The business process outsourcing industry, once seen as the displacer of domestic jobs, now faces displacement itself. As outsourcing becomes less a matter of low-cost labor and more a matter of automation, the question of location has become less relevant. Technology-based business models such as robotic process automation and business process as a service have encouraged both startups and established SaaS (News - Alert) players to move into the traditional BPO space, and they are mounting a challenge to the status quo. This disruption goes beyond companies. Many countries that have relied on the BPO industry for economic development now see the era of easy work coming to an end.
Against this backdrop, competition is still as tight as ever in the A.T. Kearney 2016 Global Services Location Index, which helps companies determine the best places to locate their offshore business and IT service operations. True, countries in the Asia Pacific region continue to dominate the index, with eight out of the top 20 countries (and six out of the top 10) located in the region. But locations in Latin America and Eastern Europe also make a strong showing, with five countries each among the 20 highest scorers, based on a weighted average of financial attractiveness, people skills and availability, and business environment. We offer this lineup of top-ranked countries in this year’s GSLI.
The Top 10
No. 1 – India
India has led the index in every single edition since its inception in 2004. The country’s highly attractive financial conditions and its deep pool of skilled labor consolidate its position at the forefront of business and IT services offshoring. And the contracts and investment just keep on pouring in.
No. 2 – China
China is pulling closer to India as its population becomes more educated and proves itself more culturally adaptable. The drop in currency value has also helped, as has improved governance and more open financial markets. But China is much more likely to make its weight felt as a customer rather than a provider of BPO services.
No. 3 – Malaysia
Malaysia, without leading the scoreboard in any individual metric, nevertheless makes a solid showing in nearly all of them. And the action isn’t limited to Kuala Lumpur. The country is also building a major offshoring hub in Penang, just 100 miles south of the border with Thailand.
No. 4 – Brazil
Currency devaluation has given a shot in the arm to Brazil, which this year has risen four positions in the index to give Malaysia a run for its money. But to hold onto its post, the country will need to reverse the slight decline in its relative scores for IT and BPO experience.
No. 5 – Indonesia
Indonesia is not at the top of most professionals’ minds when they think about services offshoring. That’s a shame. The country’s immense talent pool, attractive financial profile, and solid infrastructure portend a future with great potential.
No. 6 – Thailand
Thailand is another Southeast Asian country with huge upside. Its companies are sophisticated, its population well educated, and, especially, its financial profile is extremely good. Thailand is a country to look out for in the future.
No. 7 – The Philippines
Many observers will be surprised that the Philippines does not rank higher in the index, given that it’s the clear runner-up to India in terms of business services outsourcing volume. Fortunately, the country is not resting on its laurels. Business and government are promoting the Next Wave Cities Program to extend the benefits of the BPO and IT services industry to tier 2 and tier 3 cities.
No. 8 – Mexico
Mexico has much to recommend it as a nearshoring destination for U.S. companies: a well-developed telecom infrastructure, a large population of ICT and engineering professionals, travel times similar to those of U.S. domestic destinations, and a growing pool of English-speaking talent. The U.S.’s southern neighbor also shows promise as a location to provide services to companies with customers among the U.S. Latino population, as well as to businesses in other Latin American countries.
No. 9 – Chile
Chile has one of the most accommodating business environments in all of Latin America and a strong education system. As a result, the country is a destination for high-end offshore functions such as research centers for global banking clients and R&D centers, as well as more traditional back-office jobs.
No. 10 – Poland
Poland closes out the top 10 in the index, climbing one position on the back of a strong improvement in compensation costs. The presence of multiple offshoring centers – not just Warsaw, but also Kraków, Wroclaw, Katowice, and Lodz – give Poland a considerable edge over its smaller regional competitors.
Johan Gott co-authored the 2016 GSLI and is a principal in the private equity practice at global strategy and management consulting firm A.T. Kearney (www.atkearney.com).
Edited by Rory J. Thompson