American businesses looking to place their technology operations offshore should give strongest consideration to India, Canada, or China, said a report released by outsourcing consulting firm neoIT.
India, which took the No. 1 spot in neoIT's ranking of 14 possible IT outsourcing destinations, offers "cost competitiveness, a highly skilled labour pool and a high level of service maturity," it said in its annual report 'Mapping Offshore Markets Update 2005.'
The country's skilled labour pool and mature level of services helped it provide $12 billion in outsourced IT services last year. It also leads the world in IT services exports, with sales topping $12 billion last year.
To help companies evaluate potential offshoring location, neoIT has ranked countries based on the neoIT 'Offshore
Attractiveness Index,' which rates each country's characteristics to generate a quantitative net cost benefit of outsourcing to that destination.
The five factors are:
- Financial benefit.
- Service maturity
- People
- Infrastructure, and
- Catalyst.
Components of the Offshore Attractiveness Index
|
|
Level 1 Factors |
Level 1 Weights |
Level 2 Sub-factors |
|
1 |
Financial benefit |
30% |
|
|
2 |
Service maturity |
25% |
|
|
3 |
People |
25% |
|
|
4 |
Infrastructure |
5% |
|
|
5 |
Catalyst |
15% |
|
Source: neoIT
NeoIT ranked Canada second, noting its "geographic proximity to the US" and its "skilled labour force."
Canada's IT services exports last year totalled $8.2 billion. China, with its "low cost, large pool of skilled labour, and rapidly improving infrastructure," ranked third.
In its report, however, neoIT cautions that China's attractiveness is "negatively affected by the lack of English-language proficiency" in the country. China exported $700 million worth IT services last year.
Based on the index, India, Canada, China, Poland and Ireland ranked in the top five. Other countries ranked in the report include Ireland, the Czech Republic, Russia, Malaysia, Mexico, Hungary, the Philippines, Brazil and South Africa.
NeoIT also found that Eastern Europe has been rapidly gaining ground as the preferred outsourcing destination for Western Europe, while the Philippines, Malaysia and Mexico also make steady progress as preferred global destinations.
Poland ranked fourth with its "low overall business operations cost" and "language and cultural connections with Western Europe."
The sixth-ranked Czech Republic is "an emerging contender," neoIT said. Russia ranked seventh, as the consulting firm raised flags over the country's "unpredictable political and business climate.
