, see “The Shifting Geography of Offshoring” at www.atkearney.com. OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 3
  5. 5. A World of Risks With a global business environment tial differences in how to strike a rate of 6.4 percent, compared to in flux and economies continually balance between continued stimulus 2.2 percent for developed countries.† shifting, the picture in the global ser- and belt-tightening to avoid large In short, because they have been vices industry is growing more com- deficits and longer-term debts. The more resilient in the face of the reces- plex. The following trends have signif- choices these two countries make sion, emerging economies are catch- icant implications for the industry: have a major impact on the global ing up more quickly. A sector shift is Countries are pursuing different services market, as these countries also under way, as developing econo- fiscal strategies. The differences in are the largest demand centers for mies ramp up their service sectors how countries are adjusting follow- services outsourcing. in addition to their manufacturing ing the Great Recession could not Production and consumption base. China, in particular, appears be more pronounced. Consider, for are shifting. Among other things, set to expand its services sector in example, the stark contrast between the Great Recession has accelerated the coming decade. the hard-line fiscal austerity program the shift of global economic produc- Political uncertainty in the pursued in the United Kingdom tion and consumption from devel- United States. In the aftermath of and the quantitative easing under oped to developing worlds. The IMF the November 2010 mid-term elec- way in the United States. The polar- predicts that in 2011, developing tions, the outlook in the United opposite policies underline substan- countries will grow at an average States for an enduring political con- In a political climate of high unemployment, strong, traditional IT outsourcing services are however, these concerns are still intensifying as under threat. These include multi-year contracts politicians respond to the growing frustrations of based on developing and maintaining custom their constituents. While reducing global services code and requiring legions of programmers and trade through legislation and regulation is nearly on-site systems-integration workers. In the new impossible—especially when dealing with multi- model, outsourcers provide standardized software national companies—many firms have elected solutions on a per-use basis. Such services require to keep at least a temporarily low profile on their that outsourcers combine BPO services with offshoring to avoid risking their reputations. In cloud-based technology, enabling customers to the long run, however, the cost and talent arbi- outsource entire business processes and only pay trage benefits for overseas locations are still great for the information they access or use.7 and the underlying business case for offshoring In the past two years, a variety of outsourcers remains intact. As manufacturing supply chains have worked on acquiring the complete stack of have permanently left the shores of developed capabilities required to survive the shift and economies, the same is happening to services create a new business model for the outsourcing supply chains, and a forced move to reshore them industry. These capabilities include: hardware would result in significant costs for businesses. and connectivity for hosting and network capabil- Traditional outsourcing is under threat. ities; standardized software that can be deployed While the business case for offshoring is still on shared hardware platforms or through cloud 7 See “Building Flexibility into Software Licensing” at www.atkearney.com.4 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  6. 6. sensus to address the nation’s eco- shoring and its link in the public and elsewhere.†† Demand centers innomic challenges seems as remote consciousness to economic hardship Western Europe will consequentlyas ever. Nevertheless, the seriousness in the United States. face a challenging road ahead. Com-of the country’s fiscal worries was Europe’s precarious fiscal panies that have restructured mayunderlined recently by the austere situation. The Greek debt debacle emerge stronger and leaner, with arecommendations of a bipartisan last spring highlighted the precari- favorable attitude toward offshoring.commission on reducing the national ousness of Europe’s economic out- Debates about internationaldebt. For firms with global opera- look, and the ensuing debate on exchange-rate policy. The growingtions, the political climate is particu- fiscal policies demonstrates the wide international debate over exchange-larly sensitive. A bill introduced in array of opinions across the eurozone. rate policy—and the threat of cur-the Senate this year sought to bar The Organisation for Economic rency wars—reflects the lack ofcompanies from receiving tax credits Co-operation and Development a strong, institutionalized, inter-or deductions if they closed a U.S.