There is no doubt that the top 5 big players of the offshore outsourcing industry are India, China, Malaysia, Philippines and Vietnam. Let's try to review how they compare on factors like language, IT infrastructure, educational system, cost, government support, political and economic environment, talent pool, and cultural compatibility.
Despite world wide talk over jobs from the US and UK being outsourced to Asia-Pacific countries, the surge of outsourcing has anything but abated. More and more big, medium and small businesses are looking to reduce their operational costs by outsourcing the same work to better qualified professionals for a fraction of the cost. As per the 2005 Duke University CIBER/ Archstone Consulting study, a whopping 73 % of Fortune 2000 companies admitted that offshoring played a crucial role in their overall growth strategy.
China - A newcomer in the outsourcing sphere, China is a close contender of India, but still lags behind the sub-continent due to its lack of English-speaking manpower. Still, China is slowly growing as an IT outsourcing destination for those looking for another cost alternative to India. A recent study by PriceWaterHouse Coopers threw up some surprising findings. The study revealed that by outsourcing to China companies could save approximately 37% as compared to if they outsourced to India.
Recognizing that outsourcing may well be good for their economy, the Chinese government has started to actively showcase to the world the benefits of outsourcing to China. It has liberalized the economy, made its laws and policies more flexible and is stressing on education, particularly learning English.
However, although India is a low-cost destination, China offers services at a cheaper rate than India, and that's where its strength lies in the labour sector. Nevertheless, China's workforce in the outsourcing sector is not as large as India's and not as skilled, especially concerning fluency in the English language.
China's outsourcing industry is still in its fledgling state, with start-ups still lacking senior managerial skills. The huge cultural divide between China and the US and other western countries is the huge cultural incompatibility.
Vietnam:-Vietnam is fast emerging as a promising offshore destination for software outsourcing and for fulfilling other IT needs of businesses. Political stability is another factor. The current government has held power since Vietnam's 1975 reunification, meaning that there have been more than 30 years of political stability in the country. In addition, Vietnam has had no conflict with any neighbour country since 1979 and neither have there been any ethnic and religious conflicts within the country. So, companies find it safe to outsource to Vietnam.
There are many factors that swing the situation in Vietnam's favour. It has one of the most stable and secure economies in the Asia-Pacific region and has been a WTO member since 2007.
Its labour cost is economically attractive, with IT outsourcing being almost 30 percent less expensive than India and 50 percent less expensive than Eastern Europe (source: NeoIT 2006 and Ukrainian Hi-Tech Initiative 2007).
Vietnam also boasts of one of the youngest, most hardworking and fast learning workforce. Sixty percent of the country's population is under 30 years of age. Literacy levels are high and English is commonly spoken and understood since English is taught as the main foreign language since grade 6. The country has a 96 percent literacy rate and a whopping 80 percent of the country's college graduates hold degrees in the sciences (Vietnam Economic Times). This makes Vietnam an ideal destination for outsourcing technological projects.
Although Vietnam does face stiff there is fierce competition from other outsourcing countries like India, China, and the Philippines, the Vietnam software outsourcing industry is more than capable of facing this challenge. The country boasts of more than 3,000 companies and 15,000 IT engineers in software outsourcing alone. In addition, the Government of Vietnam is actively developing the IT sector, setting up Software Technology Parks all over the country.
Vietnam's economy is vibrant and fast-growing. Its laws and government policies are business and foreign investment-friendly and the country is constantly strengthening its protection and enforcement of intellectual property rights.
Philippines - Philippines dominates the Business Process Outsourcing (BPO) industry, thanks to its vast manpower that speaks fluent English. The call center industry comprises 80% of the outsourcing industry in the country. Most schools in Philippines teach English. It also has a strong cultural compatibility with the western countries. Its history as an American colony gave the country both some sense of cultural affinity with the US. Operational and labour costs in the Philippines is also less as compared to other outsourcing destinations.
There are two areas in which outsourcing is flourishing in the Philippines - SEO and IT. The Philippine IT-BPO Road Map 2016 developed by Outsource2Philippines (O2P) and Everest Group estimated 2010 employment and revenue at 530,000 and US$9 billion, respectively.
It is also fast gaining a global reputation as being an affordable destination for shared corporate backroom operations, particularly in financial fields such as accounting and bookkeeping, account maintenance, accounts receivable collection, accounts payable administration, payroll processing, and the like.
Filipino animators are also carving out a niche for themselves in web development outsourcing.
Interestingly, the Filipino workforce is one of the most compelling advantages the Philippines has over any other Asian country. Education has high priority and the literacy rate in the country is 94.6% is among the highest in the Asia-Pacific region.
Philippines has an edge over its outsourcing rivals in the following areas:
Very cost-effective: Wages are almost one-fifth that of what are paid in the U.S. Infrastructure also works out cheaper for those looking to offshore as communication network, electricity and housing costs are practically half the U.S. rates.
Open economy: Philippines has a liberalized economy that allows for 100 percent foreign ownership in almost all sector. It also offers other attractive benefits such as tax reduction, especially in the Special Economic Zones.
Philippines offer state-of-the-art telecommunications facilities, and a well-developed transportation, business and economic infrastructure connect the three major islands. Adequate and uninterrupted power supply is another attraction, vital for the outsourcing industry that is so internet-dependent.
India - The hub of the entire outsourcing industry, India has managed to capture the developed world in a manner that is nothing short of extraordinary. Statistics speak for themselves. India alone commands 65% of the world's BPO offshore outsourcing market. The country also has one of the highest numbers of ISO-9000 software companies and the outsourcing industry booms all over the large country.
India also has one of the largest talent pools in the world, churning out around 3.1 million graduates each year - highly qualified men and women in fields as diverse as medicine, IT, law, finance, writing, website designing, and much else.
Perhaps the biggest thing in favour of outsourcing to India is that language can never be barrier to effective communication. All educated Indians speak English.
India is one of the leading players in the world as regards Information Technology. The Government of India's policies encourage IT development, which is why the country boasts excellent international data communication links and internet access in major cities. Thanks to government support, India has been able to build high-tech areas where technology and infrastructure are of international standards.
The Indian economy is among the top ten economies in the world and has a stable government that supports outsourcing.