India world's best outsourcing destination: AT Kearney

The top three slots in AT Kearney's 2011 Global Services Location Index (GSLI) are occupied by three Asian countries: India, China and Malaysia. The three countries have enjoyed the top three rankings since the inception of the GLSI in 2003, demonstrating "remarkable staying power, thanks to their deep talent pools and cost advantages".

"India is the all-around standout, able to provide manpower for any type of offshoring activity. With its first-mover advantage and deep skill base, it still maintains the lion's share of the IT services market," the report said.

Furthermore, the report says India has proven itself adept at competing in all dimensions of the industry, being the "preeminent destination and leader" in all fields of offshore services.

India has excellence in IT, thanks to its elite educational institutions, in BPO because of the large annual output of qualified graduates and in voice, because of the English language capabilities of its population.

"With its first-mover advantage and deep skill base, India remains the unquestioned leader in the index —- a half -point ahead of China and a full point in front of Malaysia.

"On top of that, India's IT services stalwarts are moving up the value chain," the report said, adding that companies such as Infosys and Wipro are developing their R&D capabilities and expanding well beyond their traditional vendor roles.

Asia ranked highly throughout the rest of the top 10, which features Indonesia (5), Thailand (7), Vietnam (8) and the Philippines (9). China has begun offering specialised skills not only in English, but also Korean, Japanese and Chinese. However, China may not make a great impact in the call centre arena, the report said, adding that China's most attractive avenues are high-end analytics and advanced IT, where it is an alternative to Russia and Eastern Europe.

Nevertheless, it can be a strong competitor to India in the BPO sector. Indonesia, Vietnam and Thailand have not yet devoted as much as they can to promoting information and communications technology, but they score highly in the index because of their vast talent pools and competitive wages.

The Philippines, an early entrant into the service sector, is also relatively well-rounded. It has had more than a decade to hone its capabilities and has now moved into IT operations from being primarily a contact-centre hub.

The Middle East and North Africa have also become increasingly attractive because of their proximity to Europe and their vast talent pools. The United Arab Emirates climbed to 15th overall, serving as a regional services hub.

Other countries on the list of 50 are Germany (26), Singapore (32), Canada (39), France (44) and Australia (46). While many European countries were badly hurt by the financial crisis, Estonia (11), Latvia (13) and Lithuania (14) saw their ratings climb.

These countries engaged in a process of "internal devaluation", cutting wages and expenditures, and as a result were able to offer highly competitive cost structures. The UK was also able to benefit from a sharp drop in wages and climbed to 16th in the ratings from 31st in 2009.

The United States is the top customer for outsourcing services, accounting for 63 per cent of global IT outsourcing spending. Its tier-2 locations rank 18th as outsourcing locations, thanks to a combination of talent and accessibility.

Latin America continues to serve the US market well and is expected to grow in importance. Mexico, in 6th place worldwide, leads the region, due to a sharp drop in wages over the year, the increased attractiveness of "near-shoring" and a well-developed talent pool.

Chile dropped to 10th place from 8th, while Brazil was number 12 for the second straight year. The Global Services Location Index analyses and ranks the top 50 countries worldwide for locating outsourcing activities, including IT services and support, contact centres and back-office support.

The rankings are based on a country's performance in categories such as financial attractiveness, people and skills availability and the business environment.