Based on recent research from the Everest Group, the offshore services market continued to grow with 46 new offshore delivery centers established in Q4 2010, a 12-month high. Q4 also witnessed a revival of activity in emerging locations. South Africa announced a financial incentives and skills development program to further attract the IT-BPO industry. During 2011, Everest predicts we are likely to witness activity in emerging locations across both captives and third-party service providers.
Click through for Q4 2010 outsourcing trends identified by the Everest Group.
The Market Activity Heatmap witnessed no change in categorization of countries. Q4 witnessed high market activity in India, Philippines, China, and Costa Rica with both captives and third-party service providers setting up multiple delivery centers in these locations.
Asia continued to dominate delivery center activity with half of all new delivery centers set up in Q4 2010. India dominated with nine new delivery centers set up during the quarter, while significant activity was also reported from China and the Philippines.
In addition to being a leading global player in voice BPO, the Philippines is also emerging as a credible location in non-voice BPO and IT.
Established locations in Latin America such as Brazil, Mexico, and Chile witnessed the addition of one delivery center each from leading service providers.
Over the last 10 to 12 months, activity in Latin America has become more broad-based and now also includes Central American countries. In fact, Costa Rica reported significant activity during Q4 2010 with three delivery centers established in the country.
Gradual economic recovery in Continental Europe has started impacting investor confidence with increasing activity. Q4 2010 witnessed 13 delivery centers set up across captives and third-party service providers. This is in sharp contrast to five centers during Q3 2010 and an average of eight centers during each quarter in 2009.
Following previous quarters, Africa continued to witness offshore activity in Q4 2010. Despite the crisis in Egypt and Tunisia during Jan 2011, players are likely to evaluate locations in Africa for offshore service delivery.
In contrast to Q4 2009, Q4 2010 saw a much higher share of Tier-1 cities as compared to Tier-2 cities. The higher share of Tier-1 cities is largely attributed to new service providers that prefer established Tier-1 cities for expanding their delivery footprint in a new geography. Service providers having existing presence in offshore locations also actively consider Tier-2 cities given lower costs of delivery in these cities compared to Tier-1 locations.
Regulatory developments witnessed in Q4 2010 include South Africa announcing incentives and measures to further promote IT-BPO industry in the country, and the Philippines gearing up for an activity in newer functions such as non-voice BPO and IT (having established leadership in voice BPO for English).
However, the violent narcotics situation in Mexico is worsening and is spreading to previously unaffected locations. The situation has not prompted any incumbent players to shut down their Mexico operations. However, new players planning to enter Mexico for offshore delivery are likely to closely monitor the situation.
