The political crisis in the Middle East and Africa during the beginning of the year continues to have an adverse impact on delivery of offshore services from the region. During the violence and subsequent curfew in Egypt and Tunisia, some companies shut their centers completely while others shifted work to other centers in their global portfolio.
Service providers are beginning to expand into Tier-3 cities in India, beyond Tier-1 and Tier-2 locations. Although Tier-3 locations provide benefits of lower operating cost (30-40% cheaper than Tier-1 cities) and access to a fairly sizeable labor pool, there are challenges for leveraging these locations for offshore delivery of services. These include availability of fewer options of quality infrastructure and a relatively nascent business environment in these locations. Consequently, service providers are leveraging these locations for serving the Indian domestic market.
Uruguay is beginning to emerge as a credible location for multilingual operations in Latin America. Key advantages include access to a rich multilingual pool besides English (e.g., Spanish, Portuguese, Italian and French), as well as stable geopolitical environment with advanced infrastructure support for businesses.
Based on recent research from the Everest Group, the offshore services market witnessed 35 new delivery centers set up across captives and service providers during Q1 2011. Although this is lower than the 46 centers set up in Q4 2010, most of the decline can be attributed to the impact of seasonality with the first quarter typically reporting a lower market. The Everest Group expects location activity to increase during the latter part of this year.
Activity did increase in Latin America with the number of new centers reaching a 12-month high, and Brazil being reclassified as a “mature location” on the Everest Market Vista Location Maturity Heatmap.