Offshore Outsourcing Isn’t Where It Used to Be

Outsourcing has moved on. An A.T. Kearney study of offshore outsourcing trends is making some surprising predictions of trends in 2005. For one thing, outsourcing isn’t just about call centers any more. As wages and prices creep up in those countries that have become perennially popular objects of complaint among U.S. pundits and politicians, and as the nature of the jobs that are outsourced changes from taking orders and handling customer service issues to far more comprehensive “business processes,” just about everybody in the world is angling for a slice of the outsourcing pie.

The companies that outsource business processes are still primarily based in the United States, Western Europe, and Japan. But whereas A.T. Kearney’s 2004 survey ranks just 25 countries with potential to handle those services, next year’s survey will likely include 40 countries, with newcomers such as the Czech Republic, Hungary, and Malaysia, as well as Morocco, Tunisia, Ghana, and Uruguay. Dubai, Sri Lanka, and Mauritius are setting up efforts to lure outsource work, according to Ravi Aron, professor of operations and information management at the University of Pennsylvania’s Wharton School of Business.

Citing Singapore as a primary example of a “hub-and-spoke model in globalization of services,” Aron points out that Singapore’s free-trade agreement with the U.S. has led many Indian companies to locate in Singapore in order to help insulate themselves against punitive U.S. legislation. Singapore also has extensive ties to Chinese business.

Among the attributes that make a location attractive for outsourcing are low wages and high educational standards, along with a population proficient in more than one language. By that last standard, the Czech Republic seems a winner, since 70% of the population speaks a foreign language, and Western European countries that choose to outsource business processes to the Czech Republic don’t have to go all the way to Asia to get the work done. Being in the same time zone is another advantage: For instance, South Africa’s growing outsourcing business can handle Western European clients with ease, since they share time zones.

In the Western Hemisphere, Chile seems poised to develop as a significant outsourcing site, and Puerto Rico and the Dominican Republic have begun to position themselves to handle the growing Spanish-speaking market in the United States. But even foreign-language proficiency may not be so necessary in the near future, Wharton’s Aron suggests that more complex business processes will be handled by workers with expertise in a specific area, and that research, analysis, and problem-solving will be undertaken by, say, Brazilian or Russian experts, and the results then presented in English as necessary.

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