Top five outsourcing destinations to watch

India maybe losing its pre-eminence as the IT outsourcing venue of choice. Here we look at five outsourcing venues to watch

1. Argentina

Argentina is seen by many companies as an ideal location for outsourcing.

For one, it has low market and labour costs. With budgets tighter than ever, this is a big plus for many UK firms.

Argentina also has a large labour pool[], which is highly literate, both in terms of IT and language. Spanish is the first language of Argentina, and English is the second.

The labour force includes a solid base of technically savvy and well-educated workers, particularly programmers, ready for work at a reasonable price.

The country developed its IT talent during the dot-com boom of the Nineties.

During this time, Argentina supplied around 65% of the design and implementation work for most of the regional Internet start-ups.

Argentina also boasts a robust, deregulated telecoms network, and an abundant supply of office-space.

The Latin American country is also attractive because of its cultural similarities to the West.

Argentina pros and cons

Pros - Argentina is rich in natural resources, has a highly literate and skilled IT population, and a diversified industrial base.

Cons - Argentina's government has done little to support or develop IT outsourcing over the past decade. It has also suffered some difficult economic problems - inflation, external debt, capital flight, budget deficits. However, the economy is improving.

2. Bulgaria

Bulgaria is climbing as an outsourcing centre, catching up on more established centres such as the Czech Republic.

Amongst the Eastern European outsourcing locations, Bulgaria competes with Slovakia, Hungary, Poland Russia and the Ukraine.

Eastern Europe is attracting many Western Europe firms looking to outsource, because of the region's cultural affinity with the West.

Like the Czech Republic, Bulgaria's relatively low costs and strong education system are key factors in its favour.

Bulgaria has benefited from improvements in its business environment, as a result of reforms carried out to qualify for European Union membership. Bulgaria joined the EU on January 1, 2007.

Bulgarian outsourcing vendors excel in the more challenging programming technologies, with developers being well versed in C++, Java and open source.

Bulgaria also has a good mix of high skills, fairly low labour costs and good production quality.

Bulgaria pros and cons

Pros - As an EU member, Bulgaria has a close affinity with western European countries and businesses. The IT outsourcing sector has benefitted from economic reforms, and the country offers highly skilled developers.

Cons - The cost of outsourcing to Bulgaria can be higher than outsourcing to the Far or Middle East and Africa.

3. China

Along with India, China is still a top outsourcing domain, and is growing in popularity.

Its IT sector is also growing and developing.

China provides an excellent supply of low-cost outsourcing resources - labour in particular - as is the case with India.

Secondly, if western companies are dealing with customers or companies who have Asian headquarters, there is a language and cultural advantage to outsourcing to China. For example, in cities like Shanghai, engineers tend to be multi-lingual, speaking Japanese and Chinese.

However, when it comes to the English language capability of Chinese workers, this tends to be unsatisfactory for many western businesses.

China also lacks good protection for intellectual property, so software or products could be duplicated with little comeback.

Another consideration is that China is several time zones away for western companies, particularly US firms, which can make communicating hard work.

China pros and cons

Pros - China offers low-cost outsourcing, and strong links with Asian markets. It is also worth considering for low-cost software development.

Cons - Intellectual property protection is limited, language may be a barrier in working with Chinese vendors and workers, and China is many time zones away.

4. Egypt

As an IT outsourcing region, the Middle East and Africa is growing as a home to remote services for global companies in Europe, Asia and the US.

Egypt, Jordan and the United Arab Emirates (UAE) are all on the rise, along with Tunisia, Ghana, South Africa, and Israel - with its extremely skilled programming workforce.

Egypt, in particular, claims to have one of the largest talent bases of any country in the Middle East.

It is home to an increasing number of outsourcing centres operated by multinationals. For example, Indian outsourcing giants Satyam and Wipro have expanded by setting up outsourcing centres in Egypt.

Egypt is recognised for its young working population, large multilingual workforce, solid infrastructure and competitive cost structure.

The Egyptian government also offers tax incentives to outsourcing propects.

Egyptian outsourcing firms claim that their language skills and low labour cost would be able to compete with India in terms of handling outsourced work.

Egypt pros and cons

Pros - Egypt is growing in popularity, boasting a large multilingual workforce, and solid IT infrastructure.

Cons - Egypt, and the Middle East region as a whole, continues to be politically volatile. As such, it may be unappealing to some Western businesses.

5. The Philippines

Southeast Asian nations are continuing to build up an outsourcing presence. The Philippines is one of the faster growing countries, vying with Malaysia, Thailand, Indonesia and Singapore.

The Philippines has a blossoming IT outsourcing sector, and the lowest wage and telecoms costs of all the outsourcing countries.

The Philippines is strong in back-office outsourcing, in addition to its traditional contact centre services.

Back-office firms provide finance and accounting, HR management, payroll, logistics and publishing.

Philippine outsourcers also specialise in application development and legacy application maintenance, and are well versed in Java and .NET.

Recent currency appreciation has driven wages up by a third, but the country has managed to stay cost competitive despite this.

The Philippines has a close cultural affinity with the US, and workers have a good command of English.

It is a popular choice for companies that want to move their low-level maintenance work offshore.

Philippines pros and cons

Pros - The Philippines is a good location for straightforward software development projects, business process outsourcing, and legacy application maintenance, for a good price.

Cons - The time zone difference may cause problems. The country's software services sector is not as big or broad as, say, India. There is also the question of political instability.

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