Skill availability is critical for selecting an offshore destination. Over the last decade, several new offshoring destinations have emerged across Asia, Eastern Europe, Nordic region and the West Asia. Although, the quantum of offshoring to some of the geographies is low at present, the future scenario is likely to change, driven by the rush amongst the established service providers to set up base in these low cost regions.
Apart from the traditional low-cost arbitrage possibilities, the other prominent drivers for setting up base in offshore destinations include service language markets other than English, create a global footprint, exploit regional, cultural compatibilities, geographical de-risking, disaster recovery management and skill availability, said ValueNotes in its latest research.
India?s strength lies in its vast pool of skilled manpower. The value proposition that India puts forward cannot be easily replicated. The country?s prominence as an offshoring destination for high volume as well as high value and complex jobs will be maintained, but only as long as the country is able to maintain the supply of qualified people at a reasonable cost.
The availability of domain skills differs amongst destinations and their competitive positioning depends on availability of the skill sets. While India scores high on research and analytical skill count, Philippines and East European countries score higher in customer relationship management functional skills compared to other destinations. China is strong in IT and non-voice transaction processing work.
China has good infrastructure and low cost labor. However, the country?s lack of English skills is a hurdle for the high-end analytical jobs.
Singapore is positioned as a safe location for sensitive high value activities, and the government policies there has simplified the outsourcing process further. But costs are significantly higher. Philippines has an edge over other Asian countries due to the English language skills of its workforce.
Eastern European countries are poised to take more offshoring business, due to their attractive regulatory environments as well as proximity and cultural similarity with Europe. While Nordic countries like Denmark and Sweden specialise primarily in back office services and mostly cater to the European companies and financial institutions.
Though labour cost arbitrage has been the primary driver for offshoring, skill availability will determine the comparative advantage of vendor destinations in the long run.