How is the Global Economic Shake-Up Shifting the Global Services Landscape? (Part 1)

Without question, the past twelve months has seen a material shift in the world economic order. Aside from debt bailouts and economic concerns in the West, global markets and global market practices continue to dominate many conversations. From rising debates ranging from global labor practices to the impact of free trade versus Chinese mercantilism, among other discussions, it seems the global sourcing equation is getting more and more complicated. In the context of global services markets, a recent AT Kearney study that I came across raises a number of findings and observations that will help contribute to continued discussions in these areas. Perhaps its most insightful high-level takeaway is how the recent recession has in fact "accelerated the shift of global economic production and consumption from developed to developing worlds" despite local protectionist policy and rhetoric in certain markets.

Moreover, AT Kearney suggests that offshoring is in the process of overcoming "negative perceptions" despite protectionist banter in some services corners. As the authors of the study put it, "despite growing concerns about job still grew in developed countries as economies globalized...[and] in the long run, the cost and talent arbitrage benefits for overseas locations are still great and the underlying business case for offshoring remains intact. As manufacturing supply chains have permanently left the shores of developed economies, the same is happening to services supply chains, and a forced move to reshore them would result in significant costs for businesses."

What countries are benefiting the most from the global services realignment? The top three haven't changed at all (India, China and Malaysia, in that order). But Egypt, Mexico, Estonia, Latvia, Lithuania, the UAE, UK, Costa Rica and Russia, among others, all moved up in the rankings relative to AT Kearney's 2009 study on the same topic (as did Poland, jumping 15 spots to 24 overall, representing the biggest gainer of the group). Who were the losers? Thailand, the Philippines, Chile, Bulgaria, the US, Sri Lanka, Tunisia, Romania, Ghana, Pakistan, Senegal and Argentina represent some of the top-30 ranked countries that lost group in the survey. Canada, Jamaica and Morocco also dropped materially in the rankings as well. So in short, everything you heard about India's services growth continues to be true -- and then some (more on this in a follow-up post). But the global market for services talent extends well beyond India's borders, and is becoming more and more complex, especially as companies increasingly investigate what the rising powers in Central America, Central/Eastern Europe and other regions can provide. As a final aside, it will be fascinating to note which direction Egypt moves in the 2011 study, given the current situation.

- Jason Busch

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