- (OECD) predicts an uneven recov- national organizational architec-based facility in favor of one over- ery in the eurozone, with growth ture that can address the dynamicseas. Though defeated, the bill’s curtailed because of deficit-reduction nature of the world’s problems.title — Creating American Jobs and plans and credit-market tensions † IMF, World Economic Outlook.Ending Offshoring Act—is a testa- related to the persistent sovereign- †† OECD Economic Outlook, Paris:ment to the unpopularity of off- debt concerns in Greece, Ireland 18 November 2010.computing; new service capabilities; and commer- manufacturing powerhouses — and we can expectcial strength to move from a long-term contract to see a similar development in services. As withmodel to a flexible, “pay-as-you-go” approach. offshoring of manufacturing, the move of servicesThese are the preliminary steps toward what will jobs will grow less controversial with the passageend up being a revolution in the BPO and ITO of time. Much as the United States and EU coun-marketplace.8 tries exchange a wide range of services, trading of Globalization of services has tremendous services will also grow between developed anduntapped potential. Regardless of changes in the developing countries. In the medium to longoutsourcing industry business model and other term, demographics will reinforce this trend. Astemporary setbacks, we believe the era of global- the developed world ages, it faces a choice betweenization of services production has only just begun. allowing more liberal immigration policies andThe untapped potential is enormous. IT and importing manufactured goods and services.BPO offshoring are early manifestations of a larger Countries such as India and Egypt, with large,trend that, in the long run, means that more func- young populations, are well-positioned to take ontions can and will be located outside the countries a greater role in delivering services to countrieswhere end-customers reside. with shrinking labor pools. We have already witnessed a shift in the foot- In the future, therefore, we will see a dramaticprint of manufacturing across the globe to the shift in the relative balance of service productionpoint at which emerging markets have become among developed and emerging markets.8 See “Outsourcing (But Not as We Know It)” in Executive Agenda, Vol. XIII, No. 2, 2010, at www.atkearney.com. OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 5
  7. 7. Highlights of the 2011 Index Baltic states are a dramatic example — Estonia The top three countries in the 2011 Index have moves into 11th place and Latvia 13th amid demonstrated remarkable staying power. Thanks ongoing austerity programs. The United Kingdom to their deep talent pools and cost advantages, advances from 31st to 16th place due to the India, China and Malaysia have been first, second pound’s fall in value coupled with slowing wage and third, respectively, since the inception of the increases. Mexico reaches 6th place and is now Index. Wage changes and currency shifts from the Latin America’s top location in the Index, thanks financial crisis, however, have led to major changes to currency depreciation and increased nearshor- in other rankings within the Index (see sidebar: ing sentiment in the United States. In the Middle Currency Woes on page 7). East, improving fundamentals allowed Egypt Formerly lower ranked states with highly to inch forward to 4th, while the United Arab qualified labor once again became viable options Emirates (UAE), acting as a regional services hub, amid currency devaluation (see figure 2). The moved from 29th to 15th position, because its Figure 2 Fallout from the financial crisis shook up the rankings, as once-expensive countries moved up Change in rankings (2009 to 2011) 1 India 0 26 Germany 8 2 China 0 27 Ghana –12 3 Malaysia 0 28 Pakistan –8 4 Egypt 2 29 Senegal –5 5 Indonesia 0 30 Argentina –5 6 Mexico 5 31 Hungary 6 7 Thailand –3 32 Singapore 3 8 Vietnam 2 33 Jamaica –10 9 Philippines –2 34 Panama 9 10 Chile –2 35 Czech Republic –3 11 Estonia 5 36 Mauritius –6 12 Brazil 0 37 Morocco –8 13 Latvia 14 38 Ukraine 4 14 Lithuania 5 39 Canada –13 15 United Arab Emirates 13 40 Slovakia –2 16 United Kingdom 15 41 Uruguay –5 17 Bulgaria –4 42 Spain 3 18 United States –4 43 Colombia 0 19 Costa Rica 3 44 France –3 20 Russia 13 45 South Africa –5 21 Sri Lanka –4 46 Australia 1 22 Jordan –13 47 Israel 2 23 Tunisia –5 48 Turkey –4 24 Poland 15 49 Ireland –1 25 Romania –4 50 Portugal 0 Source: A.T. Kearney Global Services Location IndexTM, 20116 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  8. 8. service sector became more competitive as the the United States accounted for 63 percent offinancial crisis tempered the breakneck speed of global IT offshore outsource spending, downits growth.9 somewhat from pre-crisis levels of approximately The following offers a breakdown of the 67 percent.10 At the same time, the United StatesIndex results by region: presents an interesting supply possibility, as its North America. The United States is the top tier-2 locations rank 18th in the Index, thanks tocustomer market for outsourcing services and its top position in people skills and availabilitywill remain so for the foreseeable future. In 2010, (see figure 3 on page 8).Currency WoesFluctuating currencies cause vola- This doomsday scenario will renminbi and other emerging markettility for corporate planners, and hopefully be averted as central banks currencies would appreciate. Offshor-currency concerns will likely remain and international institutions come ing companies will see a decline ina central feature of international together to broker solutions among labor arbitrage opportunities in certainbusiness and policy into the future. major players such as the United countries as this process unfolds.China is currently under attack for States and China. Kati Suominen of The challenge for corporate plan-its undervalued currency, which has the German Marshall Fund sees two ners is to look beyond the month-to-been propped up by $2.5 trillion in other more palatable options going month or even year-to-year currencyreserves. Meanwhile, the United forward: détente and “containment.”