Electronics Production | June 01, 2009

What are the riskiest outsourcing destinations?

Part 1 of 2: Outsourcing to India, China, or Eastern Europe? Outsourcing has long been a trend in the electronics industry, but what are the riskiest outsourcing locations?
A new study by The Black Book shows the 25 riskiest locations for outsourcing. Criteria assessed include Corruption, Geopolitical Issues, unstable currency, Infrastructure or Legal System Immaturity.

Here are the Top10 of the riskiest outsourcing destinations:

10: Jerusalem (Israel): mainly due to existing threats of rebel and terrorist attacks, as well as transnational / geopolitical reasons and obstructive forces to capitalism.

09: Mumbai (India): here, terrorist and rebel activities are rated highest among the concerns. Others include transnational / geopolitical issues, uncontrolled environmental waste / pollution, as well as weather and climate hazards.

08: Rio de Janeiro (Brazil): a high crime rate and a low ratio of policemen vs. citizens is the main concern for Rio de Janeiro. Other reasons are corruption and Organised Crime, an immature legal system, uncontrolled environmental waste / pollution, unsecured Infrastructure.

07: Manila/ Cebu/ Makati (Philippines): the book list Climate Hazards, Corruption & Organised Crime as the main risks for outsourcing. Others include uncontrolled environmental waste / pollution, an immature illegal system and terrorist activities.

06: Delhi/Noida/Gurgaon (India): is also risky destination for outsourcing companies. Reasons cited include transnational & geopolitical issues, rebel and terrorist activities, infrastructure, as well as uncontrolled environmental waste & pollution.

05: Kingston (Jamaica): climatic hazards, an immature legal system and unsecured networks and infrastructure are the main reasons for Kingston being on that list. The study points out corruption & organized crime, unsecured & unprotected networks, as well as uncontrolled environmental waste & pollution.

04: Kuala Lumpur (Malaysia): a high crime rate, unsecured & unprotected networks, uncontrolled environmental waste & pollution, as well as an immature legal system make the Malaysian city a risky outsourcing location.

03: Johannesburg (South Africa): entering the Top3 of risky outsourcing locations. Here organised crime, currency instability, corruption are named amongst the main risk factors. Others include an immature legal system, as well as uncontrolled environmental waste & pollution.

02: Bangkok (Thailand): the country's unstable currency, unsecured & unprotected networks and the immaturity of its legal system are named as main factors. Corruption, a high rate of organised crime, uncontrolled environmental waste & pollution, as well as terrorist threats make it the 2nd riskiest location.

01: Bogota (Colombia): tops the list of riskiest outsourcing destinations, due to a high level of corruption and organised crime. The country's unstable currency, transnational & geopolitical issues, unsecured & unprotected networks, terrorist or rebel target threats only add more risks.

It has to be noted that the survey selected 125 offshore locations for the survey based on locally employed industry employee counts. NO American or UK companies were included in this survey, as the analysis is focused on offshore outsourcing locations only. ( http://www.TheBlack )

The customer satisfaction survey in the managed services sector, the Black Book 2009 State of the Outsourcing Industry report also reveals six significant paradigm shifts impacting global suppliers and buyers for the latter half of this year and into 2010.

• Indian outsourcers have regained strong buyer confidence by demonstrating tangible transparency, accountability and ethical management practices to eighty-one percent of US companies buying services offshore;
• Technology budgets will be fully restored or expanded over next twelve months, corroborated by sixty-eight percent of outsourcing buyers;
• Buyers predict fastest spending growth in progressive outsourcing organizations that consistently demonstrated client empathy through the downturn. As the economy improves, sixty percent of clients anticipate shifting from less agile outsourcers that were unmovable through recession-related renegotiation issues;
• BPO projects that deliver speedy return-on-investments are highest in demand. 180-day ROI's, typical in Procurement Outsourcing, Accounts Receivable, Accounting and Financial transaction processing, will be creating the greatest growth in new contracting through 2010;
• Cloud Computing & Software-as-a-Service explodes IT outsourcing growth guidance. Remote Infrastructure Management and bundled applications development/maintenance initiatives which have been on hold by ninety-one percent of CIOs will receive the most immediate funding; and
• The multishore trend expands as more outsourcers diversify in lower cost locations. Although clients have yet to score any Chinese outsourcing firms in the highest Black Book ranks of overperformers, China's Neusoft, entered the 2009 group. Two South American providers, CPM Braxis and Neoris, maintained top survey rankings, and one Russia-based firm, EPAM, was highly nominated.

"Outsourcing's cost argument still outweighs political issues in this survival economy," said Scott Wilson, author of "The Black Book of Outsourcing", and principal of Brown-Wilson Group, a Datamonitor company. "Despite the pending policy changes in U.S. corporate tax code, high US and UK unemployment rates, and the recent offshore scandal at Satyam, the core drivers of outsourcing have remained intact," added Mr Wilson commenting this year's results.

The image is not part of the article.

Source: TheBlack BookofOutsourcing


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