The world's top 20 outsourcing hotspots

India remains the favourite backoffice of the world thanks to its 'first-mover advantage' and deep skill base, as per global management consulting firm AT Kearney's ranking of the best outsourcing destinations.

The top slot in AT Kearney's 2011 Global Services Location Index is occupied by India.

"India is the all-around standout, able to provide manpower for any type of offshoring activity. With its first-mover advantage and deep skill base, it still maintains the lion's share of the IT services market," the report said.

Furthermore, the report says India has proven itself adept at competing in all dimensions of the industry, being the "pre-eminent destination and leader" in all fields of offshore services.

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India has excellence in IT, thanks to its elite educational institutions, in BPO because of the large annual output of qualified graduates and in voice, because of the English language capabilities of its population.

"With its first-mover advantage and deep skill base, India remains the unquestioned leader in the index --- a half -point ahead of China and a full point in front of Malaysia.

"On top of that, India's IT services stalwarts are moving up the value chain," the report said, adding that companies such as Infosys and Wipro are developing their R&D capabilities and expanding well beyond their traditional vendor roles.

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2. China

China follows next at the 2nd position. Both India and China have a good majority of educated young people with good labour cost opportunities.

China lags behind India in terms of industry size, lack of language capability, concern over intellectual rights protection. China is an important player in the Asia-Pacific offshoring sector.

China has begun offering specialised skills not only in English, but also Korean, Japanese and Chinese.

However, China may not make a great impact in the call centre arena, the report said, adding that China's most attractive avenues are high-end analytics and advanced IT, where it is an alternative to Russia and Eastern Europe.

Nevertheless, it can be a strong competitor to India in the BPO sector.

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3. Malaysia

Malaysia is the third best outsourcing destination. It offers a safe business environment, good quality human capital at a low cost and strong government support, says the study.

Indonesia, Vietnam and Thailand have not yet devoted as much as they can to promoting information and communications technology, but they score highly in the index because of their vast talent pools and competitive wages.

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4. Egypt

Egypt is the world's fourth best outsourcing destination. The currencies of Eygpt and Jordan are closely linked to the dollar and their competitiveness is strengthened by a weak dollar.

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5. Indonesia

Indonesia is the 5th best outsourcing nation. It has the potential to compete with the Philippines.

The survey further said the global financial crisis has slowed recent offshoring moves, the percentage of companies' staff offshore may very well increase as a result of the crisis.

Layoffs at home are not translating to layoffs among offshore workers as companies seek to reduce costs.

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6. Mexico

Mexico, in 6th place worldwide, leads the region, due to a sharp drop in wages over the year, the increased attractiveness of "near-shoring" and a well-developed talent pool.

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7. Thailand

Thailand comes next on the list at the seventh position. Thailand and Indonesia share similarities with the Philippines but lag behind in terms of language skills.

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8. Vietnam

Vietnam is a country to watch out, says the study. It has an offshoring industry focused on information technology. Japanese companies have outsourced work to Vietnam for years.

It is the 8th hottest BPO destination in the world.

Singapore has the best business environment according to the study.

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9. Philippines

The Philippines is the world's 9th best offshoring nation. It is also the second largest offshoring destination, with a 15 per cent share of the global market.

The Philippines, an early entrant into the service sector, is also relatively well-rounded.

It has had more than a decade to hone its capabilities and has now moved into IT operations from being primarily a contact-centre hub.

It has many call centres serving the US market. It is now moving into IT and non-voice BPO services, states the study.

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10. Chile

Chile is the 10th best outsourcing destination and a leader in Latin America. Its favourable business environment and political stability are the positive indicators.

The country is also set to join the Organisation for Economic Co-operation and Development (OECD), a symbolic entry to the league of advanced economies, says the study.

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11. Estonia

While many European countries were badly hurt by the financial crisis, Estonia (11), Latvia (13) and Lithuania (14) saw their ratings climb.

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12. Brazil

Sao Paulo, in Brazil, is transforming from a strong industrialised base into a service and technology-oriented offshoring location.

The city has a mix of global multinational executives who have their BPOs and contact centers providing IT services and R&D.

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13. Latvia

Lativa and some other European  countries engaged in a process of "internal devaluation", cutting wages and expenditures, and as a result were able to offer highly competitive cost structures.

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14. Lithuania.

Lithuania  has a strong knowledge-based economy. It ranks 14th in the list of the most attractive oursorucing destinations in the world.

Its economy is the production of high value-added products and services.

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15. The United Arab Emirates

The Middle East and North Africa have also become increasingly attractive because of their proximity to Europe and their vast talent pools.

The United Arab Emirates climbed to 15th overall, serving as a regional services hub.

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16. The United Kingdom

The United Kingdom was also able to benefit from a sharp drop in wages and climbed to 16th in the ratings from 31st in 2009.

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17. Bulgaria 

Bulgaria is the 16th hottest BPO desitnation worldwide. Low wages, good language skills and an economy that is slowly gathering pace when it comes to knowledge-based services and products have seen Bulgria move up the ladder.

Other countries on the list of 50 are Germany (26), Singapore (32), Canada (39), France (44) and Australia (46).

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18. The United States

The United States is the top customer for outsourcing services, accounting for 63 per cent of global IT outsourcing spending.

Its tier-2 locations rank 18th as outsourcing locations, thanks to a combination of talent and accessibility.

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19. Costa Rica

Costa Rica is the 19th best outsourcing destination in the world.

The Global Services Location Index analyses and ranks the top 50 countries worldwide for locating outsourcing activities, including IT services and support, contact centres and back-office support.

The rankings are based on a country's performance in categories such as financial attractiveness, people and skills availability and the business environment.

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20. Russia

India continues to lead the IT outsourcing market, although the battle for supremacy in the outsourcing business could witness a change with Russia emerging as a strong contender.

Currently, Russia is the 20th largest IT outsourcing supply market, behind India, China and many others.

Russian IT companies specialise in high-end software and embedded software product development, which acts as a differentiator from lower-priced Indian offerings.