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Information technology services providers are investing in delivery centers in alternative locations around the world in order to meet the needs of multinational corporations, according to Gartner. The analyst firm says India’s dominant position as an offshore location is being diluted by effective alternative destinations as more and more countries are considered potential offshore locations. In addition to the 30 leading global locations, an additional 50 countries have either started activities to establish an environment attractive to companies considering investing in lower-cost countries, or become home to external service providers that are beginning to sell services abroad.


“Business opportunities are growing in emerging markets and this is causing organizations to reassess their global delivery choices,” says Ian Marriott, research vice president at Gartner. “They are reconfiguring their sourcing strategies to support a broader geographic footprint as new locations emerge for offshore services.” Currently, 63 percent of buyers of IT services use Latin American locations, 55 percent use locations in EMEA and 63 percent use locations in Asia/Pacific. Western European buyers use predominantly India (35%), Poland (21%), Brazil (18%) and China (16%).

Top Three Most Used Countries for Offshore IT Services by Region in 2012

Latin America

Percentage

EMEA

Percentage

Asia/Pacific

Percentage

Mexico

50.2

Poland

25.3

India

48.5

Brazil

46.8

Russia

19.2

China

45.9

Argentina

22.1

South Africa

16.6

Malaysia

13.9


Source: Gartner (September 2012)

Marriott says new and emerging locations such as Brazil, Poland and Malaysia provide valuable additions to providers’ delivery capabilities, though providers do not intend them to replace India. Traditional India-based providers are establishing global delivery models to deliver the right volume of resources, with the right skills, at the right place, in the right time zone, and at the right price to meet the needs of customers. The additional locations will gain importance as customers seek benefits beyond cost reduction and demand more focus on local-language skills, greater cultural compatibility with demand centers, and the benefits of proximity in terms of reduced travel times and same-working-day communications.

“Providers are beginning to de-focus further investments in India and will aim to create critical mass across a number of these centers,” adds Marriott. “This will allow them to establish a global delivery network through a combination of common methodologies, tools, processes and procedures, to provide seamless and consistent delivery capabilities to their customers, wherever they are located.” At the same time, the globalization of business and business opportunities means that sourcing and operational leaders must carefully consider how their businesses will need to change to operate in different locations and how these changes can be best supported. “Despite the widespread use of offshore services, many organizations still struggle to make critical provider choices and focus on cost as the dominant factor in globally delivered services,” Marriott explains.

---Gartner

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