Vietnam top global outsource market as Chinese labor cost rises

Vietnam has been revealed as the world’s top outsourcing location for the first time, according to new research from global real estate adviser Cushman & Wakefield. Driven by costs, risks and operating conditions, Vietnam and several other countries are now particularly attractive in the current global environment reports Cushman & Wakefield.

With one of the highest growth rates in outsourcing, Vietnam has established its presence in the sector as an alternative destination for low-cost offshoring services, rising from fifth place last year’s index by Cushman & Wakefield. The country’s government has put in place policies to promote the country as an outsourcing destination, with the services segment expected to expand rapidly.

Key Report Highlights Include:

• Vietnam capitalizes on increasing Chinese labor costs to take first place in ranking.

• India remains the world’s largest BPO market.

• The maturing Philippines leapfrogs India in terms of growth, strengthening its proposition as a BPO market.

• New entrants deliver strong international language proficiencies and connectivity.

Richard Middleton, Cushman & Wakefield’s head of occupier services for APAC and EMEA commented, “While not the cheapest outsourcing destination, Vietnam is still very competitive when compared to other global locations and wage rises in India and China largely contributed to it surging up the ranking to take first place in 2015.  Despite rising costs and concerns that overheating will inevitably lead to further pressure surrounding access to skilled labor, India remains the world’s largest BPO destination by market size.”

Rising one place on the 2014 index to take second position this year is the maturing Philippines BPO market, which has become an established pillar of the country’s economy.  The market in fact hit a record US$15 billion in revenue last year, leapfrogging India in terms of growth and absorbing 70% of India’s voice and call centre operations.  The shift in power has in part been a result of spiraling Indian labor costs and climbing rates of attrition – which stand at 26.9%, the highest globally – as rising wages have left companies continuing to compete for the best talent.

Summary of Key Global Trends:

• Costs: Rising inflation, labour and property costs in established BPO destinations such as China and India are adding to the attractiveness of emerging locations

• Value creation: BPO providers are now looking beyond simply cost reduction to focus on innovation and customer care optimisation

• Energy security: With Russia readily able to restrict its gas supply into Europe it is now seen as an unreliable supply partner, meaning that those countries more heavily reliant on Russian energy have now become a riskier proposition when looking to attract new BPO and shared service centre operations

• Breadth and depth of BPO service provisions: BPO providers are now combining vertical solutions (such as claims processing, health payer business processing and loan portfolio management) with horizontal solutions (such as payroll, HR and supply chain management) to deliver effective BPO strategies

• Language proficiency: Language proficiency remains high on the agenda for BPO providers with locations offering a turnkey labour pool, trained and equipped in multiple language skills particularly attractive.

Source: worldpropertyjournal