† swings so they can stay attuned toStates has angered some countries In détente, countries would look to the long-term trends. A typical plan-because of its quantitative easing. the IMF to settle disputes and provide ning horizon for establishing offshore Government interventions solutions for international currency centers is three to five years—oftenthroughout the world are prompt- troubles. This would be a neat solu- longer. Some of the exchange-rateing worries about destructive “cur- tion to current problems, but highly fluctuations we have seen in the pastrency wars.” A full-scale currency unlikely given that policymakers in few years may be merely blips, such aswar would indeed put the brakes many emerging markets still do not the dramatic dip of the British pound.on the world’s economic growth trust the IMF. In containment, coun- Other currencies are significantlyprospects and would injure the tries would not cooperate at the level more likely to experience longer-termglobal offshoring industry. In such described above, instead holding out changes. As developing countries (fora scenario, economic relations the threat of tariffs and currency example, China and India) experiencebetween countries could devolve devaluations. The interconnectedness dramatic export-led growth, theirinto tit-for-tat duels about curren- of their economies and a fear of currencies will come under long-termcies — one country erecting tariffs “mutually assured destruction,” how- pressure to appreciate, which has theto counter the effects of another’s ever, would lead to a certain level of potential to alter the economic calcu-devaluation. Economic uncertainty good behavior. This system could be lations of corporate planners.would reign and companies would stable for global firms to navigate— † Kati Suominen, Globalization at Risk:find global service supply chains albeit cautiously. The dollar would Challenges to Finance and Trade, Yale University Press, New Haven, Conn.:costly and difficult to maintain. likely decline in this era while the October 2010.9 The rankings were made before the recent political unrest in Egypt and Tunisia began. As a result, the political uncertainty and country risk associated with both countries have dramatically increased. The situations need to be monitored closely to gauge whether the long-term risk profiles will change.10 International Data Corporation, Worldwide and U.S. Offshore IT Services 2010-2014 Forecast, May 2010. OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 7
  9. 9. Figure 3 The United States leads in people skills and availability People skills and availability scores United States (tier 2) 4.37 2.22 1.34 1.67 9.60 India 4.34 2.22 1.39 1.25 9.20 China 3.90 2.22 1.33 1.06 8.51 United Kingdom (tier 2) 3.94 0.55 1.39 1.67 7.55 Germany (tier 2) 3.92 0.58 1.40 1.33 7.23 Canada 3.69 0.31 1.47 1.67 7.14 France (tier 2) 3.93 0.53 1.37 1.22 7.05 Brazil 2.89 1.75 1.07 1.19 6.90 Spain 3.91 0.40 1.32 1.22 6.85 Australia 2.65 1.44 1.67 6.00 Russia 1.82 1.69 1.29 1.18 5.98 Ireland 2.67 1.41 1.67 5.79 Singapore 2.61 1.52 1.38 5.54 Mexico 2.11 0.89 1.14 1.19 5.33 Argentina 2.41 0.48 1.06 1.31 5.26 Indonesia 1.18 1.72 1.09 1.10 5.09 Malaysia 1.91 1.24 1.22 4.60 Thailand 1.77 0.63 1.16 1.03 4.59 Egypt 1.65 0.72 1.04 1.11 4.53 Israel 1.87 1.24 1.31 4.49 Philippines 1.38 0.83 1.94 1.22 4.38 Turkey 1.33 0.72 1.20 1.07 4.31 Poland 1.18 0.46 1.39 1.22 4.25 Chile 1.70 1.20 1.15 4.22 Hungary 1.42 1.37 1.26 4.15 Colombia 1.46 0.41 1.00 1.13 3.99 Vietnam 1.08 0.68 1.22 0.97 3.96 Pakistan 0.71 0.97 0.94 1.22 3.85 Czech Republic 1.04 1.39 1.26 3.79 Portugal 0.90 1.31 1.33 3.63 Ukraine 0.60 0.58 1.24 1.17 3.58 Romania 0.75 1.14 1.29 3.42 Estonia 0.40 1.43 1.33 3.18 Sri Lanka 0.62 1.28 1.13 3.16 United Arab Emirates 0.80 1.42 0.89 3.15 Costa Rica 0.62 1.19 1.29 3.14 Latvia 0.53 1.35 1.21 3.11 Lithuania 0.51 1.34 1.21 3.10 Slovakia 0.48 1.34 1.22 3.10 Relevant experience South Africa 0.81 0.35 0.58 1.35 3.09 Size and availability of labor force Uruguay 0.54 1.17 1.29 3.04 Education Bulgaria 0.51 1.16 1.21 2.94 Mauritius 0.48 1.11 1.31 2.91 Language capabilities Morocco 0.59 1.03 1.07 2.90 Jamaica 0.30 0.86 1.67 2.85 Tunisia 0.48 1.05 1.07 2.70 Senegal 0.36 1.25 0.90 2.59 Jordan 0.34 1.12 1.06 2.58 Panama 0.42 0.83 1.13 2.41 Note: Values below 0.20 not shown due to space constraints. Ghana 0.32 0.80 1.06 2.31 Source: A.T. Kearney Global Services Location IndexTM, 2011 Some cause for concern exists, however: U.S. sions or choosing local options, historical trends anti-outsourcing sentiment is re-emerging, par- suggest that once the economy rebounds, global- ticularly given the country’s stubbornly high ization will resume. unemployment rates and rancorous political dis- Still, companies are not automatically assum- course. While we believe that some companies ing that overseas locations are the answer to their will likely respond to such a hostile environment service transformation questions. U.S. tier-2 and in the short term by postponing offshoring deci- tier-3 cities with strong talent pools and low oper-8 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  10. 