India leading offshore services nations' list

New Delhi, Mar 15: India, closely followed by China, continues to lead the list of the world's leading offshore services locations by a wide margin, with declines in cost advantage being offset by improvements in talent supply and business environment.

''People continue to be India's greatest asset, particularly the large and educated labour force in combination with relatively low labour costs. As a result of being the leading global offshore hub for several years, it can demonstrate high scores on relevant experience like major certifications,'' said Mr Vivek Gupta, Managing Director of management consulting firm AT Kearney Ltd.

The country also does well on Security of Intellectual Property, he said.

He, however, added, ''Just as its strengths are well known, so are the challenges it faces. Attrition levels remain a chronic problem, as does the tax and regulatory environment.'' According to a survey conducted by AT Kearney, in 2006, the South East Asian nations reinforced their position as the primary alternates to India and China, with all six major Asean markets of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam -- being ranked among the top 20 locations.

Besides Brazil, Chile, Bulgaria, Mexico, Slovakia, Egypt, Jordan, Estonia, Czech Republic, Latvia, Poland, Vietnam and the United Arab Emirates occupied the top 20 slots.

The survey also indicated that globally the wage cost advantage of offshore locations for office services is set to last for another 20 years.

Even though wages in offshore locations for services, such as IT, business processes and call centers, have started to rise, they will remain cheaper for the foreseeable future under the most aggressive projections of wage inflation and currency appreciation in developing countries, it added. The labour cost changes are partly the result of accelerating wages and currency appreciation in offshore hot-spots, as well as downward pressure on wages in impacted sectors in developed countries.

At the same time, key emerging markets have continued to improve their attractiveness in terms of access to talent, industry experience, quality certifications and their regulatory environment.

This year's Global Services Location Index showed how the relative cost advantage of the leading offshore destinations declined almost universally, while their scores for people skills and business environment rose significantly.

''While total compensation costs for sample positions like IT programmers or call center representatives rose by 5-10 per cent in most developed countries, average wages for similar positions in India, China, the Philippines and parts of Eastern Europe and Latin America grew anywhere from 20 per cent to 40 per cent,'' said Mr Martin Walker, Senior Director - Global Business Policy Council, AT Kearney.

''At the same time, we have seen telecom costs in many emerging markets drop by 25 per cent or more, as competition and volumes in the market increase. Similarly, we saw double-digit growth in university enrollment in countries like China, Brazil and Egypt, and the number of firms with quality endorsements like Carnegie Mellon's CMMI certification and the ISO 27001 data-security certification almost doubled in several emerging markets,'' he added.

Virtually every country in the index, even those which fell in the rankings, improved their absolute score in the last year - confirming that competition is intensifying and maintaining current performance levels is no longer sufficient to attract and retain the world's fast-growing remote services business.

The A T Kearney Global Services Location Index, conducted annually, analyses the top 50 services locations worldwide against 41 measurements in three major categories: cost, people skills and availability, and business environment.

UNI