Careers: As the World Outsources

India faces pressure from both Eastern European outsourcing destinations and a new crop of scrappy Asia-Pacific upstarts.

The Indian subcontinent has been an outsourcing Mecca for more than a decade. Even though there are plenty of fresh alternatives, India continues to be a magnet for outsourcing activity. According to a recent study from market watcher Gartner Inc., for example, India is still tops among all outsourcers.

Not that it’s sitting as pretty as it was a decade ago.

India’s embattled position isn’t indicative of a suddenly endangered offshore outsourcing marketplace. If anything, Gartner and other industry watchers say, firms actually increased their consumption of outsourcing services during the ongoing economic crisis. In its “Global 2010 CIO Survey,” published last September, UK-based IT staffing specialist Harvey Nash projected that the overwhelming majority of CIOs -- some 90 percent, according to its survey -- planned to maintain or increase their outsourcing activities in 2011.

Where Gartner and other market watchers had called attention to the rise of viable non-Indian outsourcing alternatives, the Harvey Nash survey painted a picture of a thriving global outsourcing market -- with especially compelling outsourcing alternatives in Eastern Europe. “The role of India in offshore outsourced programmes remains dominant, but the dominance is waning and the rise of Eastern Europe as a preferred hub, especially for European-based CIOs, is undeniable,” the report said. “More than one in ten global CIOs now undertakes offshore activity in Eastern Europe. That figure is significantly higher within those European countries closest to the region."

Gartner’s new report buttresses this finding. For one thing, the market watcher notes, India faces plenty of competition from countries such as China, the Philippines, Vietnam, and Malaysia, all of which have benefitted from a strong, government-led push into outsourcing. These countries likewise boast good (or improving) infrastructure resources, and -- in the cases of China, Malaysia, and the Philippines -- top-notch educational systems.

India is to some extent a victim of its own success -- or, more specifically, of its increasing affluence. As the Indian rupee increases in value, Gartner notes, the cost of Indian outsourcing services likewise increases.

“Clients continue to seek a portfolio of offshore countries, and with India again experiencing increasing labor costs and attrition, this is creating opportunities for other offshore locations to target the services needs of more-mature Asian clients,” said Ian Marriott, research vice president at Gartner, in a statement.

Offshore opportunities abound. This year, five new offshore locales cracked Gartner’s Top 30: Bangladesh, Bulgaria, Colombia, Mauritius, and Peru; three other countries -- Panama, Sri Lanka, and Turkey -- rejoined the list.

Moreover, the countries they displaced -- Australia, Canada, Ireland, Israel, New Zealand, Singapore, and Spain -- remain strong offshore competitors, with hyper-developed infrastructures, strong government support, and top-notch educational systems. They’re considerably pricier than Gartner’s Top 30 alternatives, however. “[T]hey should still be considered important in the context of nearshore locations whose maturity -- albeit with somewhat lower cost advantage -- offers significant benefits for organizations seeking a balanced portfolio of countries from which services are delivered,” said a Gartner release.

Consumers of offshore services tend to cite a litany of familiar complaints, starting with cultural differences and project management issues.

Shops that opt to outsource to emerging offshore locales have additional concerns. “Enforcement of laws with regard to data/IP and privacy protection, and legal maturity continues to be an adoption barrier for using a number of low cost countries despite country governments taking action to improve the policies and regulations in these areas,” said Marriott.