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Egypt, Mexico move up outsourcing list amid unrest, violence

Stephanie Overby | Feb. 8, 2011
A.T. Kearney's just-released Global Services Location Index ranks Egypt and Mexico the fourth and sixth most attractive countries for offshore outsourcing. India and China hold on to the top two spots.

FRAMINGHAM, 8 FEBRUARY 2011 - In what could be viewed as unfortunate timing, management consultancy A.T. Kearney released its annual Global Services Location Index last week naming Egypt the fourth most attractive location in the world for offshore services outsourcing—up two spots from its sixth-place ranking in 2010.

"We did our research before the unrest began," explains Johan Gott, manager of the A.T. Kearney's Global Services Location Index. "Emerging markets in general tend to be more risky than developed markets. You had the Mumbai attacks [of 2008] that at the time created uncertainty around India as a offshoring destination. In Thailand, there were the riots around Bangkok last year. These things happen. We don't want to minimize the impact in Egypt. Short term, it's a very serious issue. Long term, it's too soon to tell."

The index, which ranks 50 countries based on financial attractiveness, people skills and availability, and business environment, placed Mexico number six in offshoring attractiveness—up five spots from last year—even as narcotics-related violence continues in the country's northern states.

The main reason for Mexico's rise? The country's average wages decreased 18 percent in dollar terms last year. "They suffered economically as result of global financial crisis," says Samantha King, a consultant in A.T. Kearney's Washington, D.C. office. "Also on the skills side, Mexico has one of the largest number of CMM-I [Capability Maturity Model-Integration] certifications in the world. The government has sponsored the services sector and has done a tremendous job of increasing capabilities."

India Stays at The Top

India, China and Malaysia were ranked number one, two, and three, respectively, as they have been since A.T. Kearney began producing the index in 2003.

And India isn't likely to budge anytime soon. "There's India and then there's everyone else," Gott says. "They have a very strong talent base. Their costs are still low. And most importantly, India has transformed itself from a provider of low-value code factory type work to move higher and higher up the value chain."

China's massive labor pool and low costs take some of the sting out of language issues and security concerns, but the country overall has placed less emphasis on services than it has on manufacturing, says Gott. And Malaysia has developed a niche in multimedia services.

The United States, 18th overall, came in first specifically for people skills and availability yet again, but faces some challenges to that HR dominance, according to Gott. "America creates some of the best talent in the world—the top ten to twenty percent are world-class. The problem is that broader base of talent," Gott says. "The American education system is hard pressed to produce evenly high quality and those spikes and troughs create some difficulty."

Canada, Jordan and Jamaica Slip

 

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