10. ating costs are becoming attractive alternatives, in ing nearshoring sentiment, even with the difficultlight of lower domestic wages and greater avail- times related to escalating drug violence in itsability of human resources during the recession. northern states. The country boasts one of the Canada (39th) falls in the Index this year. It is highest numbers of Capability Maturity Modelno longer primarily an offshore destination to the Integration (CMMI) certified centers worldwide.11United States, as its relative cost-competiveness Additionally, as its management schools improvehas eroded. Instead of strong growth in contact in quality, Mexico could carve out an importantcenters serving its southern neighbor, Canada is space in the service sector (see sidebar: Mexico: Citytoday equally important as an integrated part of by City on page 10).the North American IT supply chain,much as the two countries’ auto-motive industries have become inter-twined over the years with multiplesupplier relationships and assembly Mexico stands to benefit fromplants on both sides of the border. Latin America. Latin America’s increasing nearshoring senti-proximity to the U.S. consumer mar- ment, even with the difficultket serves it well as a services hub.With a growing Spanish-speaking times related to escalating drugpopulation in the United States andEnglish proficiency continuing to violence in its northern states.grow in Latin America, customer ser-vice activities will naturally increase.Latin America, similar to otherregions, presents a kaleidoscope of skill sets. Chile dropped to 10th place from 8th, largelyBrazil excels in IT and is a strong platform loca- because its economic contraction was less severetion for software developers and systems integra- than elsewhere, meaning its wages have remainedtors. Mexico is becoming a more prominent BPO relatively stable. The country’s infrastructure scorelocation, as it supports the United States with also received a slight downgrade because of theboth Spanish and English. Meanwhile, Chile has vulnerabilities exposed during the February 2010emerged as a niche destination for R&D and ana- earthquake; although by all accounts, Chileanlytics, while Costa Rica and Argentina continue to authorities’ response to the disaster was com-grow their offshore services presence despite facing mendable. The recent success in rescuing trappedsome decline in cost-competitiveness. miners has helped fortify the country’s brand. Mexico (6th) is the highest-ranked Latin Brazil ranks 12th for the second straight year.American country. Its average wages decreased 18 The country’s standing in global services has beenpercent in dollar terms last year, as it was buffeted challenged in recent years by a strengthening cur-by economic headwinds from the United States. rency. While this demonstrates strong economicThe country now stands to benefit from increas- prospects in a bleak global landscape, it hinders11 CMMI is a process-improvement program created by the Software Engineering Institute of Carnegie Mellon University. OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 9
  11. 11. export growth. The triumph of President Luiz electricity infrastructure. Argentina (30th) falls Inácio Lula da Silva (whose term in office ended five slots as inflation and rising demands among on the first day of 2011) in bringing Brazil to the labor leaders for increased wages challenged its global stage will hopefully linger as his successor, competitive position. Dilma Rousseff, the country’s first elected female Colombia (43rd) enters the Index after per- president, defines the new political trajectory. forming particularly well in the people skills and Costa Rica (19th) moves up three spots, availability category. Colombian Spanish is a neu- thanks to infrastructure modernization, increased tral accent that allows call centers in Colombia to international bandwidth and improvements in serve people throughout the Spanish-speaking Mexico: City by City The Global Services Location ture for IT services. Mexico City both technical and soft skills by Index looks at IT/BPO potential also offers a vast range of services 2013. Mexico IT promotes Mexico at the country level, but in our and Queretaro is a smaller alternative as a nearshore outsourcing location client work we are asked to develop location that has capitalized on its for U.S. companies. ProSoft offers a more detailed view of each coun- aerospace industry to grow (see subsidies and tax incentives for com- try in order to match client needs figure). Across all regions, Mexico panies investing in the IT sector. to specific locations. We therefore has prioritized the development of The following offers a description work with clients to customize the the IT/BPO industry through several of some of Mexico’s top destinations: Index methodology according to initiatives. Mexico First aims to cer- Guadalajara is often referred to their specific preferences. Once tify 60,000 specialized workers in as “Mexico’s Silicon Valley,” reflect- a shortlist of countries is deter- mined using this methodology, we Figure: Key IT/BPO locations in Mexico perform deep dives for each location to understand the internal market dynamics. This research requires Ciudad Juárez Monterrey Hub for nearshore City features top a thorough assessment of such BPO has security technical university aspects as city-level talent availabil- concerns and homegrown IT firms ity, government incentives and infrastructure. Here we provide Santiago de a brief outline of a city assessment Queretaro for Mexico. We selected this coun- Hermosillo Less expensive Tier 2 emerging location is an try instead of several others in the location is aerospace hub close to the Index because not only is it a top U.S. West Coast performer with a large industry, Mexico City it also presents a range of capabil- Largest city has a Culiacán Guadalajara BPO focus and a ities across the country. Tier 2 location Mexico’s “Silicon deep pool of talent Guadalajara and Monterrey are features contact Valley” is home to HP, centers and IT IBM and Flextronics the top locations in Mexico in terms of talent availability and infrastruc- Note: BPO is business proc process outsourcing cess Source Source: A.T. Kearney Global Services Location IndexTM, 201110 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  12. 