India remains the offshore hotspot of the world for now but its service competitiveness and cost efficiency is being challenged by Phillipines, Vietnam and Indonesia. And that's not all, in terms of scale, its neighbour China is fast closing in on its heels, according to IT consultancy firm Gartner.
"India is already the most successful country among the offshore locations. It continues to score very well across all the 10 criterion," Gartner said in its latest report on offshore services. According to Gartner, even though India's cost competitiveness is being challenged by the appreciation of its currency, it manages to compensate on the other nine criterion. The 10 criterion used to judge the attractiveness for offshore locations were language, government support, labour, infrastructure, education, cost, political and economic environment, cultural compatibility, global and legal maturity and data security and privacy.
"Attractive cost structures in the Philippines, Vietnam and Indonesia create tough competition for India, while China remains the most prominent challenger in terms of scale," the report stated. The top 30 nations identified by Gartner for globally sourced activities in 2010-11 include eight new countries.
Philippines is another attractive destination. Gartner sees foreign companies getting attracted to the country's young, experienced labour pool specialising in contact centers (customer interaction center) and finance and accounting and business process outsourcing (BPO), complemented by a good command of the language and cultural compatibility with Western economies.
"Clients continue to seek a portfolio of offshore countries and with India again experiencing increasing labour costs and attrition, this is creating opportunities for other offshore locations to target the service needs of more mature Asian clients," said Ian Marriott, research vice-president (V-P) at Gartner.
Gartner said India's competitiveness is also being challenged by countries like Indonesia that offer cheaper labour for IT and business process skills in the region.
This year Indonesia also improved its labour pool from 'poor' to 'fair' and improved 'costs' from 'very good' to 'excellent'.