NeoIT’s Take on Offshore Markets

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    If you’re in charge of sorting through your company’s plans for offshore IT or business process outsourcing (BPO) work, run — don’t walk — over to this site and download a copy of “Mapping Offshore Markets Update 2005,” by NeoIT.

    What a useful document — and it’s free! In it you’ll find a wealth of insights that help put offshoring into perspective.

    After a basic rundown on the concepts of onshoring, offshoring and nearshoring, NeoIT provides its take on the size of the IT and BPO for the main countries doing that.

    Not counting work being done domestically in the US or major EU countries, ITO tallies up to $25 billion for 2004. About $12.2 billion in BPO was performed. India received the lion’s share — about 47% of the overall market. The next closes competitor: Canada with 37%. Ireland was number three, with 6% of the business — though all of it ITO and not BPO.

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    Once the scope of the market is laid out, NeoIT provides its annual “Offshore Attractiveness Index.”

    It examines several factors for each country and scores it. Then it adds up the scores and applies a weighting factor to rank the contenders.

    Level 1 factors include: financial benefit (cost savings for labor and operations, which is weighted at 30%), service maturity (process maturity, industry size, and security and IP protection, rated at 25%), people (the labor pool and skill level, language proficiency, HR and education standards (rated at 25%) infrastructure (telecom and communication as well as physical, rated at 5%) and catalyst (government support, cultural compatibility, time zone differences and the geopolitical environment, rated at 15%).

    The report provides a ranking for both ITO and BPO.

    India comes out on top for both. Canada is number two for ITO, followed by China. The Philippines are number two for BPO, closely followed by Poland, Ireland and Canada, in that order.

    And what of the competition between India and China? Here’s what the report says, in part:

    The only country with the potential to challenge India’s dominance of the ITO and BPO industries is China. But its potential is still small. Though the country boasts a large pool of inexpensive, skilled labor and a vibrant domestic IT industry, its international activity has been minimal… More importantly, Chinese suppliers lag miles behind their Indian counterparts in process maturity and project management capabilities. Decades of isolation have made English language proficiency uncommon in China, largely depriving the country’s suppliers of access to lucrative US and UK markets…

    You’ll also find a SWOT chart (strengths, weaknesses, opportunities and threats) that provides details — and advice — for each country, as well as detailed lists of IT and BPO functions that you might consider sourcing globally — and the countries that are currently best suited to take in the work.

    The only item missing: Inclusion of the US. I think it’d be useful to find out how NeoIT would position this country with its domestic outsourcing industry against the other contenders.

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