AT Kearney ranks India top BPO destination

India has emerged as the top outsourcing destination in AT Kearney's Offshore Location Index 2004. It is followed by China and Malaysia. Countries from Asia, Latin America and East Europe make up the Top Ten.

India tops the list in terms of both cost advantages as well as offshoring experience and the skill sets of its people, while China and Malaysia trail India in terms of language skills and experience.

The survey termed India and China as "battling giants", saying India has a major lead through continuing cost advantages and its market maturity and the quality of its it training and management and English skills. China trails in business process outsourcing (BPO) experience and qualifications.

Singapore and Philippines also rank in the Top Ten, confirming the strength of Asian economies in offshore competition, AT Kearney said in its survey.

The index ranks the Czech Republic fourth, while Singapore is placed fifth, followed by Philippines, Brazil, Canada and Chile. Poland is placed tenth on the list, followed by Hungary and New Zealand.

Till now, India has attracted the lion's shore of offshore jobs without any impact on cost levels. While India's wages were comparable to other low-cost Asian locations, favourable tax rates and competitive infrastructure costs helped India maintain its overall cost advantage, the survey said.

AT Kearney expects the Czech Republic, Poland, Hungary and other East European countries to emerge as strong challengers to India.

Even though China is trailing, its cost advantages and large educated labour pool has helped it grow as an outsourcing destination for Japanese and Korean companies.

Since China joined the World Trade Organisation (WTO), companies in the West have opened more than 130 research and development centres there, the report added.

Both China and India, however, score poorly in terms of political and economic risks and weak infrastructure, with China scoring very badly in areas like intellectual property rights and bureaucratic red tape and it clearly needs to improve the English language skills of its workforce if it wishes to challenge India, the release said.

AT Kearney said Malaysia and the Philippines were emerging Asian contenders, while Czech Republic, Poland and Hungary were are emerging as European outsourcing hubs.

Brazil and Chile take the lead in Latin America. Singapore topped the business environment in offshoring with its aggressive government promotions, excellent education and infrastructure, high ratings for social and political stability and intellectual property rights.

Malaysia is a natural choice for offshore services with low costs on infrastructure and an attractive business environment, but it will be unable to match India or China's scale advantages, the report further said.

"But, effective government promotion of infotech and services sectors is likely to make Malaysia one of the strongest competitors to India's BPO dominance in five years," the AT Kearney report said.

As European companies start looking for offshore destinations, eastern Europe becomes a destination due to attractive cost options, cultural similarities, language skills and technical capabilities and minimal regulatory issues, it said.

Cost advantages and a large workforce with relatively good BPO experience are Brazil's strong points, the report has said. Chile offers the best business environment and infrastructure in the region, it said.

Strong performances by Singapore, Canada and New Zealand also proved that developed countries could be profitable destinations despite their high cost structure. They score high on international assessment of mathematical, scientific and reading literacy.