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October 1, 2008
Top 50 emerging global outsourcing cities
By Avinash Vashistha (Tholons), Imrana Khan (Global Services)
They are not Bangalores or Makatis yet; but they could get there sooner. There are nine new entrants and six dropouts from the 2007 list
Tier-1 global service providers such as Accenture, ACS, Cognizant, Capgemini, CSC, EDS, Genpact, HP, IBM, Infosys, LogicaCMG, TCS, Satyam and Wipro continue to increase their global presence. The difference is that service providers such as IBM and Accenture are looking to tier-2 and tier-3 Indian cities for expansion, while the Indian providers Infosys, TCS and Wipro are heading toward cities in South America and Eastern Europe.
In a way, the choice of the right city has become more important than the choice of the country. It is rather the city (than the country), which represents a more accurate package of attributes that service providers seek. Thus, Cebu City and Monterrey matter more than the Philippines and Mexico from a decision-making standpoint.
| Region-wise Break-up (%) |
The region-wise analysis reveals something near to obvious — Asian cities are the ones that rock the top 50 cities chart. However, an interesting point is that not only the tier-1 cities in the Asia-Pacific region are ruling the outsourcing industry but also many tler-2 and tier-3 Asia-Pacific cities are fast emerging as outsourcing des-tinations. Of the top nine emerging cities, six — Cebu City (The Philippines), Shanghai (China). Beijing (China), Ho Chi Minn City (Vietnam), Kolkata (India) and Shenzhen (China) — are from the Asian continent. 38% of the top cities list has been occupied by such locations followed by 26% by Central and Eastern European cities. |
Global Services-Tholons study identifies those locations that are globally recognized for their "specific" outsourcing services offerings as well as the ones that are establishing themselves as specialized locations for particular outsourcing functions. To make the study complete, like last year, we have also come up with the names of top emerging outsourcing cities as that’s the main focus of this study.
There are eight such cities instead of five that we had reported last year (see Table 2 — "Top 8 Global Outsourcing Locations").
This year’s list of top 50 emerging global outsourcing cities, though, has quite a few surprises. We profiled nine "new entrants" — including Quezon City (The Philippines), Toronto (Canada), Rio de Janeiro (Brazil), Mexico City (Mexico), Jaipur (India), Singapore (Singapore), Chengdu (China), Guadalajara (Mexico) and Mandaluyong City (The Philippines) — to the list (see Table 3). Last year we had profiled top 15 emerging outsourcing locations.
The perspective of the city
Location assessment based on a city as opposed to a country is reflective of the ongoing trend we are witnessing in the global outsourcing arena. Service providers are looking to identify and tap the inherent capabilities and capacities of specific locations. This transition on how service providers view locations illustrate both the maturity of the outsourcing model and heightened focus on optimization of service-delivery. Today, a single provider can have centers in multiple countries and cities, with each city having the optimal conditions to fulfill specific service lines. Software development can be done in Bangalore, customer service can be done out of Makati City, while engineering services are delivered out of Kraków. The one-stop-shop country model has in fact given way to the more efficient, multicity, best-of-breed city model.
| Dropouts |
| Rank (2008) |
City |
Country |
| 31 | Perth | Australia |
| 36 | Baguio City | The Philippines |
| 37 | Leeds (Yorkshire & Humber) | U.K. |
| 38 | Birmingham, Alabama | U.S. |
| 45 | Oklahoma City, Oklahoma | U.S. |
| 50 | Juarez | Mexico |
Further, this also reflects the increased responsibilities, which local government units now have in developing their respective cities. City officials, infrastructure providers and local stakeholders are often better able to promote, stimulate and market their city’s specific capabilities to potential outsourcing service providers. Moreover, local stakeholders are able to address infrastructure and ecosystem concerns in a timelier manner. Many city mayors and local government units, for example, can provide city-specific tax incentives and telecom providers can deploy connectivity in a much more targeted scale. In contrast, nationwide agendas and developmental rollouts, as otherwise mandated by national governments, are often prolonged and drawn out — a pace unfavorable to most service providers.
| New Entrants |
| Rank (2008) |
City |
Country |
| 21 | Quezon City | The Philippines |
| 22 | Toronto | Canada |
| 26 | Rio de Janeiro | Brazil |
| 30 | Mexico City | Mexico |
| 31 | Jaipur | India |
| 36 | Singapore | Singapore |
| 37 | Chengdu | China |
| 44 | Guadalajara | Mexico |
| 45 | Mandaluyong City | The Philippines |
Though we highlight the increasingly vital role, which individual cities play in a country’s outsourcing industry, we do not discount the significance that national governments and institutional bodies play in shaping the sector. National governments and industry bodies are commonly tasked to provide guidance, policies and set direction. Likewise, these organizations provide essential monitoring and regulatory roles — ensuring that labor and business-related concerns are managed and implemented.
As such, the role of the city with regards to outsourcing should not be viewed as one, which has become entirely independent of the country. Rather, one should view the evolution of the city as a direct result of a country’s inherent capabilities as an outsourcing provider. Referring to Prague as a "Center for Excellence" for software development, or Ho Chi Minh City for IT Outsourcing (ITO) processes, for example, highlights the respective country’s strengths.
The full version of the article and the study results are accessible from the Global Services magazine website.
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