US among top locations for ''offshore'' work: A T Kearney

While India, China and Southeast Asia continue to dominate A T Kearney's annual ranking of the most attractive locations for "offshoring" of service activities such as IT, business processes and call centres, the United States ranks surprisingly well in a new version of the index.

For 2005, the global management consulting firm added four lower-cost cities in the United States, United Kingdom, Germany and France to determine how they compare to more traditional offshore locations across the 40 measurements analysed to create the Global Services Location index (previously known as the Offshore Location Attractiveness index). The US, represented by San Antonio, ranked 11th out of the 40 countries evaluated.

Additional findings from this year's index include:

  • India remains the best offshore location by a wide margin, although wage inflation and the emergence of lower-cost countries decreased its overall lead.
  • Improved infrastructure and relevant people skills have increased the attractiveness of China as a low-cost option for servicing Asian markets.
  • Thailand jumped from 13th to 6th in this year's index and Southeast Asian countries now make up four of the top six locations on the index.
  • Offshore attractiveness in Europe continues to migrate eastward as Bulgaria, Slovakia and Romania all enter the index for the first time.
  • The Middle East and Africa appear to be the next frontier in offshoring as countries such as Egypt, Jordan, United Arab Emirates and Ghana perform well.

Where Developed Countries Rank:
"In previous years, clients kept asking us where lower-cost cities and regions in the U.S. and Europe would stand if they were included in the index," said Simon Bell, director of A.T. Kearney's Global Business Policy Council. "So we collected the necessary data and, as we suspected, the U.S. in particular scored very well in the index."

Despite higher costs, the US benefits from the breadth and depth of its skill-base, strong infrastructure and generally positive business environment. The UK regions (as represented by Belfast) do not perform quite as well (ranked 28th out of 40), but still match or surpass better-known offshore locales like the Republic of Ireland and South Africa. Germany (represented by Leipzig) and France (represented by Marseille) placed 31st and 35th, respectively, largely due to higher costs and weaker business environments, but still rank among the best locations for people skills and infrastructure quality.

"The performance of the four developed countries is not surprising since mature markets still offer by far the best combination of skill levels, relevant experience, infrastructure and business environment," said Paul Laudicina, managing director of the Global Business Policy Council, the A T Kearney sponsor of this research. "The standard index gives cost factors a 40 per cent weighting, v/s. 30 per cent each for people skills and business environment. If cost savings are given a higher weighting, then North American and West European locations drop down the rankings.