Nearshore outsourcing locations increase in popularity

Nearshore locations are growing in popularity as outsourcing destinations, according to new research from the National Outsourcing Association (NOA).

Martyn Hart, chairman of the NOA, said as Europe has grown to encompass more states, central European countries have begun to trust destinations such as Romania and Bulgaria more with outsourcing projects. “For reasons such as data protection and common currency issues,” he said.

The NOA surveyed 50 plus delegates attending the European Outsourcing Association summit held this month. The delegates were a mix of: those who have, or are considering outsourcing; companies which fulfil outsourcing contracts; and legal and consultancy service companies that support the industry.

59 per cent of respondents believed Romania and Bulgaria are more attractive to work with than the countries once were, while only 9 per cent said the attraction had been reduced.

“Eastern Europe holds benefits because they have a good education system,” added Hart. Although most Indians hold English as their second language, Hart dismissed this as an attraction, pointing to another NOA survey undertaken recently. This showed only 4 per cent of the British population (based on a sample of 1000 people) felt they receive good service from Indian call centres.

However European nations do not have the scale of staff to pose a threat to outsourcing industries belonging to their Asian and South American counterparts, said Hart. While the majority of survey participants- 58 per cent- believed different geographies are suited to different types of outsourcing projects. Only 17 per cent of those questioned said Indian providers are leaps and bounds ahead of other geographies.

The majority of those surveyed - 75 per cent - also believe a major Indian player will soon acquire a large European or American provider. This was particularly because of the increasing industry trend towards consolidation.

“The most significant thing for me is the growth in the mega mergers,” Hart said. “There will be more utility type organisations and more EDS and HP type deals,” he suggested.

When predicting the type of provider the larger Indian outsourcing players, such as TCS, Wipro and Infosys, will look to acquire, Hart mentioned Cap Gemini. “Although Cap Gemini is not as strong in the States so it could be CSC [Computer Science Corporation],” he added.

“Indian providers will acquire for market share and for want or consultancy services,” Hart concluded.