Where in the world is “the new Bangalore”?

I’m always sceptical - but curious - when any location is presented to me as “the new Bangalore”. Lately, it seems to be happening more frequently, as various regions of the world jockey for position, attempting to grab the business of companies that might otherwise consider India to be the de facto location of choice for offshoring.

There’s plenty of evidence to suggest that some of these new regions will succeed, especially as the cost advantages offered by Indian outsourcers continue to deteriorate.

Earlier this month, consultants at AT Kearney published their research into how the geography of outsourcing is shifting. If you haven’t seen the findings already, I’d urge you to take a look. They make for pretty interesting reading.

On the whole, it seems to me that trying to pinpoint the countries or regions that have the best offshoring proposition is a dicey business and raises a whole host of questions for prospective customers. Do these emerging outsourcing hubs have the necessary people, with the right language and skills capabilities, to meet the requirements of multinational companies? Is the technical infrastructure in place (and sufficiently robust) to support the high-volume data flows involved? What financial incentive are outsourcers in that region able to offer its target audience? Can they guarantee the kind of political stability that this audience will expect? What cultural barriers may be encountered?

Prospective customers will expect robust answers to these questions from suppliers in any new offshoring location.

They might also be wise to take a look at the recent performance of that region’s currency against their own. In the last year, many companies have been caught out by the volatility of foreign exchange markets when it comes to offshoring their activities - and these shifts have, in some cases, made nonsense of carefully forged cost structures and pricing schemes. Both buyers and sellers of offshoring need to become a whole lot better at hedging against currency fluctuations and, in particular, at calcuating whether a devaluation of the local currency against the pound or dollar is likely to be outstripped by wage increases in that region.

Of course, no-one is saying that offshoring can’t provide a very attractive option for organisations looking to make savings - just that they need to think very carefully about the particular region they choose. In June, I’ll be blogging from Nairobi, where I’ll be asking these questions of prospective suppliers, employees and government supporters of offshoring there. Is Kenya the new Bangalore? We’ll see! 

Posted by on 05/28 at 09:21 AM

Comments

Post a Comment

Name:

Email:

Location:

URL:

Remember my personal information

Notify me of follow-up comments?

Submit the word you see below:

Next entry: Wish you were here? Probably not.

Previous entry: Some thoughts on the Indian general election