12. world with relative ease. A major hurdle, however, now all Colombian school children receive Englishis the level of English among professionals. As training. In Bogota, the “Talk to the World” cam-Colombia’s currency appreciates, the government paign provides funding for companies to upgradewill have to adjust to the fact that it will not be able their employees’ English capabilities.to compete as a low-cost destination and will have Europe. The financial crisis pummeled manyto look higher on the value chain for advanced ser- economies in Europe, and fiscal woes in Greece,vices such as architectural rendering and finance. Ireland and elsewhere have raised the specter thatTo achieve this shift, several English-improvement the euro could fail. In the process, countries out-programs have opened in the past few years, and side the eurozone that were once too expensive oring its history as a major electronics Though foreign firms have not yet pool, however, is shallower than thecenter specializing in software design, been directly targeted, a general others listed above.semiconductor design, embedded sense of unease is stifling invest- Ciudad Juárez has long been asoftware and multimedia. General ment or expansion of operations in hub for nearshore BPO services, cap-Electric, IBM, Intel, Hitachi, the area. italizing on its proximity to El Paso,Hewlett-Packard, Siemens, Flextron- Mexico City hosts numerous Texas, just across the Rio Grande,ics and Solectron have national head- large and small IT firms, domestic to turn large volumes of physicalquarters or major development cen- and foreign, offering voice, BPO documents into data. It is one of theters in the city. The region contains and KPO services. The growth of Mexican cities hit worst by drug-16 ITO and BPO service centers, this sector in Mexico City is a natu- related violence, however, with more150 software companies and 35 ral byproduct of the city’s economic than 3,000 homicides in 2010 alone.design houses, but competition is weight and the synergies among the Hermosillo and the surroundingfierce for the limited talent that broad range of businesses operating area is a tier-2 option just across thespeaks English. there. The city has shown increased border from the United States that in Monterrey is an IT and BPO focus in recent years on BPO devel- the past has been primarily orientedcenter, housing both international opment. The city and its environs toward manufacturing operations,and domestic firms and home to contain 72 universities with IT but which is emerging as an IT desti-Mexico’s most successful homegrown programs. nation in close proximity to clientsfirms Softtek and Neoris. Softtek Queretaro provides an alternative on the U.S. West Coast.was started by engineers from petro- location to the country’s established Culiacán is another tier-2 loca-chemical company Alfa, while Neoris hubs and has gained prominence as tion. Its main focus is IT and contactwas a spin-off of the IT operations an aerospace hub and manufacturing centers. Many of the IT companiesof Mexican multinational cement site for Canadian aerospace and in Culiacán are working in state-sup-giant CEMEX. Firms in Monterrey defense company Bombardier. The ported IT technology clusters.have access to some of the country’s Queretaro site offers call-center and Other states, such as Aguascali-top technical talent through the BPO capabilities; the knowledge entes, Zacatecas and Baja California,Monterrey Technical Institute. base of the local population is high are also starting to develop strategiesHowever, Monterrey is experienc- and compensation costs are also less, to promote the IT/BPO sector,ing an upsurge in drug war violence in part because of the location’s rela- mainly through technological parksconnected to the northern states. tive obscurity. The region’s labor and human capital initiatives. OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 11
  13. 13. had experienced long stretches of growth once However, he bundled his somewhat reassuring again became viable offshoring options. message with a plea to Indian firms that they find Estonia (11th), Latvia (13th) and Lithuania a way to invest in job growth in the United (14th) are examples of countries that have climbed Kingdom. Trade relations between the two coun- in the rankings as a direct consequence of the eco- tries have indeed become quite symbiotic, with nomic crisis. Strong people skills have allowed jobs in the United Kingdom being created by these countries to develop small but strong BPO Indian firms and vice versa. and voice markets. The global financial crisis hit In addition to the United Kingdom, we also all three (Latvia in particular) harder than most include two other main customer markets for IT/ countries, propelling them into a dire situation BPO services in Europe: Germany and France. with rapidly expanding current account deficits. We use tier-2 cities (cities in areas of the country Instead of devaluing their currencies, Latvia, that have a lower relative income level) in these Lithuania and Estonia pursued what they called countries as a benchmark to compare them to the “internal devaluation.” Their governments and offshore competition. For the United Kingdom, private sectors cut wages by an average of 35 per- we use cities in Northeast England, Wales and cent and slashed expenditures. As a result of these Northern Ireland as benchmarks. For Germany, painful adjustments, cost levels became more we use Saxony in the former East Germany, and competitive. Increased cost-competitiveness has for France, the region of Languedoc-Roussillon. propelled these countries to the higher echelons of In Central and Eastern Europe, Poland is the the Index and has already yielded new invest- top story, moving up 15 places to 24th after ments in the IT/BPO sector. U.K.