Despite the dominance of countries such as India for offshore IT services to organisations in the US and UK, Gartner research of nine countries in Asia Pacific for offshore IT delivery rated all of them either ‘poor’ or ‘fair’ on the data/IP security and privacy criterion.
The study analysed India, China, Bangladesh, Indonesia, Sri Lanka, Thailand, Vietnam, Malaysia and the Philippines.
Gartner said organisations offshoring IT to these locations need to conduct thorough due diligence on the overall costs of delivery, taking into account risks, including security and privacy.
The research found India is still the most popular destination for offshore IT services, with China its nearest rival, but Eastern Europe and Latin America are now competing more aggressively.
Gartner said although India and China are the top two, Bangladesh, Indonesia and Vietnam are gaining regional traction for offshore service delivery. It also found that more mature countries in the region, such as Malaysia and the Philippines, are refocusing on their core capabilities of higher-end IT infrastructure, help desk, application and business process services.
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“Although the use of Asian countries for offshore or nearshore services has not yet peaked, we are seeing some distinct changes in demand and supply patterns in the region,” said Gartner analyst Jim Longwood.
“Ongoing cost pressures in Europe are driving some multinational corporations to consider moving their offshore services in mid-cost countries such as Malaysia to lower-cost locations in Asia, Eastern Europe and Latin America.”
Other pressure on Asia Pacific-based suppliers include Western countries becoming more protectionist, and their own cost increases.
To counter caution from their traditional customer bases in the West, suppliers in countries such as India are changing their business categories and expanding sales operations in other regions closer to home, said Gartner.
“With demand slowing in Europe and North America, we have seen a range of Indian providers expanding their regional Asian presence and leveraging their nearshore capabilities,” said Longwood. “As a result, they are growing their presence in more mature markets like Singapore and Malaysia, and are now challenging the traditional multi-national application service providers in these markets.”