“Don’t get bitten by Asia’s offshore tigers,” says Gartner

IT offshoring; not the most exciting topic in the world but a vital contributor to the global IT economy. Last week Gartner released a new report detailing the challenges and opportunities facing Asian locations and warned that while emerging stars such as Indonesia and Vietnam offer great cost savings, there are risks.

Primary among these, as I noted for The Reg, is that none are doing well when it comes to their Data/IP Security and Privacy rating.

Indonesia, Thailand, Sri Lanka, Bangladesh and Vietnam all ranked “poor”, while more mature markets China, Philippines, India and Malaysia only did one better at “fair”.

Report author Jim Longwood also told me that despite ostensibly low costs, some emerging destinations may incur hidden “soft costs”.

“In some countries, for example, you might have to use a local joint venture; or for manufacturing pay additional fees to ensure a higher level of continuity of power supply than local businesses and homes might receive to avoid ‘brown outs’,” he said.

“Another soft cost is building a local brand, to enable the captive to attract a better quality of resources, e.g. when competing against the well-known global brands like of IBM, HP, Microsoft, SAP & Oracle for local talent. Part of this may well be investing building campus type facilities as the Indian providers have done.”

So, which will emerge as the favourite place to offshore IT services in the future?

Well, there are a number of locations vying for the business of MNCs, the analyst told me. Vietnam Bangladesh and Indonesia are leading the pack of emerging Asian countries thanks to strong government support for the first two and “more adhoc local entrepreneurial means” in the latter.

As for China, well it is certainly creeping up fast on India, and was rated by Gartner as the sub-continent’s number one challenger in terms of scale.

However, India has won the “current battle” in terms of horizontal IT services for apps and business processes and will not be overtaken by the Middle Kingdom anytime soon.

“However, versus India, China has certainly won the ‘battle’ to be a leading global site for manufacturing technology whether for TVs, telecommunications or IT hardware componentry,” he added.