-based Barclays weathering the economic troubles and benefiting opened an IT center in Vilnius in 2009, and U.S. from improved investor sentiment. Hungary financial services company Western Union has (31st) and the Czech Republic (35th) also fared also announced plans to establish a regional ser- slightly better this year because of decreasing wage vice center in Lithuania. Significant growth is still levels. However, the nearshoring story in Europe needed, however, to get the Baltic states on the still shows a shift to Bulgaria (17th), Romania same turf as the more traditional European out- (25th) and the Middle East. sourcing locations. Portugal (50th), Ireland (49th) and Spain The United Kingdom rises substantially in (42nd) — which together with Greece (not the rankings, from 31st in 2009 to 16th in 2011, included in the Index) have been grouped under driven by steep drops in compensation costs the less-than-flattering acronym PIGS — are all (14 percent in dollar terms). First and foremost, countries in financial distress and have not seen however, the United Kingdom is a demand market improvement in the Index this year, as opposed to for outsourcing. In what is now a rather regular the Baltic states. While some time in coming, refrain on both sides of the Atlantic, British politi- the crises have just started to appear in these coun- cians have decried outsourcing in the face of tries. Although austerity measures are being put mounting unemployment. On a recent visit to forward, they have not yet taken effect. They are India, however, British Prime Minister David also less likely to be as far-reaching as the extreme Cameron tried to put to rest the notion that the measures taken by other European governments United Kingdom would prevent IT outsourcing. (for example, the Latvian government). It should12 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  14. 14. be noted that currency devaluation is not an in recent years as an ideal offshoring locationoption for these countries to increase competitive- for European firms taking advantage of theness as they are members of the eurozone. region’s proximity and vast pool of skilled talent. Middle East and Africa. The region of the Indeed, North Africa has eclipsed several EasternMiddle East and North Africa has emerged European locations, as demonstrated in this year’sIndustry Activity in the Top 10 LocationsThe Global Services Location ITO from being primarily a contact- ing in BPO work. On voice work inIndexTM ranks countries based on center hub. languages other than Chinese, how-their attractiveness across IT, BPO For most countries, the outlook is ever, it is almost non-existent, otherand voice work, but all countries more complex, and success is deter- than a cluster of Japanese-languagehave specific niches in which they mined by identifying a niche. China contact centers in the country’scompete. For companies locating is a good example: It ranks second Northeast.their shared services functions off- in the Index based on its strong off- As countries continue to special-shore, it is not just a matter of pick- shore fundamentals, but its capabili- ize in offering services, it is impera-ing the top countries in the Index. ties are mixed in terms of industry tive for buyers of services to under-Deciding on an offshore location is activity. China is increasingly strong stand these differences whena complex decision that must con- in the IT area and is rapidly improv- evaluating locations.sider each country’s mix of capabil-ities and specific niche in global Figure: Industry activity in the top 10 countriescompetition. To illustrate the differ-ent profiles, we assessed the Index’stop 10 locations based on their capa- Country BPO Voice ITObilities in IT, BPO and voice, and Indiathe industry activity in each of these Chinasectors (see figure). India alone has proven able to Malaysiacompete in all dimensions. It is the Egyptpreeminent destination and leaderin all fields of offshore services, excel- Indonesialing in IT thanks to its elite educa- Mexicotional institutions, in BPO becauseof a large annual output of qualified Thailandgraduates, and in voice because of Vietnamthe English capabilities of its pop-ulation. The Philippines, an early Philippinesentrant into the service sector, is also Chilerelatively well-rounded. It has had Note: BPO is business process outsourcing; High industry activity Limited industry activitymore than a decade to hone its capa- ITO is information technology outsourcingbilities and by now has moved into Source: A.T. Kearney Global Services Location IndexTM, 2011 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 13
  15. 15. Index, which features Egypt 4th in the world and There is significant diversity in the ranks of the leader in the Middle East. The country has these top Asian players. India is the all-around scored consistently well over time because of standout, able to provide manpower for any its economical wage rates and large supply of type of offshoring activity. The Philippines’ long- talent. The Egyptian government has also actively established tradition of providing leading call- promoted the sector abroad while aggressively center support continues to be strong. China pushing industry to bring its standards up to provides competitively priced high-end analytics international levels. However, the recent political and engineering, while Malaysia attracts IT ser- turmoil in the country could have long-term con- vices offshoring (see sidebar: Industry Activity sequences for Egypt as a sourcing location. in the Top 10 Locations on