WHILE India and the Philippines remain the top countries for offshoring, an A.T. Kearney study revealed companies are looking to locating in Tier-3 sites outside these nations’ capitals.
“While India and the Philippines are still top of mind when it comes to offshoring, the hunt for new talent is now taking companies beyond these countries’ capitals and major cites to Tier-3 locations, such as Surat, Nagpur, and Lucknow in India; and Bacolod and Iloilo City in the Philippines,” A.T. Kearney’s New York partner Arjun Sethi was quoted in a news statement as saying.
Sethi based his statement on the recently released 2016 Global Services Location Index (GSLI) by the management consulting firm. The report shows India and the Philippines unchanged in the index from the 2014 ranking at No. 1 and No. 7, respectively.
A.T. Kearney ranks countries to arrive at its GSLI according to financial attractiveness (FA), people skills and availability (PS&A) and business environment (BE).
India’s FA score of 3.22, while lower than Indonesia—also unchanged at No. 5, is still higher than the Philippines’s 3.17 score. The Philippines’s PS&A score of 1.43, while higher than Malaysia’s 1.42 score, pales in comparison to India’s 2.55 PS&A score. Malaysia and China, to note, also remained unchanged from their 2014 ranking of No. 2 and No. 3, respectively.
But the Philippines’s BE score of 1.29 beats India’s 1.19. “Since the 2014 GSLI, the Philippines has registered gains in its scores in infrastructure, environment and tax and regulatory costs,” the report, titled “On the Eve of Disruption,” said.
The report added that companies are looking at Tier-3 cities in the Philippines as location for offshoring because of the advantages these sites offer. “One advantage of Tier- 3 cities is the relative affordability of real estate. Another advantage is the relative availability of labor, its lower cost and lower attrition rates,” the report said.
Now on its seventh edition since 2004, the 2016 GSLI “helps companies make key location decisions for offshoring and industry development projects with objective guidance,” A.T. Kearney said.
The 55 countries in the 2016 index—four new countries have been added this year—are selected based on corporate input, current remote services activity, and government initiatives to promote the sector, the consulting firm added.
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