BrazilAPAC countries among top offshoring picks for global companies
Eight countries in the Asia Pacific region are among the globe’s top 15 destinations for offshore services. This is according to a benchmark from global management consultancy Kearney.
The trend of offshoring business services is growing as companies look towards tapping into the global workforce in order to reduce costs, expand their talent pool, and enhance their overall efficiency.
Now valued at around $681 billion, the global market for business services has grown substantially over the past decade. Projections from Kearney suggest the sector will enjoy a continuing upward trajectory in the years ahead, with an anticipated compound annual growth rate of 8% up to 2027.
The 2023 Global Services Location Index (GSLI) from Kearney examines which countries rank as most attractive in terms of potential locations for offshore services. The GSLI ranks 78 countries based on 52 metrics that cover four dimensions including financial attractiveness, people skill and availability, business environment, and digital resonance.
APAC countries dominated this year’s rankings, with India, China, and Malaysia securing the top three positions. This can be attributed to their cost advantages, an abundant talent pool, and the robust skill sets of their workforces.
Additionally, several other Southeast Asian nations – including Indonesia, Vietnam, Thailand, the Philippines, and Singapore – landed a high spot among the top 15 countries. Noteworthy is Singapore’s remarkable ascent from 38th to 14th place in this year’s ranking, marking the most significant improvement among all countries.
India
Traditionally, India has been the frontrunner in the index and this year is no different. It ranked in first place, mainly owing to its skilled workforce and bargain value. The current demand for services in India are mostly related to artificial intelligence (AI), machine learning, and data processing, which are all anticipated to be pivotal technologies in the coming years.
Recognizing this trend, the government has initiated programs aimed at enhancing the skills of nearly 5 million workers in areas such as AI, 3D printing, drones, and the Internet of Things (IoT), strategically capitalizing on the emerging opportunities in these fields. To keep the momentum, India is building on a $50 billion sustainable mobility cluster tasked with incorporating the latest IT innovations onto electric vehicles.
China
Securing the second position in the ranking, China stands out as a tech powerhouse, prioritizing self-sufficiency amid ongoing tech stack and trade conflicts with Western nations. Renowned for prolifically filing tech-related patents – particularly in areas such as AI, machine learning, quantum computing, blockchain, and cloud technology – China’s economy takes the lead in embracing digitalization.
The nation places a strong emphasis on enhancing digital skills through government-funded and public–private initiatives.
Malaysia
Globally ranked third, Malaysia has shown a commitment to cultivating digital skills, embracing emerging technologies, and allocating government support to skills development in the digital realm.
The workforce, armed with advanced digital capabilities like cloud architecture, analytics, AI, and software development, is estimated to contribute $105 billion annually to the country’s GDP. Serving as a hub for many prominent companies, Malaysia's digital economy further promotes initiatives facilitating the integration of tech startups across the region.
Indonesia
Ranked 6th, Indonesia boasts a sizable workforce of approximately 135 million, but grapples with a shortage of skilled workers. Only 40% of the workforce has the requisite skills for engaging with emerging technologies, resulting in a two-spot decline in this year's rankings.
Despite that, Indonesia is on a path to resurgence through its newfound emphasis on enhancing digital skills. This renewed focus has attracted interest from major IT players, drawn to the country's cost-effective environment, prompting potential investments in the burgeoning digital economy.
Vietnam
Vietnam, ranked one spot below Indonesia in 7th, remains a strong Asian outsourcing destination. The presence of major technology companies demonstrates that the country is a global digital hub, motivating it to continue upskilling its workforce. In the IT sector, Vietnam is a popular outsourcing location for big companies in China, India, and others.
The Philippines
Ranked 12th globally, the Philippines maintains its status as the primary business process outsourcing (BPO) hub in Asia. Boasting a landscape that accommodates over 1,000 BPO companies and employs nearly 1.2 million people, the country sustains its role as a vital engine for business processes. There has been a surge in demand for technologies like artificial intelligence, machine learning, and internet of things.
Singapore
Singapore jumped a remarkable 24 spots in this year’s ranking, from 38th to 14th place. The tiny country’s remarkable climb is attributed primarily to its robust digital resonance and capabilities that cultivate innovation. This strength is evident in the country's flourishing ecosystem of tech startups.
Anticipating the future demand of its tech economy, which is projected to require an additional 1.2 million digitally skilled workers by 2025, Singapore acknowledges the importance of a capable workforce. In response to this demand, the government is actively engaged in strategic initiatives outlined in research, innovation, and enterprise plans, including a substantial $19 billion investment over a five-year period aimed at advancing the nation's research and development landscape.
Looking ahead, Arjun Sethi, global vice chair of digital transformation at Kearney, said that companies should continue to evolve their attractiveness for companies in the face of continued change. “Geopolitical, economic, and technological forces have spurred significant changes in the global labor market. Therefore, a country’s ability to reskill and redeploy its workforce in response to changing market demands and technological disruptions is key to improving its attractiveness as an offshore location for business services.”
