India, China still top offshore locations list

by CXOtoday Staff    Mar 26, 2010

According to Gartner’s latest research, India and China still remain the undisputed leaders for offshore IT and business process outsourcing services in the Asia Pacific region. However, a number of countries are making considerable investments in this area and positioning themselves as credible alternatives.

"In view of India’s dominance, many countries trying to tap into this market are reassessing their strategy and looking at niche markets like call centers, logistics and other back-office functions where they might have a physical proximity advantage over mature countries like Australia, Hong Kong and Singapore," said Jim Longwood, research VP at Gartner.

The 10 leading countries in Asia Pacific included the undisputed leader in offshore services India, with China remaining the greatest challenger in terms of potential scale. The other countries include a mix of mature environments that offer limited cost benefits (Australia, New Zealand and Singapore) and emerging countries with a variety of challenges, but attractive costs (Malaysia, Indonesia, the Philippines, Thailand and Vietnam).

"Countries such as Malaysia, the Philippines and Vietnam have continued to strengthen their position against leading alternatives, while Indonesia has entered the top 10 for the first time," added Longwood.

Indonesia was a new entrant into the top 10 list this year due to its expanding business environment targeting both offshore IT and business services, its large labor pool and its well-established industry base in mining and manufacturing involving prominent multinational companies. Pakistan dropped off the top 10 list.

"This was largely due to Indonesia’s noticeable progress in addressing offshore opportunities rather than Pakistan’s drop in performance, but political instability was also an issue here," said Longwood.

In addition to the top 10, four other countries were also strongly considered: Pakistan, Sri Lanka, Bangladesh and North Korea. All of these countries have started to establish attractive environments for companies looking for low-cost countries or that have external service providers located in these countries that are beginning to sell services beyond the domestic market.