Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ Listed At No. 12 In Offshoring Rankings Report

Established Players and New Locations Compete for Offshore Jobs, Increasing Complexity for Companies, New
A.T. Kearney Study Finds

India, China lead top 25 ranking, as new contenders emerge in Asia, Europe and Latin America; high quality and low costs present challenge to U.S. and other mature markets

NEW YORK (March 30, 2004) — Countries to which white collar jobs are being offshored offer a range of attractions besides low-cost labor, creating a complex decision-making process for companies selecting offshore locations, according to a new study, the Offshore Location Attractiveness Index, by global management consulting firm A.T. Kearney.

Countries competing to establish themselves as offshore destinations now offer a broad spectrum of assets. Large-population countries such as India and China, and to a lesser extent, Russia, Brazil and the Philippines, offer vast pools of educated workers. At the other end of the spectrum, small, highly-developed economies like Singapore, New Zealand and Ireland offer excellent infrastructure, education systems and business-friendly low-risk environments that make them attractive offshoring locations, also.

Highlights of the 2004 Offshore Location Attractiveness Index
India tops the index by a wide margin, ranked first not only for cost advantages, but also for the depth and breadth of offshoring experience and people skills. While trailing India in language skills and experience, China ranks second, thanks to a similar combination of low-cost, high-volume skills. Malaysia, Singapore and the Philippines also rank in the top 10, confirming the strength of Asian economies in the offshore competition. The Czech Republic, Poland, and Hungary also score highly, reflecting growing interest in offshoring among European companies. Brazil and Chile lead the pack in Latin America.

Higher-income locations like Canada and New Zealand continue to perform well, thanks to high education levels, infrastructure quality and business-friendly environments
"Offshoring today is about much more than labor arbitrage," said Andrea Bierce, a vice president in A.T. Kearney's financial institutions practice in New York and a co-leader of the study. "Companies considering where to locate must weigh a complex balance of factors having to do with the availability and quality of the workforce and the business environment. There is no 'one size fits all.'"

Bierce said companies at advanced stages of global sourcing increasingly are pursuing multi-location offshoring strategies, trying to find the most advantageous mix of benefits and risks from multiple destinations around the world.

A.T. Kearney's 2004 Top 12 Ranking for Offshore Location Attractiveness

1. India
2. China
3. Malaysia
4. Czech Republic
5. Singapore
6. Philippines
7. Brazil
8. Canada
9. Chile
10. Poland
11. Hungary
12. New Zealand

The A.T. Kearney Offshore Location Attractiveness Index analyzed the top 25 offshoring destinations against 39 measurements in three major categories: cost, people skills and availability, and business environment.

The study team assigned weights reflecting the drivers of offshoring decisions based on A.T. Kearney research and engagement experience. Because cost advantages have been the primary impetus behind offshoring, financial factors constitute 40 percent of the total index weight. People skills and availability and business environment each received a 30 percent weighting.
The complete top 25 ranking is included in the Offshore Location Attractiveness Index white paper.

India and China: Battling Giants
India's pre-eminence as an offshore location is remarkable. While the mix of cost and quality criteria used in the index results in most countries clustered in a narrow band, India outperforms its nearest competitor by a very wide margin. "India has extended a significant lead through its continuing cost advantages and its increasing market maturity," said Stefan Spohr, A.T. Kearney vice president and study co-author. "It has attracted the lion's share of offshore migration activity to date without any impact on cost levels."

While India's wages are comparable to other low-cost Asian locations, favorable tax rates and increasingly competitive infrastructure costs help India maintain its overall cost advantage. India's established lead in IT and business process outsourcing, together with the quality of its IT training and management schools and English language skills, enables India to capture the top spot in the people skills and availability category.

Although China trails India in BPO experience and qualifications, its cost advantages and large educated labor pool helped move it to second place. A growing offshore destination for Japanese and Korean companies, China also attracts U.S. and other multinationals because of its talented workforce. Since China joined the World Trade Organization, Western companies have established more than 130 R&D facilities there.

Both China and India score poorly for political and economic risk and weak infrastructure. China scores particularly poorly in areas of intellectual property piracy and bureaucratic red tape. Most importantly, China clearly needs to improve the English language skills of its workforce if it wishes to challenge India.

China's national and regional governments are now targeting the IT and BPO sectors, with IT skills and language training, subsidies for certification, special economic zones and software industry parks. As the supply of multi-lingual, IT-skilled labor grows, China's low wages will make it an increasingly formidable competitor. China's East Asian language skills, especially Japanese, are likely to give it an advantage over India.

Malaysia and the Philippines: Emerging Asian Contenders
While sometimes overlooked, Malaysia is a natural choice for offshore services. Low costs, particularly for infrastructure, the most attractive business environment among emerging markets, and high levels of global integration helped Malaysia reach the number three spot in this year's index

With only 22 million people, Malaysia will be unable to match India's and China's scale advantages, but effective government promotion of the IT and services sector will likely make Malaysia one of the strongest competitors to India's BPO dominance in the next five years.

