This year's top 30 countries for offshore services

One of India's key advantages as an offshore outsourcing location was its lower cost. But it may be losing this advantage to countries like Pakistan and Vietnam, which now offer staff at far lower costs than in India.

Vietnam, with a significant French-speaking population, is also at an advantage as French-speaking countries in Europe embrace offshore outsourcing, said Arup Roy, senior research analyst at Gartner, on Thursday.

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India still has an edge over these locations if clients consider the maturity of the staff in the area of outsourcing, and their ability to hire more staff in India, Roy said.

Gartner released Thursday its listing of the top 30 countries for offshore services in 2008.

A number of countries have positioned themselves as credible alternatives to Brazil, Russia, India, and China, popularly referred to as the BRIC countries, Gartner said.

Mexico, Poland, and Vietnam have continued to strengthen their position against leading alternatives, while others are making their debut in the top 30, according to Gartner. These countries will be seeking to take advantage of the opportunity created by the increased focus that many organizations now have on cost optimization, as a result of the current economic crisis, it added.

For the list, Gartner assessed the suitability of 72 countries as offshore locations based on 10 parameters such as cost structure, IT labor pool, government support, and intellectual property (IP) protection laws, Roy said.

For a variety of clients the priorities are different, according to Roy. If they are looking for strong IP protection and security, they will look at Singapore or Australia as offshore locations rather than India. Indian laws for enforcing a contract are very lax, Roy said.

Countries like the Philippines and Vietnam do not have as severe a problem with staff attrition as India, he added.

French-speaking countries like Morocco are also poised to benefit from more offshore outsourcing by French-speaking markets in Europe, Roy said. Morocco entered the Gartner top 30 list for the first time this year.

However, language will not be a key factor when it comes to offshore outsourcing work like IT services, which are not really tied to language, said Roy. It is likely to be more important for call centers and business process outsourcing work, which tend to be more language dependent, Roy said.

Indian companies will have to set up near-shore locations in Europe to be able to offer French and other European language skills.

Having services centers near shore is likely to be critical for outsourcers in markets like the U.S. as well, as customers now use a mix of low-cost offshore locations, and near-shore locations to meet their requirement of greater control, cultural similarity and similar time zones, Roy said.

A number of Indian companies like Tata Consultancy Services, Infosys Technologies and Wipro have set up near-shore locations in Europe and South America.

Although only seven countries from the Americas appeared in the final list of 30, these countries are becoming an attractive proposition for the U.S., the largest buying market for offshore services, Gartner said. The countries from the Americas listed by Gartner are Argentina, Brazil, Canada, Chile, Costa Rica, Mexico, and Panama.

Latin American countries are able to increasingly take advantage of their Spanish-language skills in the U.S., as more organizations now require Spanish language from their providers for communication with Spanish-speaking parts of their workforce, Gartner said.

Although Canada fared badly on cost, it led the rating for political and economic environment, cultural compatibility, global and legal maturity, and data and IP security and privacy, Gartner said.