The outsourcing market is shifting from offshore to nearshore outsourcing. That can be concluded bases on this year’s Top 100 Outsourcing Cities ranking. While Bangalore retained the first place for the fourth year, Mumbai moved up to the second place. Last week during a webinar Tholons presented the list, announcing Bangalore will be facing severe competition in the upcoming time. A 1st rank in the next year is far from certain. Eastern-Europe in general and Poland more specific are ranking very well on this year’s list.
The traditional outsourcing countries are no longer alone
India and Philippines have been the main outsourcing destinations for the US and UK for about 10-15 years. Over time outsourcers have become more convenient in outsourcing and many more countries have joined the scene. For different reasons today other locations are being considered.
Tholons has noticed more focus on nearshore although being higher cost locations. This choice is being made for many different reasons, e.g.:
- near time zone
- cultural affinity
- when it’s IT related intellectual property law is a very important decision factor.
Tholons’ survey revealed that low cost is no longer the main driver. It’s even proven higher cost locations can be more effective. This changes the focus more towards cost effectiveness instead of just “low cost”.
Emerged, emerging and wave cities
The Top 100 cities are divided into three groups: emerged, emerging and next wave cities. The main difference between the 10 emerged and the 50 emerging cities is the scalability you can achieve. Besides there is a fourth group: “On Tholons radar” which are cities that could join the list in the upcoming time.
We were very surprised by three Polish cities ranked on this year’s list. Kraków managed to climb 3 places and is leading the emerging group while Warsaw maintained its position among the emerging cities. Wrocław is ranked for the 1st time. Already for some years it was “On the radar”.
Not on the list, but on the radar is Gdansk (Goyello’s main development location). Thanks to the huge effort of the local government Gdansk is for sure an emerging BPO and ITO city.
Eastern Europe is the leading continent
The graphs below (prepared based on the data provided by Tholons) Eastern Europe appears to be leading when you sum the number of cities by region, which proves the shift from the traditional outsourcing regions towards more nearshore outsourcing.
We realize this graph doesn’t tell us anything about the market size. The picture changes when you sum the number of cities by country. India is leading this list with 14 cities.
Within Eastern Europe Russia and Poland are leading. Those are the biggest nearshore markets for Western-Europe and even for the US it’s becoming a more important outsourcing market. Poland ranks close after Russia.
The final decision is up to you
If you are not just looking for a tremendous amount of resources most of the mentioned cities could be considered. Like Brian Tumpowsky, director sourcing and governance of the Publicis Groupe, mentioned during the webinar it’s most important to keep your outsourcing policy balanced. What technology do you need? Will the location be able to provide it? What is your experience?
“75% of the cities on the list is for most companies not feasible. Going to China could be the next step for some companies, but for most this will be years away.” Brian Tumpowsky during the webinar
You might decide in favor of a certain destination because of:
- Typical factors (e.g. political climate, economic conditions, etc)
- Your customer requirements (e.g. time zones)
- Internal requirements (e.g. virtual vs. physical)
- Skill and capability needs
- Risk tolerance to explore less mature destinations
- Internal maturity and experience
- Availability of other provider options in the considered area
- Ability to leverage provider presence in area for internal business reasons.
Tholons’ list can support and inspire you when you consider outsourcing abroad. Just like other lists it’s just a ranking based on a group of relevant factors. All these factors will be relevant to you as well, but the weight per factor might be different for you.
In case you are looking for help we would like to share our experiences with you. Feel free to comment below or to contact us through our contact form which you can find here. You can also discuss with us on Twitter: @Goyello.
This post has been published before on PetersOpinion.