Reseller News

NZ ranks among Gartner's offshore IT 'Top 30'

New Zealand is one of ten countries from Asia/Pacific represented in analyst firm Gartner's annual Top 30 list of best countries to host offshore IT operations.

It assessed the suitability of 72 countries as offshore locations, and the analysis showed that the dynamic nature of the market has seen a number of countries position themselves as credible alternatives to the BRIC countries (Brazil, Russia, India and China).

These included the undisputed leader in offshore services -- India -- and the greatest challenger in terms of potential scale -- China. The rest are a mix of mature environments that offer limited cost benefits (such as Australia, New Zealand and Singapore) and emerging countries with a variety of challenges, but attractive costs (such as Malaysia, Pakistan, the Philippines, Thailand, and Vietnam).

"Countries such as Mexico, Poland and Vietnam have continued to strengthen their position against leading alternatives, while others have forced their way into the 'Top 30'. These countries will be seeking to take advantage of the opportunity created by the increased focus that many organisations now have on cost optimisation, as a result of the current economic crisis," said Ian Marriott, research vice president at Gartner.

During the last 12 months there has been significant activity in many countries to consolidate or grow their positions as leading locations for offshore services. "As a result of this, four countries have dropped out of the 'Top 30' and have been replaced by four that were just outside the 'Top 30' 12 months ago. This does not mean that the four 'relegated' countries have underperformed this year but the dynamic nature of the market has seen others making strong progress," said Mr Marriott.

The four countries leaving the 'Top 30' this year were Northern Ireland, Sri Lanka, Turkey and Uruguay. The new entrants into the 30 leading countries for offshore services were Egypt, Morocco, Panama and Thailand. Strong interest in nearshore locations was a key factor; language skills, cultural compatibility, time zone and travel time were important considerations. As French speaking countries increase their proportion of work conducted offshore, they have been keen to find appropriate French language countries, and saw Morocco 'step up'. The nearshore benefits of Egypt and Panama, and the cost consideration in Thailand were also important.

In 2008, Gartner's top 30 locations for offshore services, by region, were:

-- Americas: Argentina, Brazil, Canada, Chile, Costa Rica, Mexico and Panama

-- Asia/Pacific: Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Thailand and Vietnam

-- Europe, the Middle East and Africa (EMEA): the Czech Republic, Egypt, Hungary, Ireland, Israel, Morocco, Poland, Romania, Russia, Slovakia, South Africa, Spain and Ukraine

Although only seven countries from the Americas appeared in the final list of 30, these countries are becoming an attractive proposition for the largest buying market for offshore services -- the US. Only Canada was rated "excellent" for language (with fluent English and French) but Latin American countries are able to leverage their Spanish-language skills increasingly in the US as more organisations now require Spanish language from their providers for communication with parts of their workforce that speak Spanish as a first language.

The key evaluation criterion of cost was where Canada fared the worst ("fair") compared with "good" or "very good" ratings for all other countries in the region. However, Canada again led the rating for political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy. Argentina was rated less favourably than the rest for its political and economic environment. Brazil and Mexico were considered "very good" for cultural compatibility, and the Latin American countries all managed a solid "good" rating for global and legal maturity. As observed in other regions, data and intellectual property security and privacy remain "work in progress" for many developing countries.

The final list of 30 countries included 13 from EMEA and for the first time saw two North African countries enter the leading countries in EMEA. Locations such as Ireland, Israel and South Africa fared well for language skills, because of the quality and quantity of English-language speakers. However, other countries, such as Morocco, Romania, the Czech Republic, Poland and Hungary were also given credit for the availability of alternative languages that address the needs of an increasing number of continental European buyers.

Cultural compatibility was variable, although only one EMEA country (the Ukraine) was rated lower than "good." In recent years, many countries in EMEA have become nearshore centres for traditional service providers and large Indian providers. This is reflected in the global and legal maturity section, where eight of the 13 countries scored between "good" and "excellent." Few countries in this region, with the exception of Russia, have a good selection of local service providers actively selling their capability outside their own country. In the final category of data and intellectual property security and privacy, a mature domestic environment or membership of the EU resulted in the highest ratings.

Gartner also found that external service providers (ESPs) have started to target places outside the 'Top 30' to get closer to mature countries, such as the Nordic regions and France that show increased interest in offshore. "Given the current financial turmoil, cost will remain an important factor. However having the right balance between lower cost and higher risks, and lower risks and higher costs will be critical in times of recession and uncertainty," said Marriott.