Kudos for ICT industry

Sri Lanka has been included back into the top 9 Asian destinations for Offshore IT services by Gartner Inc., the world’s leading information technology research and advisory company.

Gartner previously rated Sri Lanka in the Top 30 locations in 2007-8 but has found it important to include Sri Lanka back in to the 2010-11 list given the improving profile of the ICT industry.

“It (Sri Lanka) has improved its scoring for “government support”, “infrastructure” and “political and economic environment,” Gartner said in justifying the re-inclusion of Sri Lanka.

Sri Lanka is also among the 9 Asian Pacific countries featured in the list as the leading emerging offshore locations evaluated by Gartner. Others are India, China, the Philippines, Bangladesh, Indonesia, Malaysia, Thailand and Vietnam.

The top 30 countries for offshore services were rated according to 10 criteria that will help determine which locations are right for individual organisations.

The 10 criteria were: language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy.

Sri Lanka was also among eight countries to make their debut in the Top 30 in the latest ranking.

Many organisations that choose to move IT services to lower-cost countries are daunted by the task of determining which country (or countries) would best host their operations. Gartner has conducted an analysis of these countries to assess their capabilities and potential as offshore services locations.

“Clients continue to seek a portfolio of offshore countries, and with India again experiencing increasing labour costs and attrition, this is creating opportunities for other offshore locations to target the services needs of more-mature Asian clients,” said Ian Marriott research vice president at Gartner.

Gartner elected to focus on emerging countries this year due to the dynamic changes taking place as they move towards developed country status. Gartner excluded the mature countries of Australia, New Zealand and Singapore this year because their maturity has led to little year on year change to their rating. Gartner also included two new countries to this year’s analysis — Bangladesh and Sri Lanka. Sri Lanka was last assessed in 2007-2008, while Gartner assessed Bangladesh’s offshore rating for the first time.

During the past 12 months, there has been significant activity in many countries to consolidate or grow their positions as leading locations for offshore services. Gartner has seen interest and steps taken by governments to improve their attractiveness to foreign companies setting up offshore operations in their countries. These measures include initiatives to improve the English language capability in the education system, setting up policies to better protect data, intellectual property (IP) and privacy, and improving the country’s infrastructure.

 “Enforcement of laws with regard to data/IP and privacy protection, and legal maturity continues to be an adoption barrier for using a number of low cost countries despite country governments taking action to improve the policies and regulations in these areas, “said Marriott.

Ratings of various countries as an offshore location:

Bangladesh: It rated “very good” in “costs”.  

China: Improved its scores for “political and economic environment” from “good” to “very good”, and “culture compatibility” from “fair” to “good”. Contributing to the increased rating for China is its rising global political and economic leverage, especially during the recent global economic crisis. China held a steady positive growth rate spurred by the $583.9 billion stimulus package in 2009. The Shanghai 2010 World Expo has helped to increase cultural awareness within China.

India: India is already the most successful country amongst the offshore locations. It continues to score very well across all 10 criteria. With the rising Rupee, its cost competitiveness is being challenged, but this is compensated by its strength in other areas.

Indonesia: Improved “costs” from “very good” to “excellent”, and “labour pool” from “poor” to “fair”. Based on several surveys that Gartner analysed, Indonesia continues to offer amongst the cheapest labour costs for IT and business process skills in the region. Indonesia has consistently increased its global competitiveness in its IT skills, lowered its unemployment rate and increased the number of qualified engineers. As a result, it is also attracting an increasing number of vendors providing offshore services out of Indonesia.

Malaysia: Improved its “government support” and “infrastructure” from “good” to “very good”. In Malaysia’s 2010 budget, the government introduced green IT initiatives to encourage green technology adoption. The Malaysian government is also investing in high speed broadband (HSBB), and 1.3 million homes and premises are expected to access HSBB services by 2012. It is becoming a regional centre of excellence for service desk, remote infrastructure monitoring and support as well as shared services centre for logistics.

Philippines: Gartner’s scores for the Philippines remain largely unchanged, although “global and legal maturity” slipped back from “good” to “fair”. Gartner continues to see foreign companies being attracted to the country’s young, experienced labour pool specialising in contact centres and finance and accounting (F&A) business process outsourcing (BPO), complemented by good language and cultural compatibility with western economies.

Thailand: Thailand’s rating has not significantly changed across the 10 criteria, although Gartner has seen Thailand’s desire to improve its policies around the areas of ‘data/IP/security and privacy” and “education”.

Vietnam: Improved its “labour pool” and “Culture compatibility” ratings from “fair” to “good”, but the “cost” rating slipped back from “excellent” to “very good”. Vietnam’s labour pool continues to be attractive due to the size of its young workforce. The Vietnamese government has created a priority list in 2010 to train 40 percent of its workforce in selected fields including IT. From a culture compatibility improvement perspective, Vietnam now has a sizeable expatriate community from Japan, South Korea, Taiwan, Malaysia, Singapore, Thailand and France.

Additional information is available in the Gartner report “Gartner’s 30 Leading Locations for Offshore Services, 2010-2011.” The report is available on Gartner’s website at http://www.gartner.com/resId=1491316