China, Outsourcing, Global Outsourcing Report

China to be world’s top outsourcing destination

04 Apr 2005 | (Survey)

Three-quarters of US companies outsourced some or all of their information technology activities in 2004. And that percentage is likely to increase this year, according to a special survey on outsourcing and offshoring, the Global Outsourcing Report, released by Horasis and Going Global Ventures said.

While a smaller percentage of companies are outsourcing those activities offshore (32%), half of them have cut full-time jobs as a result. India is the most competitive and popular technology outsourcing destination in the world in 2005, according to the report, and China will be the No. 1 technology outsourcing country in 10 years. The Global Outsourcing Report 2005 is the first-of-its-kind report to rank countries based on opportunities, costs and risks they present for IT outsourcing, both now and in the future.

Outsourcing has become a supercharged issue, thanks to fears of job loss, but despite the political difficulties, the strategy can provide huge corporate benefits in terms of productivity, prices, profits and wages. But companies need to be able to assess the risks and benefits of each country they are considering as an outsourcing destination.

The Report was compiled by Frank-Jrgen Richter, president of Horasis: The Global Visions Community, a Geneva-based strategic advisory firm that develops scenarios related to issues of globalisation, and Mark Minevich, an international strategic advisor and principal at Going Global Ventures, a US-based international consulting and venture advisory firm.

“The Report makes an important intellectual and practical contribution to addressing one of the most dramatic business trends in current history,” said Mr Richter. “This report is a catalyst for identifying the next wave of winners in technology outsourcing, even before trends and problems can emerge,” added Mr Minevich.

Twenty countries have emerged as the leading technology outsourcing destinations in 2005. China, Costa Rica, the Czech Republic and Hungary round out the top five countries. The Report predicts that in 2015 the top five outsourcing destination will be China, India, the US, Brazil and Russia.

Using two different indexes—the Global Out- sourcing Index (GOI) and the Future Outsourcing Rank (FOR)—the Global Outsourcing Report 2005 contains analytical country profile for each of the 20 economies in the study, providing a comprehensive summary of the overall IT outsourcing position. The GOI is a weighted index made up of three separate ratings: the cost of doing business in each country; seven risk factors (including geopolitical, human capital, IT competency, economics, legal, cultural and IT infrastructure); and market opportunities. The Future Outsourcing Index, which assesses the long-term (10 years) competitiveness of the top 30 future outsourcing countries, is determined from GDP growth, population growth, the quality of the labour pool and analysis from leading entrepreneurs, economists and other experts.

Related Content: