Offshore services providers in the Asia Pacific are now facing increased competition from its counterparts in Latin American and Eastern European countries, according to research and market firm Gartner.
"Ongoing cost pressures in Europe are driving some multinational corporations to consider moving their offshore services from mid-cost countries like Malaysia to lower-cost locations in Asia, Eastern Europe and Latin America," said Jim Longwood, Gartner's research vice president. He added that as some Western countries are becoming more protectionist, the demand for offshore services from Asia Pacific is negatively impacted too.
Taking this situation positively, service providers in Asia Pacific made use of these market changes to revise their business strategies. For instance, Indian providers took the chance to expand their regional presence in Asia and leveraged nearshore capabilities since demand from Europe and North America decreased, said Longwood. "As a result, they are growing their presence in more mature markets like Singapore and Malaysia, and are now challenging the traditional MNC application service providers in these markets," he added. Gartner also found that there has been some market consolidation, with an increase in vendor alliances, mergers and acquisitions with offshore providers in Asia Pacific as they seek growth and scale.
Gartner's latest assessment of nine Asia Pacific countries as potential offshore service locations found that India is the clear global leader by revenue, while China is the most serious challenger by scale. Bangladesh, Indonesia and Vietnam are continuing to gain regional traction for offshore service delivery, while more mature countries, such as Malaysia and the Philippines, are refocusing on their core capabilities of higher-end IT infrastructure, help desk, application and business process services.
Sign up for CIO Asia eNewsletters.