page 13). The sectors in Indonesia, Vietnam and Thailand, how- ever, are in their relative infancy. These countries have not yet devoted as much as they could to promoting information India, with its first-mover and communications technology, yet they advantage and deep skill score highly in the Index because of vast pools of talent and competitive wages base, still maintains the (see sidebar: What’s Holding Back Thailand and Indonesia? on page 16). In particular, lion’s share of the IT Vietnam ranks as the most financially attractive country for offshoring in the services market. Index (see figure 4). India, with its first-mover advantage and deep skill base, remains the unques- tioned leader in the Index — a half-point The UAE is second in the region—15th over- ahead of China and a full point in front of all—thanks to more competitive compensation Malaysia — and still maintains the lion’s share of costs, a rise in the quality of its management the IT services market. On top of that, India’s IT schools and an improvement in literacy scores. services stalwarts are moving up the value chain. The UAE leads in headquarters functions and Companies such as Infosys and Wipro are pursu- services, which support many multinational cor- ing their own R&D capabilities and expanding porations throughout the region. Cost pressures well beyond their traditional vendor roles. have also declined in the wake of the financial In the early years of offshoring, China was crisis. Jordan (22nd) and Tunisia (23rd) remain in seen as a less-attractive option because of con- the top 25. cerns about language capabilities and intellectual Asia. The top three locations in the Index property security. The economy’s strong manu- remain India, China and Malaysia. Asia also ranks facturing orientation has also meant that the highly throughout the rest of the top 10, which service sector has remained largely undevel- features Indonesia (5th), Thailand (7th), Vietnam oped. Now, as the economy transitions to include (8th) and the Philippines (9th). more services, the government is supporting the14 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  16. 16. Figure 4Vietnam leads in financial attractivenessFinancial attractiveness scores Vietnam 7.07 0.53 0.57 8.17 Indonesia 6.95 0.59 0.56 8.10 Senegal 6.96 0.60 0.51 8.08 Pakistan 7.08 0.38 0.61 8.08 Ghana 7.10 0.26 0.67 8.03 Sri Lanka 7.12 0.41 0.47 7.99 Philippines 6.87 0.58 0.51 7.96 India 6.86 0.37 0.54 7.76 Egypt 6.53 0.75 0.46 7.74 Tunisia 6.30 0.77 0.57 7.64 Thailand 6.54 0.56 0.51 7.61 Jordan 6.39 0.48 0.55 7.42 Ukraine 6.37 0.42 0.35 7.14 Costa Rica 5.90 0.58 0.62 7.10 Morocco 6.00 0.56 0.51 7.07 Bulgaria 5.89 0.56 0.59 7.05 Jamaica 6.17 0.28 0.57 7.02 Malaysia 5.77 0.56 0.61 6.94 Panama 6.07 0.43 0.42 6.92 Mexico 5.68 0.44 0.58 6.69 China 5.74 0.51 0.31 6.55 Latvia 5.32 0.48 0.62 6.41 Romania 5.23 0.49 0.62 6.35 Lithuania 5.11 0.50 0.59 6.19 Russia 5.16 0.48 0.55 6.19 Argentina 5.31 0.41 0.40 6.12 Chile 5.16 0.75 6.10 Uruguay 4.99 0.38 0.68 6.06 United Arab Emirates 4.77 0.44 0.82 6.04 Mauritius 5.04 0.76 6.01 Colombia 5.03 0.31 0.50 5.84 Slovakia 4.88 0.38 0.56 5.82 Estonia 4.69 0.46 0.63 5.78 South Africa 4.40 0.70 0.57 5.67 Poland 4.29 0.39 0.67 5.35 Hungary 4.11 0.37 0.62 5.11 Brazil 4.40 0.52 5.06 Turkey 3.68 0.36 0.64 4.68 Czech Republic 3.50 0.38 0.65 4.53 Compensation costs Israel 2.38 0.50 0.74 3.61 Infrastructure costs Portugal 2.00 0.41 0.63 3.03 Tax and regulatory costs Singapore 1.41 0.34 0.76 2.51United Kingdom (tier 2) 1.12 0.37 0.79 2.28 Spain 1.03 0.41 0.59 2.03 Germany (tier 2) 0.80 0.40 0.70 1.89 Canada 0.62 0.76 1.40 Australia 0.53 0.75 1.28 United States (tier 2) 0.54 0.59 1.14 Ireland 0.28 0.76 1.04 Note: Values below 0.20 not shown due to space constraints. France (tier 2) 0.36 0.59 0.95 Source: A.T. Kearney Global Services Location IndexTM, 2011BPO sector with unprecedented enthusiasm. China makes its greatest impact, however; itsImproved skills — from language ability to engi- most attractive areas are high-end analytics andneering — are turning China’s BPO centers into advanced IT, where it is an alternative to Russiaviable options. and Eastern Europe, and BPO, where it can be China has begun offering specialized skills competitive with India. China is now developingnot only in English, but also Korean, Japanese and R&D capabilities as a necessary adjunct to itsChinese. Call centers are unlikely to be where manufacturing capabilities, which creates a strong OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 15
  17. 17. What’s Holding Back Thailand and Indonesia? The Global Services Location center in Bangkok, which it had ment, however, has committed IndexTM measures the underlying acquired from Philips three years to ramping up investments in infra- fundamentals that make a location earlier. What is holding back these structure in the future and we ex- an attractive destination for service countries? pect to see improvements soon. In delivery. However, in some top- Language. Language is a major Thailand, the unstable political situa- ranked countries in the Index, there impediment. English has not been tion—showcased last spring in front is no thriving industry — instead, taught historically in Thai or Indo- of the world’s TV cameras when the there is great potential. Such is the nesian schools and is not used by army clashed with the opposition on case in Thailand and Indonesia, these countries’ administrations. the streets of Bangkok—is creating which are among the top 10 in the By comparison, in the Philippines, uncertainty among foreign investors. Index but are not household names English is widely spoken as a result Hope remains, however, for improve- in offshoring. These