C&W report ranks top outsourcing locations worldwide by assessing costs, risks and operating conditions
- Vietnam capitalises on increasing Chinese labour costs to take first place in ranking
- India remains the world’s largest BPO market
- The maturing Philippines leapfrogs India in terms of growth, strengthening its proposition as a BPO market
- New entrants deliver strong international language proficiencies and connectivity
- Poland on the 18th place in the global outsourcing ranking
Vietnam has been revealed as the world’s top outsourcing location for the first time, according to new research from global real estate adviser Cushman & Wakefield.
Cushman & Wakefield’s comprehensive global report – Where in the World? Business Process Outsourcing (BPO) & Shared Service Location Index – assesses factors likely to affect the successful operation of BPO functions around the world.
Costs, risks and operating conditions are analysed by the report to provide insight into which markets are particularly attractive in the current global environment.
With one of the highest growth rates in outsourcing, Vietnam has established its presence in the sector as an alternative destination for low-cost offshoring services, rising from fifth place last year’s index. The country’s government has put in place policies to promote the country as an outsourcing destination, with the services segment expected to expand rapidly.
Cushman & Wakefield’s head of occupier services for APAC and EMEA, Richard Middleton, said: “While not the cheapest outsourcing destination, Vietnam is still very competitive when compared to other global locations and wage rises in India and China largely contributed to it surging up the ranking to take first place in 2015. Despite rising costs and concerns that overheating will inevitably lead to further pressure surrounding access to skilled labour, India remains the world’s largest BPO destination by market size.”
Rising one place on the 2014 index to take second position this year is the maturing Philippines BPO market, which has become an established pillar of the country’s economy. The market in fact hit a record US$15 billion in revenue last year, leapfrogging India in terms of growth and absorbing 70% of India’s voice and call centre operations. The shift in power has in part been a result of spiralling Indian labour costs and climbing rates of attrition – which stand at 26.9%, the highest globally – as rising wages have left companies continuing to compete for the best talent.
While the global economic recovery has remained sluggish, much of the BPO sector is being driven by English-speaking industrialised nations, placing the Philippines aggressively, ahead of many other BPO locations. The
English dialect of the Filipino workforce is also well received within the US.
A new entrant to the euro this year, Lithuania made the index for the first time securing 11th place – this was the highest placed country of any new inclusion to the ranking.
Richard Middleton added: “Benefitting from a cost competitive environment, strong labour pool and high levels of language proficiency, Lithuania is well placed as a BPO destination.”
The uncertainties of Ukraine do overshadow Lithuania for some operators, but it has still emerged and is maturing as a strong Northern European service hub, offering a world-leading shared services infrastructure and an impressive ICT infrastructure which is currently ranked 10th in the world for internet connection speeds.
With European salaries static and even falling in some markets, the differential between Europe and Asia/the Americas has reduced. This has helped Bulgaria move up 11 places in the ranking to third place overall, and, as with Lithuania, the country benefits from a strong labour pool suited to the BPO sector. Approximately 50% of graduates obtain degrees in majors suitable for the needs of the BPO industry.
Source: Cushman & Wakefield
In Latin and Central America, Brazil continues as the lead country within the region in terms of market size, benefitting from the experience and creativity of its labour pool in supporting innovative technology platforms and services. This maturity is evident in the global ranking, with Brazil rising to eighth position from 18th last year.
Cushman & Wakefield’s head of occupier services for the Americas, Mark Wanic, said: “While Brazil is able to offer mass market outsourcing services, higher taxes and accommodation costs have started to translate into some outsourcing volumes being lost to countries such as Mexico, Colombia and Central America which are becoming more cost competitive.”
Bolesław Kołodziejczyk, Senior Consultant, Valuation & Advisory Department of Cushman & Wakefield in Poland, said: “Poland slipped two places in the ranking, but it remains an attractive BPO destination with the largest workforce in the CEE region. This underperformance was due to the current geopolitical situation rather than a change in perceptions of Poland’s economic potential by investors. Poland is perceived as a mature market by a growing number of investors focused on a wide range of cities. Apart from the largest cities such as Warsaw, Krakow and Wrocław, also Poznań, Katowice and Łódź are attracting many new shared services centres. Investors are also interested in such emerging markets as Lublin, Szczecin, Bydgoszcz and Radom, but access to skilled labour and cost competitiveness of the workforce are still the key factors in the BPO sector’s further growth.”
SUMMARY OF KEY GLOBAL TRENDS IN THE REPORT
- Costs: Rising inflation, labour and property costs in established BPO destinations such as China and India are adding to the attractiveness of emerging locations
- Value creation: BPO providers are now looking beyond simply cost reduction to focus on innovation and customer care optimisation
- Energy security: With Russia readily able to restrict its gas supply into Europe it is now seen as an unreliable supply partner, meaning that those countries more heavily reliant on Russian energy have now become a riskier proposition when looking to attract new BPO and shared service centre operations
- Breadth and depth of BPO service provisions: BPO providers are now combining vertical solutions (such as claims processing, health payer business processing and loan portfolio management) with horizontal solutions (such as payroll, HR and supply chain management) to deliver effective BPO strategies
- Language proficiency: Language proficiency remains high on the agenda for BPO providers with locations offering a turnkey labour pool, trained and equipped in multiple language skills particularly attractive