Offshoring a dazzling success

Après on se demande pourquoi les pays industriels ont du chômage persistant.

Il est grand temps de même un frein à cet exode de cerveau et d’emplois.

Oui, l’Europe, vous avez raison, il est grand que l’on commence à penser à la Démondialisation.

Extrait de: Service location: Governments vie for work in offshoring beauty parade, By Jessica Twentyman, FT, June 28, 2011

In the race to grab a slice of the market for offshored services, it seems almost every country in the world is hoping to become “the new India”, or at least to create its own version of India’s dazzling success.

Twenty years ago, India had a still largely agrarian economy. Today, while agriculture still employs just over half the workforce, it contributes just 16.1 per cent of gross domestic product. Industry contributes 28.6, while the services sector accounts for 55.3 per cent.

The jewel in India’s services crown is its $76bn IT and business process outsourcing (BPO) industry, fed by a large pool of low-cost, but highly skilled English-speaking workers.

That workforce, along with India’s hefty first-mover advantage, has kept the country at the top of the latest AT Kearney Global Services Location Index (GSLI), a biennial ranking by the management consultancy firm of 50 outsourcing locations worldwide.

Johan Gott, co-author of the report and AT Kearney global policy manager, explains that each country is evaluated as an attractive destination for service delivery using 39 measurements in three categories: financial attractiveness, people and skills availability, and business environment.

Clear rivals to India are emerging. In the latest ranking, China and Malaysia lag not far behind, followed by Egypt and Indonesia.

The remaining countries in the top ten are Mexico, Thailand, Vietnam, the Philippines and Chile. The full top 50 ranking, meanwhile, reveals that currency movements in recent years have helped to boost states where cost levels had previously kept them far down the list, including the Baltic states, the UK, Mexico and the United Arab Emirates.

The GSLI is intended as a measure of each location’s potential, not its productivity, says Mr Gott, but provides some useful clues as to where many of the big outsourcing providers will look to establish global centres.

In recent years, for example, Infosys, Wipro and TCS have all established operations in Chengdu, China, alongside western technology companies including Intel, IBM, Cisco, SAP and Microsoft. The first three also have operations in Mexico.

Picking the right spot is not easy, says Vineet Nayar, chief executive of HCL Technologies, the Indian outsourcing company. Numerous considerations need to be taken into account: cost, social responsibility factors, cultural alignment and also timezone alignment with established and emerging markets, as this is what determines speed of response. Macroeconomic factors, political stability and, of course, available skills are also important, he says.

There is no room for short-term experiments, says Hansjoerg Siber, head of global operations at Capgemini, the consultancy. “We don’t want to set up lots of small locations all around the world, just to see which ones work,” he says.

“We monitor a specific location over a number of years and think a lot about what might change there, from the political parties in power to the currency exchange rate.”

Egypt and Russia may have much to offer as low-cost, high-skills base locations, for example, but they will not be viable targets, says Mr Siber, until Egypt’s political stability is more certain and the Russian government does more to fight corruption.

Luckily for the leaders of large outsourcing companies, they are shopping for locations in what is effectively a buyer’s market. Policymakers hoping to transform their countries into outsourcing hubs have to work hard to attract their attention, often by means of regional development grants and tax subsidies.

HCL Technologies, for example, has received more than £5.5m ($9m) in funding from regional development agency, Invest Northern Ireland, since it set up a call-centre in Belfast in 2004 and acquired another in Armagh the following year.

This kind of incentivisation is not new, Mr Nayar notes. It is no coincidence that the IT services business in India thrived in the 15 years that it operated under a zero-tax regime, where generous subsidies were offered on land acquisition, he says.

“But it only thrived because, in return for subsidies, companies like ours were prepared to invest in building infrastructure, training people and bringing in foreign business.”

“Now, other governments are saying to us: ‘We want to attract you to our country, to help you build the skills base and to get our people into work – and we’re prepared to subsidise you for that,’” he says. “It’s an important factor ... but it isn’t the only one.”

To present the most attractive package in this nation-by-nation beauty parade, governments must increasingly be prepared to offer “long-term, mature subsidy frameworks, not short-term rewards”, says Michael Rehkopf, partner and director at TPI, an outsourcing advisory company.

At a recent outsourcing industry meet-and-greet in China, he was surprised to discover that other US attendees were public-sector workers, representing a number of cities and states. They wanted to understand how subsidies were being packaged in China, so that they could do something similar back home.

But how much does geography really matter for customers? “For many mature outsourcing customers, offshore services are simply part of their global supply chain. They’re not particularly interested in where the services are based, only in output and outcome,” says Alex Blues, an outsourcing specialist at PA Consulting, the management consultancy.

Pour les multinationales, seul le profit compte à savoir si les pays industriels croulent sur des dettes, et non plus de recettes fiscales d'entreprises,
c'est leurs moindres de leurs soucis.

“At the other end of the spectrum, there are companies that insist that their managers go and ‘kick the tyres’ of every city their provider suggests.”

Best practice lies somewhere in the middle, he says: “Smart outsourcing customers leave the choice of location to the supplier, but give them some rules that define where they’re happy for specific services to be based and provide guidance as to the maximum amount of service that should be provided from any one location.”