Are you looking for the Tholons Top 100 Outsourcing Destinations 2012? Please read my blog post about here.
During a webinar organised by Gobal Services analysts of advisory firm Tholons have just released this year’s Top 100 Outsourcing Cities ranking. Although the top 10 didn’t dramatically change the shift towards nearshoring is clearly noticeable. Tholons concludes the 1st position of India’s Bangalore is under pressure. Eastern Europe in general and Poland more specific are well ranked as emerging locations.
The group of top cities increased
This year’s list of Top Emerged Outsourcing Cities has expanded, identifying ten global delivery locations. Two new cities join the eight previously acclaimed outsourcing cities. Cebu City and Shanghai have significantly developed their respective outsourcing industries which have allowed these cities to join the Top 10 Emerged List.
While Bangalore retained first place for the fourth year running, Mumbai moved up to second place this year, with its huge labor pool consistently displaying enhanced service delivery in complex and high-value FAO services. During the webinar Tholons announced Bangalore will be facing severe competition in the upcoming time. A 1st rank in the next year is far from certain.
The traditional outsourcing countries are no longer alone
About 10-15 years ago US and UK based outsourcers only considered India and the Philippines to be their outsourcing destinations. Over time outsourcers have become more convenient in outsourcing and many more countries have joined. For different reasons today different locations are being considered.
Tholons has noticed more focus on near shore although being higher cost locations. This choice is being made for many different reasons like near time zone, language and cultural affinity. When it’s IT related intellectual property law is a very important decision factor.
Low cost is according to Tholons’ survey no longer the main driver. It’s even proven higher cost locations can be more effective. This changes the focus more towards cost effectiveness instead of just “low cost”.
Because of this change Tholons has decided to extend its list from 50 up to 100 cities.
But even those 100 cities don’t cover the full market. This is just showing some part of the outsourcing world. Depending on your needs there are far more good locations to be considered.
Top 10 emerged, top 50 emerging and 40 next wave cities
Tholons has divided the top 100 cities into three groups: emerged, emerging and next wave cities. The main difference between the 10 emerged and the 50 emerging cities is the scalability you can achieve. Besides there is a fourth group: “On Tholons radar” which are cities that could join the list in the upcoming time.
Three Polish cities rank on this year’s list. Kraków managed to climb 3 places and is leading the emerging group while Warsaw maintained its position among the emerging cities. Wrocław is with ranked for the 1st time. Already for some years it was “On the radar”.
Not on the list, but on the radar is Gdansk. Thanks to the huge effort of the local government Gdansk is for sure an emerging BPO and ITO city.
Eastern Europe is the leading continent
Based on the data provided by Tholons I prepared some graphs. Eastern Europe appears to be leading when you sum the number of cities by region, which proves the shift from the traditional outsourcing regions towards more nearshore outsourcing.
I realize this graph doesn’t tell us anything about the market size. Because Bangalore alone might have more turnover than Eastern Europe as a whole. And the picture changes when you sum the number of cities by country. India is leading this list with 14 cities.
Within Eastern Europe Russia and Poland are leading. Those are the biggest nearshore markets for Western-Europe and even for the US it’s becoming a more important outsourcing market. This is not expected to change although I expect Ukraine will become a good follower soon. It looks like Tholons just didn’t notice them yet.
In the end you will have to decide yourself
If you are not just looking for a tremendous amount of resources most of the mentioned cities could be considered. Like Brian Tumpowsky, director sourcing and governance of the Publicis Groupe, mentioned during the webinar it’s most important to keep your outsourcing policy balanced.
What technology do you need? Will the location be able to provide it? What is your experience?
75% of the cities on the list is for most companies not feasible. Going to China could be the next step for some companies, but for most this will be years away. (Brian Tumpowsky during the webinar)
You might decide in favor of a certain destination because of:
- Typical factors (e.g. political climate, economic conditions, etc)
- Your customer requirements (e.g. time zones)
- Internal requirements (e.g. virtual vs. physical)
- Skill and capability needs
- Risk tolerance to explore less mature destinations
- Internal maturity and experience
- Availability of other provider options in the considered area
- Ability to leverage provider presence in area for internal business reasons.
Tholons’ list can support and inspire you when you consider outsourcing abroad. Just like other lists it’s just a ranking based on a group of relevant factors. All these factors will be relevant to you as well, but the weight per factor might be different for you. Therefore, based on this list you should prepare your own list. Is wish you good luck while doing this. In case you look for help feel free to contact me by filling in the contact form here. Or let’s discuss on Twitter, you will find me here.