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6 hot offshore IT outsourcing markets offer new options

Stephanie Overby | Feb. 4, 2013
Here are six IT and business process outsourcing destinations worth a look in 2013.

When you think of offshore IT outsourcing, you think of India.

Of course, "having all of your IT work done in one location is akin to having your entire retirement portfolio in a single stock--it's an unnecessary risk," says Esteban Herrera, partner with outsourcing consultancy Information Services Group (ISG).

Smart IT leaders seek to complement their India-based operations for risk management and business continuity purposes, but they also may be looking for specific language fluency, proximity, lower attrition or wage inflation or an attractive domestic market.

Certain skills--like automation testing, for example, come at a premium in a hot market like India, says H. Karthik, vice president at outsourcing consultancy Everest Group. And many emerging countries are getting aggressive with perks like new software parks and welcoming tax or regulatory environments to win new IT outsourcing business, says Herrera.

Below are six IT and business process outsourcing (BPO) destinations that may be worth a look in 2013. "They are not for everyone," says Herrera.

"Their scalability risk is much higher, typically because they are not yet graduating the numbers of IT and engineering students to support huge growth, Herrera says. "[But] we see clients who love their results in these locales [even] with limited numbers of resources."

1. Colombia

Several Indian IT services companies have set up shop here. "Colombia is positively hot right now," says Herrera. "It also is large enough to have multiple cities that offer credible, educated workforces." Neutrally accented Spanish makes Colombia attractive for enterprises looking for regional customer support or IT help desks.

"Like other Latin American countries, [Colombia] offers same time zone coverage for increasingly important IT considerations like agile development and Web support," says Alan Hanson, senior vice president with outsourcing consultancy Neo Group. Costs may be 20 percent higher than India, but that may be offset by management savings due to proximity, Hanson adds.

Pros: Large labor pool, low operational costs, attractive domestic market
Cons: Low IT services maturity, limited English skills

2. Peru

Latin America's up and comer is garnering a lot of attention for its incredible domestic growth in recent years. "Companies that want early-mover advantage might be able to capture a loyal, long-term workforce if they set up shop right now," says Herrera.

Pros: Low operational costs, rapidly growing domestic economy
Cons: Nascent market, lower quality education system, limited English skills

3. Vietnam

Some IT leaders may be surprised to find that when you take into account factors such as wage inflation, real estate costs, taxes and salaries, Vietnam ranks best in class among outsourcing destinations--even better than India, says Hanson. Vietnam is also a favorite outsourcing location for Japanese companies, adds Karthik.


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