According to KPMG’s Advisory practice, the credit crisis seems set to prompt a new rush for outsourcing services across the I.T. sector, with a number of new locations worldwide emerging as viable Business Process Outsourcing (BPO) hubs.
Launching their Exploring Global Frontiers report at NASSCOM’s recent outsourcing event in India, KPMG claims to have identified 31 cities which are rapidly emerging as leading pretenders to the BPO crown held by the traditional powerhouses such as Bangalore, Chennai or Shanghai.
As those locations rapidly approach saturation point, there is a sizable opportunity for these new and emerging locations to swallow up a large proportion of the new outsourcing work which the credit crisis is apparently creating.
The 31 locations are an eclectic mix, ranging from well-known cities in developed countries to lesser-known places in the emerging markets, well off the tourist track. Winnipeg, Belfast and Brisbane all feature for example, alongside Queretaro, Davao City and Cluj-Napoca.
On the KPMG list, Buenos Aires, with its population of nearly 13 million, thus features alongside tiny Port Louis (population 130,000) in Mauritius. Despite the difference in size, both are emerging as important future outsourcing centres, with the latter rapidly developing an international reputation as a disaster recovery centre.
Traditional sourcing locations, which have been at the forefront of the outsourcing boom, were always going to reach saturation point. Corporates now need to know which locations to consider next for their outsourcing activities. There are many locations around the world which are able to supply a credible outsourcing capability. However, there are subtle nuances in terms of labour skills, niche specialisms and government incentives which have led us to highlight these 31 locations as stars of the future,” said Edge Zarrella, Global Head of IT Advisory at KPMG.
According to Aura Aura Giurcaneanu, KPMG Partner and Coordinator of the KPMG office in Cluj Napoca, the need to develop new, cost effective, viable outsourcing locations has been highlighted by the economic events of the past few months.
“Companies are focused on reducing their cost base, both for short-term and long-term gain. As a result, more organizations are considering savings obtained through outsourcing parts of their operations. Most importantly, they should be convinced that by doing so, they are not sacrificing performance for the sake of cutting costs. Our location study aims to highlight the benefits brought by the different city choices available to them”, Giurcaneanu added.
The full list of highlighted destinations includes 10 locations in the Americas (Buenos Aires, Campinas, Curitiba, Calgary, Winnipeg, Santiago, Guadalajara, Queretaro, Boise, Indianapolis); 10 in Asia-Pacific (Brisbane, Changsha, Hangzhou, Ahmedabad, Jaipur, Nagpur, Penang, Davao City, Iloilo City, Ho Chi Minh City); and 11 in Europe, the Middle East and Africa (Sofia, Zagreb, Cairo, Port Louis, Belfast, Gdansk, Cluj-Napoca, Rostov-on-Don, Belgrade, Tunis and Lviv).
“Romania offers excellent opportunities for outsourcing, particularly in the IT sector. It has a skilled workforce, and the country has been at the forefront of IT development. Several entrepreneurs in the field have gained a worldwide reputation, demonstrating the particular aptitudes which many Romanians have shown in the IT sector. Romanian labour costs are competitive, while knowledge of English and other foreign languages is excellent. While many Romanian cities offer good opportunities, Cluj Napoca featured in the KPMG study for several reasons. It is a provincial city, which has seen substantial growth over the last few years, but its infrastructure has not yet come under the same degree of strain as that of the capital Bucharest” declared Cristian Itu, IT Advisory Senior Manager within KPMG Romania. Cluj Napoca has good communications with other Romanian cities, being located in the centre of the country. Its airport has seen rapid expansion in the last few years, and is now served by international flights from several EU cities, as well as regular domestic flights from Bucharest. Cluj Napoca is a long established university town, providing a ready source of talented graduates looking for employment opportunities with top companies.
The reasons for these locations making it on to the final KPMG list are varied but cities in the Americas should typically benefit from large labour pools, scalability, a more mature service offering, proximity to the major client base and multiple language skills. AsPac benefits from lower costs, younger populations, plenty of government incentives and the lessons learned from the numerous outsourcing centres which already dot the region. The Europe, Middle East and Africa region offers great diversity, excellent infrastructure and numerous niche specializations.
“These are fascinating times to be choosing a new outsourcing provider or location as there is simply so much choice. New cities are emerging as outsourcing contenders all the time, each boasting a different set of characteristics. Just within our 31 for example, there are specific specialisms on offer - such as accounting, R&D or even animation - driven by an apparent skills bias within the pool of locally available graduates. As a word of warning though, these locations are still ‘emerging’ and, as such, can still carry a degree of risk; an element of venturing into the unknown. This is why all outsourcing location decisions should be carefully thought through on a case-by-case basis; there is no “one size fits all” approach to outsourcing,” said Aura Giurcaneanu.
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