Evolution of Services Driven Economy

15 years ago, there were very limited options in terms of outsourcing. India was the predominant answer for IT outsourcing. 10 years ago, BPO started coming up as well. At that point, 2 primary locations emerged: India and Philippines. Predominant clients for them were the US and UK, basically the English speaking countries.
When Europe started showing interest, people were very finicky about the data Acts and data privacy as they started having Eastern Europe come into prominence.

Some of the South American countries began coming into prominence through nearshoring from the US and their Spanish language capability.

What is it that makes a location emerge as a preferred location? Perceptions about a country and the reality can be very far (illustrated in table below). 

 
  Global Delivery Locations - Perception vs. Reality

(Source: Tholons- Global Services January 2010 webinar ‘Location Assessment: Perception and Reality for Global Businesses)

Why are clients seeking new geographies?

Clients are beginning to look outside India, Canada, Philippines and Eastern Europe and Latin American countries, because of:

• Localization- More so if you have a product and have to localize that for a given country. Every product cannot be built to meet the local conditions of every country, but a regional center can help facilitate localization of products. Also, a client in the US outsourcing his call center functions would rather have his service provider provide services out of a center in the US rather than offshore.
• Evolving and Developing Processes- Some locations are reaching talent saturation, leading clients to look for other locations where they can get talent at better quality and at a better price.
• Integration of new countries into the Global Economy (Example: Brazil, South Africa, China)
• New Customer Segments are emerging- For example, customers are looking at Brazil because it is a significant economy growing at a fast pace. So while certain things can be outsourced to Brazil, at the same time clients are looking at addressing the available market there. The same can be applied to China.
• Customer Demand is becoming more sophisticated

Why will existing solutions not be enough in the new decade?

• Closer to Customer
• New Generation of Services
• Specialized Skill Requirement
• Established Locations inhibited by Talent Saturation

Moving from Emerged to Emerging

There is a move, where clients are feeling that emerged destinations are saturated in terms of the labor pool, and have salary inflations year over year. There is a churn in the people which leads to lower quality. So clients are looking for emerging destinations which probably have a higher talent pool available, lower costs and governments more eager to attract investments. Clients who have been in outsourcing for around 10 years are moving from established locations.

Main factors in play in this shift:

 Emerging destinations being viewed as opportunities:
• Emerging Locations will hold the key in the near future for Global corporations as they will provide as host of new opportunities. They are looking at such locations to bring high quality and scale together with low costs.
• Emerging Economies, opportunities to tap the domestic talent and market, and evolving customer demands are driving client and service provider migration to new international geographies
 Perception marketing:
• Perception Marketing: Effectiveness of conveying concrete information, strategic marketing, and promotions to combat negative external perceptions will be crucial in attracting potential clients and competing in the global services industry
• “Employability” and “Scalability” are now more critical to “Productivity” and “Sustainability” with exceedingly lower emphasis on “Cost Advantage” alone

 Importance of distinct Value Propositions:
• Competitive and shareholder pressures are driving demand, creating more nimble, efficient market players
• Due to the rapid maturity of the services outsourcing industry, locations are struggling to create and sustain their competitive advantage – making it even more important for “value propositions” to be brought out using the “Centers of Excellence” model