12 July 2010 | Angeline Albert
Most purchasers plan to expand offshoring activities aggressively in India in the next two years, but are also setting their sights on the Philippines, China, Malaysia, Mexico and Brazil.
The geographic spread of offshoring is extending to other parts of Asia and Latin America, according to a study of 90 global buyer organisations by the Everest Research Institute
Although more than 75 per cent of respondents currently use India and 70 per cent plan to grow their offshore work in the country thanks to its low operations costs, large workforce and established offshore history, they also expect to offshore business processes elsewhere.
The Philippines and China are the most prominent locations for expansion outside India, according to the report. The Philippines takes second place in buyers’ preference as a result of its good English skills and cultural affinity with the US. For companies with 2,500 or fewer employees, China is ranked third. Firms with more than 2,500 employees favour Mexico.
Growth in Mexico is driven only by companies that already contract services in the country. Other buyers perceive Mexico as a structural and operational risk particularly because of an escalation in drug-related violence. With regards to offshoring in China, operational risks connected to its political climate are the most prominent concern. In Malaysia the limited labour pool is the key risk.
The main drivers for expanding geographical spread are risk diversification, need for support in specific languages, regulatory requirements/constraints and the need for coverage in different time zones.