THE FUTURE of offshoring is not a race to the bottom on costs but a search for the right skills at the right price, a recent Economist Intelligence Unit (EIU) report has found
THE FUTURE of offshoring is not a race to the bottom on costs but a search for the right skills at the right price, a recent Economist Intelligence Unit (EIU) report has found.
The most important development in offshoring is not the drive for ever-lower costs, but the emergence of diverse new locations that support more sophisticated offshoring requirements, the report said.
“As costs rise in near-shoring locations like the Czech Republic and Hungary, some expect them to become just a footnote in the broader history of offshoring,” said Delia Meth-Cohn, EIU senior consultant.
“But demand is increasing for more complex capabilities and a closer linguistic and cultural fit with customers – that makes lower-cost European locations very competitive alongside global centres in India and China.”
The report found that new offshoring functions require more interaction. As offshoring becomes mainstream, the pioneers are pushing beyond the standard offshoring activities, like finance and IT support, to more complex and customer-facing operations.
As more and more transactions can be standardised and performed remotely, these types of higher-value service need the language and cultural skills that are prevalent in near-shore locations.
Furthermore, global outsourcers supporting business operations prefer not to divide up the world into near-shore and offshore.
The report found global outsourcers see their role as developing a portfolio of cost-effective service centres that can run around the clock, with a wide range of skills and capabilities.
Furthermore, European companies need shared service centres that can operate in European languages, not just in English. But India or other rock-bottom locations cannot support operations in any language other than English.
India, however, still heads the offshoring list, due to its enormous market of ultra low cost, English-speaking graduates and strong outsourcing vendors, despite a less-than-perfect telecommunications infrastructure, the report found.
China is also growing strongly due to market size and cost, but is frequently more a near-shoring market for Asian operations than a global centre, largely due to very limited English skills.
