Article

Offshore comparison shopping: Best buys abroad

Linda Tucci, Executive Editor
India retains a strong lead as the country of choice for offshore spending on IT services, capturing 80% to 90% of total offshore outsourcing revenue, according to a recent report from consultant Gartner Inc. That's not chump change in a market Gartner predicts will reach $50 billion by 2007.

"India is the only leader," writes Ian Marriott, a Gartner analyst and author of the report that looked at 50 global sourcing countries.

The coronation comes as no surprise, but the Gartner snapshot on India's cost and scope of services paints a vivid picture of India's advantages. The average salary for programmers in the U.S. in 2004 was approximately $65,000, compared with just under $10,000 in India, according to the Gartner report. Anything under $15,000 gets a rating of excellent from Gartner. Of the 18 countries measured on programmer salaries in the report, only Vietnam, a neophyte in the offshore market, pays their programmers less than India does -- roughly $5,000 a year.

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Country Comparisons

Salaries under $15,000: Brazil, Czech Republic, Russia, Hungary, Malaysia, Philippines, Poland, China, India, Romania, Vietnam

Excellent  labor pool: India, Russia

Poor data or IP security:

China, Russia

Poor government support:

Czech Republic

"In terms of size and number of IT professionals, only China comes close to India in potential," Marriott said. "Although a long-term sourcing strategy may include several countries, India should be carefully considered, because it is the leading offshore contender with a successful track record."

But there are other options to consider, Gartner said, should you choose to embark on the often-painful process of country selection. Interest in near-shore countries for IT services and business process outsourcing is strong, particularly among European companies because of language requirements and in the United States because of the immaturity of the BPO offshore services. The United States, Canada and Mexico appear to be the most likely close-by options, according to the report; Canada for currency reasons and Mexico because of its obvious ability to serve the growing U.S. population of Spanish speakers.

Europe, Ireland and Scotland offer mature call center services, but with the expansion of the European Union to Eastern Europe, the Czech Republic, Poland and Hungary are attracting offshore investment, the report found.

One of several big warnings: India's success in taking on business process services has led other countries to jump on the BPO bandwagon, such as Mauritius, Barbados and China. But business process services are much more complex and long term, compared with application services. This means that a country's sociopolitical turbulence, physical and cyber security, and the enforcement of IP and patent law are of paramount importance when evaluating where to go for offshore BPO.

More offhore news

India's looming labor crunch

The new offshore rules

When comparing scope of services, Canada is on a par with India in offering expertise in applications, IT infrastructure and business process outsourcing. But the neighbor to the north doesn't begin to match India on labor cost. The average salary for Canadian programmers in 2004 was just under $40,000. When considerations other than cost are factored in, such as government support, labor pool, educational system and security are factored in, India remains head and shoulders above other countries, Gartner said, despite ranking only fair in key areas, such as infrastructure, political stability and cultural compatibility.

For companies that like to see what's on the far horizon, the Gartner report lists early entrants. In alphabetical order, they are: Argentina, Cuba, Fiji, Ghana, Morocco, Nepal, Nicaragua, Pakistan, Senegal, Slovenia, South Korea, Sri Lanka, Taiwan, Thailand, Tunisia, Turkey, United Arab Emirates, Venezuela and Vietnam.


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