2008 year in review: Offshoring

India has remained as one of the principal offshore locations for outsourcing

This year has seen India, China, Russia and Brazil continue to dominate the offshore location agenda, but it has also marked the rise of new outsourcing destinations, such as Egypt, as credible alternatives.

However, key questions remain as the industry heads into 2009, principally the effect that the credit crunch will have on offshore providers, and the extent to which the instability of a region may affect a company's choice of outsourcing destination.

A recent report from analyst firm Gartner looked at the credentials of 72 countries as offshore locations, and listed the top 30 destinations in 2008.

Evaluation factors included language skills, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy.

Gartner's Top 30 list by region was as follows: (Americas) Argentina, Brazil, Canada, Chile, Costa Rica, Mexico and Panama; (Asia/Pacific) Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Thailand and Vietnam; and (Europe, Middle East and Africa) the Czech Republic, Egypt, Hungary, Ireland, Israel, Morocco, Poland, Romania, Russia, Slovakia, South Africa, Spain and Ukraine.

Gartner reported that Ukraine was the only country in EMEA to achieve a rating below 'good' in terms of cultural compatibility. But this may soon be challenged, according to a new industry group launched this year to promote outsourcing providers in Eastern Europe.

The Central and Eastern European Outsourcing Association (CEEOA) intends to pool resources from associated bodies based in the Baltics, Ukraine, Hungary, Bulgaria and Romania, in an effort to increase the volume and quality of service delivery in particular states.

The CEEOA claimed that it will work within the region to improve factors such as "international trade practice" and "modern business management competencies" .

Gartner's 2008 advancing offshoring destinations, meanwhile, included Egypt, Morocco, Panama and Thailand. These were all newcomers to the Top 30, and displaced Northern Ireland, Sri Lanka, Turkey and Uruguay from their 2007 positions.

Gartner analyst Ian Marriott explained that Morocco made it to the list because French speaking countries have increased the proportion of work carried offshore and have been keen to avoid language barriers. Thailand's raised position was due mainly to cost factors, while Egypt and Panama were deemed to have near-shore benefits.

But Egypt's recognition as an up-and-coming outsourcing hotspot is also due to the promotional efforts of its Information Technology Industry Development Agency (ITIDA) which announced an ambitious target to increase the country's share of the global outsourcing market to revenues of over $1bn by 2010.

This work has been helped in the UK by a persistent public relations team at Hill & Knowlton, the same agency that promotes India's representative association for software and services companies, Nasscom.

Hill & Knowlton has also promoted Cairo's strengths to businesses, and has contributed to an increase in media reports on the benefits of Egypt as an outsourcing destination, including its multilingual capabilities and the presence of many leading global service providers, including HP, IBM, Wipro and Satyam.

The promotional effort has clearly paid off: Egypt's growing popularity as a location for outsourcing services has been recognised by advisory firm Tholons in its latest global study, in which Cairo occupied the seventh position in the top 10 emerging outsourcing cities in the world.

Egypt was also named Outsourcing Destination of the Year at the National Outsourcing Association 2008 awards, and in December ITIDA signed an agreement that will see Intel motherboards assembled in Egypt before being exported to Africa.