The GSLI brings rigor to companies’ location decisions in the globalized services labor market, in particular for back-office functions such as IT and business process outsourcing. This year’s study, the seventh edition, identifies new disruptions and threats to the outsourcing market, an outcome that presents a bigger departure from past norms than any shifts in the country rankings themselves. The top-ranking countries have undergone little material change in position since the prior index, released in the fall of 2014.
While this year’s GSLI examines the trajectory of offshoring cost arbitrage to low-cost developing countries, and the rise of some new locations, the real story lies in the disruption being felt throughout this already disruptive industry in levels of automation of business processes. “Even though the top six or seven countries are landing in the same order this year as 2014, looking forward, this could all change radically because the very nature of what's being outsourced is changing,” notes Arjun Sethi, global leader of A.T. Kearney’s Strategic IT practice and principal author of the study. “For the first time, we have a trend—automation—that could displace the leadership of the likes of India and China in outsourcing. Technology’s relentless progress continues to transform in unanticipated and fundamentally different ways not only where work is moving to, but how and by whom—or by what—it is being done. The new business model associated with this automation threatens established concepts of offshoring, while expanding the market.”
The study projects that Robotic Process Automation (RPA) will continue to ripple through the service economy over the next decade, as the rules-based, repetitive tasks that most back-office employees perform are the easiest to automate. However, a disruptor has emerged in the form of Business Process as a Service (BPaaS). While in RPA robots are “taught” to emulate what humans do using the company’s own user interfaces, in BPaaS service providers use a standardized interface and process across multiple customers—with varying degrees of automation—to quickly deliver outcomes at any scale.
Observes Johan Gott, A.T. Kearney principal and a co-author of the study: “The implications on accessibility of services and employment in these countries are massive. On the client or receiver end, BPaaS dramatically lowers the entry barriers to business data management, opening the floodgates to smaller and newer companies. Simultaneously, we’re seeing a shift in required job skills that will play to those countries with the most adaptable educational systems—as standardization and automation come to dominate the simpler processes, offshorers will demand skills of a more analytic nature.”
2016 GSLI Rankings
· India, China, and Malaysia are once again the top-ranked offshoring destinations.
· Six of the top seven GSLI countries maintain their same rankings from 2014; Brazil and Mexico have switched places.
· The real news, which began to emerge in A.T. Kearney’s 2014 GSLI, is that RPA and BPaaS (or standardization) will continue to compete, and their effects will be felt throughout the service economy over the next decade.
In the 2016 GSLI ranking, India, China, and Malaysia remain the top three offshoring destinations, and Asia continues to dominate, with six of its countries among the top 10 and eight in the top 20 (see figure below). Latin America and Eastern Europe both place five countries among the top 20 in the 2016 GSLI, with the former region showing a spike in people skills and availability and the latter in business environment. Helped by currency depreciation, Brazil has risen four places in this edition of the GSLI.
The study also takes a deeper dive into optimal cities for offshoring within the ranked countries. Notes Arjun Sethi: “While India and the Philippines are still top of mind when it comes to offshoring, the hunt for new talent is now taking companies beyond these countries’ capitals and major cites to tier 3 locations such as Surat, Nagpur, and Lucknow in India and Bacolod and Iloilo City in the Philippines. We’re also seeing a sustainability phenomenon among some big companies, called social impact sourcing, impact workers include people from disadvantaged groups and lower-income backgrounds. There is even an emergence of impact sourcing service providers that focus on simpler processes and flexible work arrangements operating in frontier markets such as Kenya and Nepal. These emerging trends are good news for these countries’ social and financial platforms, and for business as a whole.”
