Top 10 Global Outsourcing Destinations’ Pros and Cons
Outsourcing is the “secret ingredient” for many successful companies. Here is what you need to know before you decide to outsource.
The Business Case for Outsourcing
Your outsourcing decision should ultimately be based on a candid assessment of how to meet your company’s strategic needs. When asked to make the business case for outsourcing in their own organization, business owners and executives routinely report the following competitive benefits and advantages:
- Outsourcing provides a reliable and immediate source of an adaptive workforce that can react in a timely fashion to a rapidly changing marketplace.
- The shared services characteristics of outsourcing can reduce costs, improve customer service and increase productivity.
- Doors to new business opportunities open more quickly when you bring specialized business skills (usually available immediately through strategic outsourcing) to the table.
- Outsourcing improves competitive differentiation — how your company stacks up to the competition — by allowing you to tap into a fluid supply chain of highly trained professionals.
For companies that routinely rely on outsourcing, most have become comfortable with the realization that outsourcing is a strategic need for business success.
Where Are the World’s Best Outsourcing Companies?
Although India and China are the leading destinations for overall outsourcing, the Philippines and Sri Lanka have established a growing influence in the world of outsourcing. For companies seeking offshoring of IT needs, India remains well ahead of other outsourcing alternatives.
Outsourcing has a distinctly international flavor, although 6 of the top outsourcing destinations are located in India and 2 of them in Philippines. We have picked up these cities from Tholons 2014 rankings, and highlighted their pros and cons with regard to outsourcing:
1. Bangalore, India
- Bangalore continues to be the world’s No.1 outsourcing destination for the past 25 years.
- The city offers a unique combination of talented workforce with first-rate English skills, large pool of vendor selection, impressive infrastructure, and partnership opportunities.
- Along with a pleasant weather and a cosmopolitan culture, Bangaloreans enjoy a lively nightlife. The only trouble is the increasing traffic in certain parts of the city, which is expected to be overcome with the metro rail project.
2. Manila, Philippines
- Manila has fast emerged as a top outsourcing destination, particularly for Finance and Accounting Outsourced (FAO) services.
- Salary costs in Manila compares favorably against other outsourcing destinations such as Singapore and Kuala Lumpur.
- Due to the steadily increasing value for Philippines Pesos, the local currency, the low-cost BPO industry has come under threat.
3. Mumbai, India
- More than 5% of India’s total GDP is generated from Mumbai.
- Good infrastructure and talented workforce make Mumbai a preferred outsourcing destination for BPO services.
- There are contradicting views about women safety in Mumbai.
4. Delhi, India
- Being India’s capital city and the country’s political power house, Delhi enjoys one of the lowest infrastructural constraints compared to other Indian cities.
- Delhi and its adjacent NCR (National Capital Region) have seen quicker transformation over the past 15 years, making Delhi a most favored IT and BPO outsourcing hub.
- The city is known for its extreme weather conditions. Between summer and winter, people have to adjust to sharp temperature differences.
5. Chennai, India
- Chennai is known as the “Gateway of South India” and produces a number of highly qualified technical graduates from its pool of top-ranking educational institutions, including the prestigious Indian Institute of Technology (IIT), Madras.
- Chennai offers the finest infrastructure and a very low cost of living.
- The city’s humidity can be overwhelming.
6. Hyderabad, India
- Hyderabad ranks second among the largest providers of IT-enabled services in India.
- The largest number of highly educated professionals in India emanate from this city.
- The city is currently serving as the twin-capital for the erstwhile State of Andhra Pradesh, which has been bifurcated into Telengana and Seemandra. Political movements to bifurcate the state have led to deep social tensions among the citizens of both states.
7. Pune, India
- Pune is a well-established outsourcing IT destination with most business-friendly areas like Kharadi, Hinjewadi, and Tathawade.
- The city has lower real estate costs and is house to 50+ top IT and BPO companies who have their main offices here.
- The language skills in English are found to be average when compared to other cities.
8. Cebu City, Philippines
- Cebu is a major commercial hub with leading universities including San Carlos and South Western.
- The local government aims to grow the outsourcing industry by 15 percent in the next three years.
- Experts have however observed the need for Cebu to produce more talented workforce.
9. Kraków, Poland
- Kraków is the one of the highest ranking cities in Central Europe with reputed universities.
- Advantages of investing in Krakow include quality and size of the labor market, and costs related to conducting BPO business activity.
- Nevertheless, the outsourcing sector in Kraków is working towards breaking certain trust barriers which still exist, making potential clients reluctant to investing in this city.
10. Dublin, Ireland
- Dublin offers highly qualified staff and has a globally recognized educational system.
- Many companies service clients with ‘first-language’ employees.
- Although an attractive destination, costs are comparatively less competitive than the other top destinations mentioned above.
What to Look Out for
There is an increasing competition by many countries to become the most favored outsourcing destinations. If you have any experience in outsourcing, we would welcome your comments about the changing landscape of global outsourcing and the impact in makes locally and globally.
– Back Office Pro