Saturday, 9 May 2009

Where Your Job Could Be Outsourced

by Mark Scott
Friday, May 8, 2009
New Outsourcing Hot Spots

Sending jobs overseas is controversial in the best of times—and even more so when the recession is forcing layoffs all around. Just look at the proposal floated May 3 by U.S. President Barack Obama to tighten tax loopholes he says encourage companies to ship work abroad.

Yet in the hunt to shrink overhead, outsourcing continues unabated, particularly in the IT sector. Problem is, classic destinations such as Bangalore aren't as cheap as they used to be. Competition there among foreign firms has pushed up local costs, and staff turnover is high as well-trained employees jump to rivals. That's forcing clients to consider other places for outsourcing. From overlooked American cities such as Boise, Idaho and Winnipeg to more exotic locales like Cluj-Napoca, Romania, or the Philippines' Iloilo City, dozens of areas around the world are trying to grab a slice of the outsourcing business.

Obama's controversial plan to collect more taxes on foreign profits made by U.S. companies could tip the balance back towards domestic outsourcing. But there will always be other factors at play, so up-and-coming outsourcing destinations around the world still have room to grow.

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Buenos Aires, Argentina

Population: 12.6 million
Ease of Doing Business Rank (Argentina): 113 (out of 181 countries)
Rigidity of Employment Index (Argentina): 35 (out of 100—the lower the figure, the more flexible the workforce)

Located in roughly the same time zone as the East Coast of the U.S. (it depends on the time of year), Argentina's huge capital offers a cheap alternative for companies looking to provide customer service for American consumers. IBM and Hewlett Packard already have IT operations in Buenos Aires, which also has a large talent pool of Spanish, English, and Portuguese speakers.

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Winnipeg, Canada

Population: 719,000
Ease of Doing Business Rank (Canada): 8
Rigidity of Employment Index (Canada): 4

The Canadian city outstrips domestic rivals when it comes to overall business competitiveness. High-quality infrastructure, such as state-of-the-art office space and IT parks, helps offset the higher labor costs compared to rivals in the developing world.

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Boise, Idaho

Population: 568,000
Ease of Doing Business Rank (U.S.): 3
Rigidity of Employment Index (U.S.): 0

Alongside a highly trained graduate pool from Boise State University, Idaho's capital also has a bustling startup scene, which has created a culture of entrepreneurship. The city's lower cost-of-living compared with other U.S. rivals doesn't mean it is a culture backwater. Boise routinely ranks near the top of best U.S. cities in which to live.

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Indianapolis, Ind.

Population: 797,000
Ease of Doing Business Rank (U.S.): 3
Rigidity of Employment Index (U.S.): 0

Not only is Indianapolis located near a number of large U.S. cities, such as Chicago, but Indiana's capital offers several local centers of excellence. The city is well known for its life-science industry and is home to a large IT-trained talent pool of graduates from local colleges. Consultants KPMG also ranked Indianapolis third in a nationwide survey of cities with the most cost-effective tax structure.

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Belfast, United Kingdom

Population: 267,000
Ease of Doing Business Rank (U.K.): 6
Rigidity of Employment Index (U.K.): 14

Putting aside its violent history, Belfast is quickly becoming an outsourcing hub for companies serving the British market. Firms like Microsoft and Citigroup are attracted by the city's youthful population (46% are under 30), large pool of IT graduates, and business costs are one-third lower than in the rest of Britain.

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Cairo, Egypt

Population: 18 million
Ease of Doing Business Rank (Egypt): 114
Rigidity of Employment Index (Egypt): 27

With a population proficient in both English and Arabic, Cairo offers outsourcing possibilities for companies from both Western Europe and elsewhere in the Middle East. Local authorities have provided tax incentives for companies establishing bases in the Egyptian capital, which is home to a young, tech-trained population.

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Cluj-Napoca, Romania

Population: 310,000
Ease of Doing Business Rank (Romania): 47
Rigidity of Employment Index (Romania): 62

Already home to the largest percentage of students per capita in Romania, Cluj-Napoca benefits from major university-based tech R&D centers and a growing multilingual graduate pool. Local officials also have provided generous tax incentives to entice foreign tech and manufacturing companies to relocate to the country's third-largest city.

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Hangzhou, China

Population: 6.7 million
Ease of Doing Business Rank (China): 83
Rigidity of Employment Index (China): 27

With 18,000 IT graduates entering the workforce each year, Hangzhou is fast becoming a center for financial services outsourcing. In the first three quarters of 2008, the sector represented 43% of the city's total outsourcing business in dollar terms—a figure that is expected to rise despite the global recession.

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Ahmedabad, India

Population: 5.8 million
Ease of Doing Business Rank (India): 122
Rigidity of Employment Index (India): 30

With a large population of finance and accounting professionals, Ahmedabad, on India's west coast, is set to become one of the country's major outsourcing centers. The population's English proficiency may not match more-established hubs, but Ahmedabad's business costs are roughly one-third less than cities like Mumbai and Bangalore.

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Iloilo City, Philippines

Population: 419,000
Ease of Doing Business Rank (Philippines): 140
Rigidity of Employment Index (Philippines): 35

Already identified by Philippine authorities as one of the next wave of IT outsourcing centers, Iloilo City has received large government grants to upgrade its IT and transport infrastructure. The well-trained, English-speaking population makes the city an ideal option for companies looking for a cheap alternative for U.S. consumer support.

Click here to see the full list of Outsourcing Hot Spots 

provided by Yahoo Finance
Statistics provided by KPMG and the World Bank

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