groups of countries called (or used to be called) developing countries, countries in transition, third world countries or emerging economies. The list of countries is long; from Canada, Australia and Ireland to Vietnam, Bangladesh, Pakistan, India, Romania, Brazil and many others. However, ‘LOW COST’ indicates one of their main selling proposition; low labor-, living-, operation-, and overhead costs.

Before you can select where to go you need to know what you want

Without a proper strategy it will be very difficult to select the outsourcing destination

Country selection can be as easy as: ‘we go where others go’or ‘if it works for others it will work also for us’. It means India on the first place, China, Russia and may be one of the countries in Eastern Europe.

Lately we had seen various charts plotting and designating various countries as attractive, feasible or risky territories for offshore outsourcing. There is one common feature of these charts: they all show on one axis the relative costs associated with a specific country or cost advantage compared to other countries. On the other axis one could plot risks, quality/availibility of labour force or skills or other factors, depending on the purpose of the exercise and preferences in selecting an offshore destination. The four quarters of such chart will visualise and represent the;

Secure markets: the cummulative cost advantage and the business risks are low. From another perspective the cummulative costs are high while the associated business risk are low. Therefore the business gain opportunity is also low.

Attractive markets: the cummulative cost advantage is high while maintaining a low risk environment. From another point of view; the cummulative costs are low while the related business risks are also low. This economies and territories, in general, provide a very attractive environment for offshore outsourcing.

Hazardous markets: the cummulative cost advantage and the associated business risks are high. From another point of view; the cummulative costs are low while and the associated business risks are high. These markets promise extraordinary business gain but recommended only for the real enterprising spirits.

Unattractive markets: the cummulative cost advantage is low and the associated business risk is also too high to be unaccaptable for most businesses. In other words the cummulative costs and the associated business risks are both high.

The above chart does not show the level of associated risks and cost advantages of the individual countries. Instead, it shows a partial list of countries belong to a specific market segment.

Another way to chart countries is to use a blend of criterias and metrics to define the offshore attractiveness of nations. A common metrics set is based on:

maturity: the number of years the companies have been exporting IT services or products

critical mass: number of businesses exporting IT services or products

export revenue: from IT services and products

Based on these metrics the countries are categorised as, for instance, ‘Leaders’, ‘Challengers’, ‘Beginners’ and ‘Up and comers’. This type of charts or lists can provide a bird eye, general view of the countries on the global IT outsourcing map. They are useful for high level orientation and pre-selections but usually too general for detailed country selection purposes.

Yet, when country selection has to be made a closer look is necessary. Prerequisite to country selection is that the company has developed an outsourcing strategy. This provides crucial input to country (an later partner) selection. The assumption is that at this moment there is common knowledge within the company on the objectives and goals of outsourcing, the management is supporting the outsourcing initiative at large and the outsourcing strategy in particular. The decision had also been made on which processes and functions will be outsourced.

The strategy documents also define if offshore or nearshore (or both) alternatives should be taken into account. This will limit the number of prospective countries on our radar.

In the next page we shall create and discuss the country evaluation checklist.