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Gartner picks top 30 countries for offshore IT outsourcing

Linda Tucci, Executive Editor
While India and China remain the undisputed leaders for offshore IT outsourcing, companies have greater choice than ever before, according to Gartner Inc.'s annual ranking of the top 30 countries for offshore services. The Stamford, Conn.-based

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firm assessed 72 countries as offshore locations this year, said analyst Ian Marriott, lead author on the study. The news?

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"Countries such as Mexico, Poland and Vietnam have continued to strengthen their position against leading alternatives, while others have forced their way into the top 30," said Marriott, research vice president at Gartner. (Full list is below.)

The other news? Unlike the stock market or company earnings, it been a very good year for outsourcing. Gartner is standing by its prediction of 60% growth in offshore IT outsourcing in Europe and 40% growth in outsourcing in the U.S. in 2008.

Marriott said the volatility in the global economy during the past 12 months has changed the offshore IT outsourcing dynamic, causing some countries to solidify their position and others to drop off the list. The four countries leaving the top 30 this year were Northern Ireland, Sri Lanka, Turkey and Uruguay. The new entrants into the 30 leading countries for offshore services were Egypt, Morocco, Panama and Thailand.

Language skills and cultural compatibility play into the rankings. Marriott said European companies, for example, have found Morocco appealing for its French language skills, which are hard to come by in India. Vietnam continues to attract customers because it is so cheap. The near-shore benefits of Egypt and Panama and the cost consideration in Thailand were also important.

Of the seven countries from the Americas that appeared in the final list of 30, only Canada was rated "excellent" for language (with fluent English and French). But Latin American countries are able to leverage their Spanish-language skills in the U.S. for organizations with workforces that speak Spanish as a first language.

Canada fared the worst on cost compared with all other countries in the Americas region. However, Canada again led the rating for political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy.

Argentina was rated less favorably than the rest for its political and economic environment. Brazil and Mexico were considered "very good" for cultural compatibility, and the Latin American countries all managed a solid "good" rating for global and legal maturity. As observed in other regions, data and intellectual property security and privacy remain "work[s] in progress" for many developing countries.

Ten countries from Asia/Pacific were represented in the 30 leading countries. These included India and the greatest challenger in terms of potential scale -- China. The rest are a mix of mature environments that offer limited cost benefits (such as Australia, New Zealand and Singapore) and emerging countries with a variety of challenges but attractive costs (such as Malaysia, Pakistan, the Philippines, Thailand and Vietnam).

For the companies that send business to India, the recent terrorist attacks in Mumbai have heightened attention paid to business continuity plans. The violence is of more concern to companies that work with a single vendor in India, Marriott said. But the traditional global firms that do have outsourcing operations in India are well-positioned to move work elsewhere. And the large Indian providers also have spent considerable effort in recent years in establishing operations throughout Asia and increasingly in South America, he said.

Here is the list of 30 countries, by region:

Americas: Argentina, Brazil, Canada, Chile, Costa Rica, Mexico and Panama.

Asia/Pacific: Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Thailand and Vietnam.

Europe, the Middle East and Africa (EMEA): The Czech Republic, Egypt, Hungary, Ireland, Israel, Morocco, Poland, Romania, Russia, Slovakia, South Africa, Spain and Ukraine.

Let us know what you think about the story; email: Linda Tucci, Senior News Writer


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