Vietnam Becomes Top Outsourcing Location

NEW YORK CITY—Vietnam has become the world's top outsourcing location for the first time, according to new research from global real estate adviser Cushman & Wakefield.

Published last week, Cushman & Wakefield's comprehensive global report, Where in the World? Business Process Outsourcing (BPO) & Shared Service Location Index, assesses factors likely to affect the successful operation of BPO functions around the world.

“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,” said Cushman & Wakefield's Head of EMEA and Asia Pacific occupier services, Richard Middleton. “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.”

Costs, risks and operating conditions are analyzed by the report to give businesses an idea of which markets are particularly attractive in the current global environment.

Vietnam has established its presence in the sector as an alternative destination for low-cost off-shoring services, rising from fifth place last year's index, C&W says. The country's government has implemented policies to promote the country as an outsourcing destination, with the services segment expected to expand rapidly.

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 center 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.

While the global economic recovery has remained a gradual proposition, much of the BPO sector is being driven by English-speaking industrialized nations, placing the Philippines aggressively, ahead of many other BPO locations. The English dialect of the Filipino workforce is also well received within the US.

A new entrant to the euro this year, Lithuania made the index for the first time securing 11th place. This was the highest placed country of any new inclusion to the ranking.

“Benefitting from a cost-competitive environment, strong labor pool and high levels of language proficiency, Lithuania is well placed as a BPO destination,” Middleton added.

The uncertainties of Ukraine do overshadow Lithuania for some operators, but it has still emerged and is maturing as a strong Northern European service hub, offering a world-leading shared services infrastructure and an impressive ICT infrastructure which is currently ranked 10th in the world for internet connection speeds.

In Latin and Central America, Brazil continues as the lead country within the region in terms of market size, benefitting from the experience and creativity of its labor pool in supporting innovative technology platforms and services. This maturity is evident in the global ranking, with Brazil rising to eighth position from 18th last year.

“While Brazil is able to offer mass market outsourcing services, higher taxes and accommodation costs have started to translate into some outsourcing volumes being lost to countries such as Mexico, Colombia and Central America which are becoming more cost competitive,” said Mark Wanic, Cushman & Wakefield's Head of Americas Occupier Services.