countries have of historic ties to the United States. ments after the upcoming elections. the fundamentals in place to be While English instruction is part Government support. A lack of successful service locations — they of curricula today in Thailand and government support has hampered enjoy large workforces and competi- Indonesia, the quality of instruction the outsourcing sector as govern- tive cost levels. Yet companies are is often lacking. ments spend their scarce resources not flocking to Bangkok or Jakarta Business environment. Indonesia on promoting different industries. to fill their needs — in fact, the suffers from a legacy of neglected With increased promotional efforts opposite is happening. For exam- infrastructure invest-ments, mani- and removing crucial roadblocks, ple, Infosys announced in July fested in poor electricity supply and Indonesia and Thailand could repeat 2010 that it was closing its BPO insufficient bandwidth. The govern- the Philippines’ success. foundation for knowledge process outsourcing, BPO sector and generating $7.2 billion in reve- also called KPO services. nues in 2009. Call centers make up the majority The top two countries have even begun link- of the country’s operations, at $5 billion in reve- ing up to expand their expertise. For example, nues, but growing BPO niches such as services Indian firms Tata Consulting Services (TCS), catering to the healthcare and pharmaceutical Infosys and Wipro have all established operations industries help fuel overall growth. Amid fierce in Chengdu, China. Chengdu’s mayor, who competition from other regional players, the gov- actively courted the Indian firms, told reporters ernment has launched a plan to build a virtual that he dismisses language concerns: “As soft- BPO university and extend training in call-center ware development will be in English for [both] skills to an additional 10,000 students to retain the domestic market and exports, language its competitive edge. Meanwhile, Singapore is will not be a problem for companies and their 32nd, as it once again is the global number one professionals.”12 in the business environment category — but a The Philippines remains an offshoring behe- small labor force and high costs give it a relatively moth, employing half a million people in the lower ranking (see figure 5). 12 “Chengdu woos Indian firms to invest in China’s IT hub,” Nearshore Journal, 1 March 2010.16 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney
  18. 18. Figure 5Singapore remains the leader in business environmentBusiness environment scores Singapore 4.67 1.64 0.97 0.70 7.99 Germany (tier 2) 4.62 1.64 0.48 0.81 7.56 Canada 4.69 1.34 0.84 0.63 7.51 Estonia 4.48 1.62 0.86 0.51 7.48United Kingdom (tier 2) 4.31 1.64 0.69 0.80 7.44 Australia 4.78 1.17 0.41 0.76 7.11 France (tier 2) 4.24 1.62 0.56 0.61 7.03 Ireland 4.21 1.16 0.95 0.60 6.92 United Arab Emirates 3.76 1.47 0.97 0.64 6.84 Czech Republic 3.85 1.31 0.92 0.67 6.76 Lithuania 4.17 1.43 0.70 0.43 6.73 United States (tier 2) 4.20 1.29 0.39 0.83 6.71 Latvia 4.17 1.08 0.88 0.40 6.53 Spain 3.77 1.25 0.55 0.69 6.25 Portugal 3.69 1.32 0.64 0.54 6.18 Malaysia 3.67 1.19 0.70 0.53 6.10 Chile 4.33 1.25 0.42 6.06 Hungary 3.62 1.17 0.61 0.66 6.06 Poland 3.81 0.97 0.70 0.55 6.03 Mauritius 3.62 0.93 0.72 0.39 5.65 Bulgaria 3.40 1.27 0.53 0.38 5.58 Slovakia 3.70 1.14 0.50 5.51 Romania 3.34 1.27 0.44 0.44 5.48 Israel 2.89 1.14 0.83 0.61 5.46 Costa Rica 3.47 1.01 0.33 0.39 5.20 Panama 3.30 1.15 0.36 4.97 Jordan 2.48 1.10 0.94 0.45 4.96 Mexico 3.32 0.75 0.31 0.43 4.81 Uruguay 2.84 1.06 0.47 0.37 4.74 Brazil 3.17 0.97 0.47 4.61 South Africa 3.18 0.79 0.58 4.56 Tunisia 2.56 1.14 0.47 0.39 4.55 Egypt 2.88 0.93 0.28 0.41 4.50 Jamaica 2.68 0.92 0.55 0.31 4.46 China 2.95 0.87 0.55 4.38 Thailand 2.73 1.10 0.36 4.31 Ghana 2.59 0.65 0.78 0.26 4.28 Morocco 2.25 0.95 0.67 0.34 4.21 Vietnam 2.62 0.98 0.30 4.13 Country risk Colombia 2.36 1.03 0.41 3.94 Country infrastructure Turkey 2.54 0.95 0.41 3.90 Cultural exposure Philippines 1.97 0.71 0.80 0.38 3.86 India 2.56 0.57 0.59 3.81 Security of intellectual property Senegal 2.39 0.70 0.30 .032 3.71 Sri Lanka 2.02 0.84 0.52 0.32 3.71 Argentina 2.35 0.96 0.29 3.63 Russia 2.16 0.99 0.34 3.56 Ukraine 2.00 0.90 0.25 0.26 3.41 Indonesia 2.40 0.66 0.32 3.38 Note: Values below 0.20 not shown due to space constraints. Pakistan 1.34 0.53 0.36 0.29 2.52 Source: A.T. Kearney Global Services Location IndexTM, 2011Glimmers of Hope lessness continue to roil the global economy. TheThe headlines about persistent economic volatil- long-term prospects, however, appear little changedity may be here for some time. For the global ser- from our first edition. An increasingly intercon-vices industry, the short term will remain rocky as nected world and increasing demand mean thatworries about sovereign debt, currencies and job- the global services industry remains on the rise. OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney 17
  19. 19. Authors Erik Peterson is managing director of the firm’s Global Business Policy Council. Based in the Washington, D.C., office, he can be reached at erik.peterson@atkearney.com. Johan Gott is a manager in the Washington, D.C., office. He can be reached at johan.gott@atkearney.com. Samantha King is a consultant in the Washington, D.C., office. She can be reached at samantha.king@atkearney.com. The authors wish to acknowledge the contributions of their colleague Rodrigo Slelatt, principal in the organization and transformation practice, and Nora Patiño, a consultant in the Mexico City office, in developing this report.18 OFFSHORING OPPORTUNITIES AMID ECONOMIC TURBULENCE | A.T. Kearney

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