While smaller in scale, the Philippines offers many of the same attractions as India: widespread English language skills and a cultural affinity for the U.S., very low costs and promising HR capabilities. The Philippines has more students enrolled in tertiary education than most European countries; more, in fact than any other country in the Index except China, India, Russia and Brazil.

The Czech Republic, Poland and Hungary: The Emerging Europeans
As European companies begin to explore offshoring, they look to the East - not to the Far East, but to Eastern Europe, which offers attractive cost options, cultural similarities, good language skills, strong technical capabilities and minimal regulatory issues for European firms. For Europe, the fragmentation of languages will require companies to offshore to a combination of countries, helping to drive the proliferation of new players.

The Czech Republic stands out in this increasingly attractive region, ranking fourth. Competitive infrastructure costs, a stable business environment and particularly strong education results make it an attractive destination for multinational corporations. A.T. Kearney anticipates a rising tide of offshore investment in the Czech Republic in the next few years, and in other Eastern European countries such as Poland and Hungary.

Singapore: Tops for Business Environment
With one of the highest per capita income levels in the world, Singapore hardly leaps to mind as a low-cost offshore location. However, excellent education and infrastructure, high ratings for economic and political stability, intellectual property protection and aggressive government promotion of the IT and services sectors continue to reinforce Singapore's position as a favorite location for regional service functions.

Brazil and Chile: Latin Leaders
Brazil and Chile are the Latin America representatives in the 2004 Index. Cost advantages and a large workforce with relatively good BPO experience are Brazil's strong points. While generally more costly than other Latin American locations, Chile offers the best business environment and infrastructure in the region, and the government is aggressively pursuing offshore opportunities.

Cost Isn't Everything
Strong performances by Singapore, Canada and New Zealand prove that developed countries can be profitable offshore destinations despite their high cost structure. All of the higher-income countries contending as offshore locations score high on standardized international assessments of mathematical, scientific and reading literacy.

Two countries that have witnessed some of the highest levels of public concern about offshoring, the U.S. and Germany, do not perform as well in these same assessments, ranking behind Canada, New Zealand, Australia and Ireland on math, science and reading literacy. In another study, the U.S. also trailed several other countries, including emerging markets, in math and science performance - notably Singapore, Hungary, the Czech Republic and Russia.

Although the U.S. and the other "customer markets" for offshore services were not surveyed in this study, the results make clear that cost is not the only factor impacting companies' offshoring decisions. For example, most developed countries currently produce far fewer science and technology graduates than their economies demand. Unless these shortages are addressed, companies have little choice but to source these talents elsewhere.

"As competition among offshore destinations increases and options proliferate, CEOs will need to consider issues ranging from geopolitical risks to compensation costs to quantity and quality of human resources," said Paul Laudicina, co-author of the study and A.T. Kearney vice president and managing director of the firm's Global Business Policy Council. "Quality is rising in importance and those countries offering better productivity, service quality and enhanced technical skills will gain a competitive edge."

"Countries concerned about exporting jobs should address the factors they can affect on their own shores," Laudicina said. "There is no silver bullet. But by raising educational standards, investing in research, providing more extensive training and reinforcing the culture of innovation, countries can remain competitive, gaining the productivity benefits of offshoring while minimizing and managing the short-term risks."

About the Global Business Policy Council
The Global Business Policy Council is a strategic service of
A.T. Kearney that helps chief executives monitor and capitalize on geopolitical, economic, regulatory, technological and social change worldwide. Council membership is limited to a select group of corporate leaders and their companies. The Council's core program includes periodic meetings in strategically important parts of the world, timely analytical products, regular member briefings, regional events and other services.

About A.T. Kearney
A.T. Kearney (www.atkearney.com) is one of the world's largest management consulting firms. With a global presence that includes more than 60 offices in 37 countries, spanning major and emerging markets, A.T. Kearney provides strategic, operational, organizational and technology consulting and executive search services to the world's leading companies. A.T. Kearney is the high-value management consulting subsidiary of global services leader EDS.


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Onetai Station: Overseas Investment Office Puts Ceol & Muir On Notice

The Overseas Investment Office (OIO) has issued a formal warning to Ceol & Muir and its owners, Argentinian brothers Rafael and Federico Grozovsky, for failing to provide complete and accurate information when they applied to buy Onetai Station in 2013. More>>

ALSO:

Tomorrow, The UN: Feds President Takes Reins At World Farming Body

Federated Farmers president Dr William Rolleston has been appointed acting president of the World Farmers’ Organisation (WFO) at a meeting in Geneva overnight. More>>

ALSO:

I Sing The Highway Electric: Charge Net NZ To Connect New Zealand

BMW is turning Middle Earth electric after today announcing a substantial contribution to the charging network Charge Net NZ. This landmark partnership will enable Kiwis to drive their electric vehicles (EVs) right across New Zealand through the installation of a fast charging highway stretching from Kaitaia to Invercargill. More>>

ALSO:

Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>

Earlier:

Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>

ALSO:

Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news