18 October 2017
Register now

Rise in offshore labour costs in 2006 - report

21 May 2007  |  4500 views  |  0 keyboard

The cost advantages of employing staff in cheap offshore locations declined in 2006, mainly due to accelerating wage levels, according to a study by consulting firm AT Kearney.

But even though wages in offshore centres for services - such as IT, business processes and call centres - have started to creep up, the cost advantages of using these locations is set to last for another 20 years, says the report.

The recent labour cost changes are due partly to accelerating wages and currency appreciation in offshore locations, as well as "downward pressure on wages in impacted sectors in developed countries", says the report.

While total compensation costs for sample positions like IT programmers or call centre staff rose by 5-10% in most Western countries, average wages for similar positions in India, China, the Philippines and parts of Eastern Europe and Latin America grew from 20% to 40%.

Paul Laudicina, managing officer and chairman of AT Kearney, says the research found that the relative cost advantage of the leading offshore destinations declined almost universally, while scores for people skills and business environment rose significantly.

"These findings reinforce the message that corporations making global location decisions should focus less on short-term cost considerations, and more on long-term projections of talent supply and operating conditions," he says.

Telecom costs in many emerging markets dropped by 25% or more, says AT Kearney, as competition and volumes in the telecom market increased. Furthermore, the number of firms with endorsements like the ISO 27001 data-security certification almost doubled in several emerging markets.

AT Kearney's Global Services Location Index comprises more than 40 metrics comparing the financial attractiveness, people skills and business environment of 50 countries worldwide. India and China lead the index by a wide margin, with declines in cost advantage offset by improvements in talent supply and business environment. However South East Asian countries reinforced their position as the primary alternatives, with the major ASEAN markets - Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam - now ranked among the top 20 offshore locations.

All five Latin America contenders - Argentina, Brazil, Chile, Mexico and Uruguay - also rose in the rankings, while newer contenders in Central and Eastern Europe such as Bulgaria, Slovakia and the Baltic States are outshining more established players like Poland, the Czech Republic and Hungary.

The Middle East and Africa also continued to attract offshore work, with Egypt, Jordan, the United Arab Emirates, Tunisia, Ghana, South Africa, Israel and Turkey all maintaining or improving their position in AT Kearney's rankings, which now includes Mauritius, Morocco and Senegal.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Norwich Union brings 150 Indian call centre jobs back to UK

Norwich Union brings 150 Indian call centre jobs back to UK

29 January 2007  |  8397 views  |  0 comments
New Web site to expose Aussie bank offshoring plans

New Web site to expose Aussie bank offshoring plans

11 December 2006  |  5031 views  |  0 comments
Public opposition to offshoring grows

Public opposition to offshoring grows

28 November 2006  |  8417 views  |  0 comments
Westpac warned on offshoring

Westpac warned on offshoring

21 September 2006  |  10070 views  |  0 comments
Norwich Union cuts 4000 jobs: outsources 500 IT roles; offshores 1000

Norwich Union cuts 4000 jobs: outsources 500 IT roles; offshores 1000

14 September 2006  |  7371 views  |  0 comments
Amicus slams HSBC offshoring

Amicus slams HSBC offshoring

04 August 2006  |  9712 views  |  0 comments
Tech staff shortage forces Wells Fargo to look offshore

Tech staff shortage forces Wells Fargo to look offshore

01 August 2006  |  11004 views  |  0 comments
UK backlash against offshore call centres brews

UK backlash against offshore call centres brews

16 June 2006  |  14767 views  |  0 comments
Europe's banks set to offshore 450,000 jobs by 2010 - Celent

Europe's banks set to offshore 450,000 jobs by 2010 - Celent

09 May 2006  |  6119 views  |  0 comments
Union warns of new wave of offshoring

Union warns of new wave of offshoring

06 March 2006  |  7954 views  |  0 comments

Related blogs

Create a blog about this story (membership required)
visit www.vasco.comvisit www.capgemini.comvisit www.innotribe.com

Top topics

Most viewed Most shared
Ripple looks to drive bank adoption with $300m XRP rebate programmeRipple looks to drive bank adoption with $...
15128 views comments | 12 tweets | 4 linkedin
Swift positive on blockchain, but big challenges remainSwift positive on blockchain, but big chal...
8346 views comments | 15 tweets | 21 linkedin
hands typing furiouslyHow artificial intelligence can deliver a...
7846 views 0 | 7 tweets | 9 linkedin
satelliteGates Foundation backs Ripple collaboratio...
7260 views comments | 13 tweets | 8 linkedin
IBM uses blockchain to improve cross-border payments processingIBM uses blockchain to improve cross-borde...
6420 views comments | 8 tweets | 16 linkedin

Featured job

Competitive base, double ote, benefits
London, UK

Find your next job