Down economy fuels IT outsourcing

“Interruptions to U.S. business customers have upset the sense of security that made Indian offshoring, in particular, an uncomplicated buying decision,” says Doug Brown, principal of outsourcing research firm The Brown-Wilson Group and co-author of the recent report 2009: The Year of Outsourcing Dangerously. “CIOs are putting continued hold on offshore projects that were routine just a year ago and analyzing alternatives that mitigate unresolved risks.”

Promising locations like South Africa, Columbia, Malaysia, Thailand and Mexico have done little in terms of government initiatives or social change to allay client fears about their safety as an outsourcing destination, says Brown. And some countries with more established IT export businesses, like the Philippines and Brazil, have been slow to progress.

India’s “tier II” cities, once poised to take business away from the likes of Bangalore, have not made the infrastructure and social improvements necessary to compete. “India’s track record does not bode well for fast development, which is allowing other locations such as Latin America and central and eastern Europe to leap ahead,” says Brown.

In fact, a few emerging offshoring locations have made strides in mitigating risks inherent to their countries while still keeping costs low, including Poland, the Czech Republic, Chile and Egypt, Brown adds.

Still, “risk factors for offshore outsourcing like terrorism, potential war, disaster, network breaks, environmental disregards, crime and disease make contingency plans a 2009 necessity,” says Brown. The trend emerging today, he says, is for IT outsourcing customers to seek out solutions closer to home–near shore or in the same country–where potential problems can be more closely managed.

The 25 Riskiest Outsourcing Hubs in the World

(Editor’s note: Rankings based on mean scores in ten areas of risk as reported by The Brown-Wilson Group’s “2009: The Year of Outsourcing Dangerously”.)

1. Bogota, Columbia
2. Bangkok, Thailand
3. Johannesburg, South Africa
4. Kuala Lumpur, Malaysia
5. Kingston, Jamaica
6. Delhi/Noida/Gurgaon, India
7. Manila/Cebu/Makita, Philippines
8. Rio de Janeiro, Brazil
9. Mumbai, India
10. Jerusalem, Israel
11. Curitiba, Brazil
12. Dalian, China
13. Juarez, Mexico
14. Brasilia, Brazil
15. Chandigarh, India
16. Colombo, Sri Lanka
17. Ho Chi Minh City, Vietnam
18. Quezon City, Philippines
19. Accra, Ghana
20. Pune, India
21. Chennai, India
22. Hanoi, Vietnam
23. Bangalore, India
24. Hyderabad, India
25. Kolkata, India

The Worst Three Cities for Corruption & Organized Crime

1. Bogota, Colombia
2. Juarez, Mexico
3. Johannesburg, South Africa

Heightening Trans-national & Geopolitical Issues

1. Delhi/Noida/Gurgaon, India
2. Jerusalem, Israel
3. Colombo, Sri Lanka

Unsecured or Unprotected Networks and Infrastructure

1. Bogota, Colombia
2. Bangkok, Thailand
3. Kingston, Jamaica

Unstable Currency

1. Bangkok, Thailand
2. Bogota, Colombia
3. Johannesburg, South Africa

Personal Crime Rate/Police-to-Citizen Ratio

1. Bangkok, Thailand
2. Johannesburg, South Africa
3. Rio de Janeiro, Brazil

Environmental Waste & Pollution

1. Bangalore, India
2. Chandigarh, India
3. Kuala Lumpur, Malaysia

High Terrorism/Rebel Target Threat

1. Mumbai, India
2. Delhi/Noida/Gurgaon, India
3. Jerusalem, Israel

Legal System Immaturity

1. Bangkok, Thailand
2. Bogota, Colombia
3. Kingston, Jamaica

Weather/Climate Threats

1. Kingston, Jamaica
2. Manila/Cebu/ Makati, Philippines
3. Bangkok, Thailand