Southeast Asian nations continue to offer competitive advantages as outsourcing choices, occupying four of the top seven places on AT Kearney’s Global Services Index.
MALAYSIA
Southeast Asia’s top choice for outsourcing and third on the global list, Malaysia is establishing itself as a major international hub for high value-added shared services, focusing on the finance, logistics and energy sectors. From manufacturing-related R&D centres in Penang, to financial service centres operated along the Multimedia Super Corridor, the country is already attracting major investments. As in Singapore, government support has been the major driver of growth and the authorities are trying to increase the small pool of skilled professionals by increasing the capacity of technical schools and universities.
THAILAND
Fourth on the global list, Thailand has a competitive cost structure, a solid education system and a business-friendly environment – all the requirements to become a serious competitor. Weak English skills and a relatively minor IT-focus have limited the growth of the sector, but the government is actively addressing these shortcomings. Outsourcing specialists Infosys have gained a foothold here, describing it as “another low-cost location that is not plagued by attrition and wage hyperinflation”. With a large pool of untapped talent, Thailand could compete for the business currently going to the Philippines.
INDONESIA
Although Indonesia has one of the most favourable cost structures in the index, it ranks close to the bottom in terms of business environment.The low quality of education and language skills needs addressing. Nevertheless, Indonesia is the third-highest new entrant in this year’s index, benefiting from competitive wages, rent and electricity costs, a relatively low tax burden and a large workforce. Low costs, a large population (third only to China and India) and increased political and economic stability may yet make Indonesia an interesting option in the future.
PHILIPPINES
Despite political instability and infrastructural weaknesses, the Philippines continues to benefit from the global exposure and English language skills of its workforce. The country tops the financial attractiveness component of the index. Low costs, a well-educated population and traditional ties to the US (including the accent) give the country an edge, particularly among American companies. The Philippines excels in providing high-quality call centres to North America.
VIETNAM
Vietnam is an emerging offshore contender, fifth in the region and climbing nine places to 10th overall, as several East European contenders slip backwards. It has a cost advantage, even over the traditional low-cost destinations of China and India. Japanese companies in particular have been offshoring IT work to Vietnam for several years.Constrained by a relatively weak business environment and shallow talent pool, Vietnam will likely replace India as a low-cost supplier of low-end processing work as India focuses on more advanced services.
