11 January 2016 (Chicago)—A.T. Kearney
today released its 2016 Global Services Location Index™ (GSLI), a research paper that analyzes and ranks the top 55 countries
for outsourcing worldwide based on metrics in three categories: financial
attractiveness, people skills and availability, and business environment. The
GSLI brings rigor to companies’ location decisions in the globalized services
labor market, in particular for back-office functions such as IT and business
process outsourcing.
This year’s study, the seventh edition, identifies new
disruptions and threats to the outsourcing market, an outcome that presents a
bigger departure from past norms than any shifts in the country rankings
themselves. The top-ranking countries have undergone little material change in
position since the prior index, released in the fall of 2014.
While this year’s GSLI examines the trajectory of offshoring cost arbitrage
to low-cost developing countries, and the rise of some new locations, the real
story lies in the disruption being felt throughout this already disruptive
industry in levels of automation of business processes.
“Even though the top
six or seven countries are landing in the same order this year as 2014, looking
forward, this could all change radically because the very nature of what's
being outsourced is changing,” notes Arjun Sethi, global leader of
A.T. Kearney’s Strategic IT practice and principal author of the study.
“For the first time, we have a trend—automation—that could displace the
leadership of the likes of India and China in outsourcing. Technology’s
relentless progress continues to transform in unanticipated and fundamentally
different ways not only where work is moving to, but how and by whom—or by
what—it is being done. The new business model associated with this automation
threatens established concepts of offshoring, while expanding the market.”
The study projects that Robotic Process Automation (RPA) will continue to
ripple through the service economy over the next decade, as the rules-based,
repetitive tasks that most back-office employees perform are the easiest to automate.
However, a disruptor has emerged in the form of Business Process as a Service
(BPaaS). While in RPA robots are “taught” to emulate what humans do using the
company’s own user interfaces, in BPaaS service providers use a standardized
interface and process across multiple customers—with varying degrees of
automation—to quickly deliver outcomes at any scale.
Observes Johan Gott, A.T. Kearney principal and a co-author of the
study: “The implications on accessibility of services and employment in these countries
are massive. On the client or receiver end, BPaaS dramatically lowers the entry
barriers to business data management, opening the floodgates to smaller and
newer companies. Simultaneously, we’re seeing a shift in required job skills
that will play to those countries with the most adaptable educational
systems—as standardization and automation come to dominate the simpler
processes, offshorers will demand skills of a more analytic nature.”
2016 GSLI Rankings
·
India, China, and
Malaysia are once again the top-ranked offshoring destinations.
·
Six of the top
seven GSLI countries maintain their same rankings from 2014; Brazil and Mexico
have switched places.
·
The real news,
which began to emerge in A.T. Kearney’s 2014 GSLI, is that RPA and BPaaS
(or standardization) will continue to compete, and their effects will be felt
throughout the service economy over the next decade.
In the 2016 GSLI ranking, India, China, and Malaysia remain the top three
offshoring destinations, and Asia continues to dominate, with six of its
countries among the top 10 and eight in the top 20 (see figure below). Latin
America and Eastern Europe both place five countries among the top 20 in the
2016 GSLI, with the former region showing a spike in people skills and
availability and the latter in business environment. Helped by currency
depreciation, Brazil has risen four places in this edition of the GSLI.
The study also takes a deeper dive into optimal cities for offshoring
within the ranked countries. Notes Arjun Sethi: “While India and the
Philippines are still top of mind when it comes to offshoring, the hunt for new
talent is now taking companies beyond these countries’ capitals and major cites
to tier 3 locations such as Surat, Nagpur, and Lucknow in India and Bacolod and
Iloilo City in the Philippines.
We’re also seeing a sustainability phenomenon
among some big companies, called social impact sourcing, impact workers include
people from disadvantaged groups and lower-income backgrounds. There is even an
emergence of impact sourcing service providers that focus on simpler processes
and flexible work arrangements operating in frontier markets such as Kenya and
Nepal. These emerging trends are good news for these countries’ social and
financial platforms, and for business as a whole.”
2016 GSLI Rankings and Changes from 2014
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