International Business Opportunities

According to a statement from the Irish Congress of Trade Unions (ICTU), Ireland could suffer a loss of about 38,000 jobs due to outsourcing to low wage countries such as India.

The services sector, employing 67% of the workforce in Ireland, would be the most threatened by offshore outsourcing.
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The annual report on Global Sourcing released yesterday by Everest Research Institute, as opposed to the current industry thinking, emphasises that labor arbitrage will continue to drive offshore sourcing decisions for the next 30 years.

The survey points out that issues such as growing wages and skills shortages in offshore markets, will eventually work themselves out, as the offshore labor market continues to expand into new locations.

Joe Fernandes, Managing Research Director, Everest Research Institute says:
“Our findings show that wages are rising for a relatively small base of workers and that shortages are cropping up only in certain skill areas”

The key findings from the survey:

• The offshore market will continue to grow at an approximate rate of 33 percent a year for the next three years.
• As a result of skills shortages in an offshore location, jobs outsourced are more likely to move to another offshore market than return to their country of origin, as labor arbitrage is sustained by a increasingly expanding offshore marketplace.
• Non IT-offshoring will represent nearly 45% of the offshore market in three years, with companies will prefer using subsidiary companies that serve the parent company exclusively for offshoring business process outsourcing (BPO) services

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According to the UK’s National Outsourcing Association (NOA), Indian IT companies will compete with western IT firms for more onshore contracts in Europe during 2006.

The UK based body foresees Indian outsourcers open up European centres or acquire European IT companies by developing a model where services they provide will be divided between 60% offshore and 40 % onshore.

Martyn Hart, chairman of the NOA, said:
“Indian outsourcing providers are starting to think about the UK market from a western perspective. Companies are no longer in the solely onshore or offshore mind-set - they are more open to using a blend of sourcing options to achieve the best result.”

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Among the original attractions of doing business in Ireland, it seems just the low corporate tax mostly continues to draw multinationals to this location.

Low corporate tax rate, language skills, the availability of an educated work force, overall low costs and high productivity first attracted multinationals to choose Ireland for European operations.

However in the last five years the environment has changed dramatically, with the increasing costs of labor, electricity, and for other services; just the corporate tax rate continues to be kept low.

So the multinationals still aimed to base their European operations in ireland to take advantage of such tax benefits, are starting to shift from doing manufacturing to financial services, research or any activities not so reliant on low costs of operation.
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By launching Dubai Outsource Zone (DOZ), Dubai is set to enter in the offshoring market.

Dubai Government, with DOZ, aims to turn the emirate into a knowledge-based economy by 2010, making it a new offshore outsourcing location.
DOZ director, Ismail Al Naqi, says:

“Dubai has made it clear it is not trying to compete with lower-cost destinations. Rather it is aiming to attract the high end of outsourcing and to complement other destinations such as India, Philippines, Germany and Russia and be a back-up centre for disaster recovery, for example”

Industries DOZ is targeting are:
ICT;
media;
biotechnology;
energy.

Over the difference of costs with India, Al Naqi explains:

“DOZ’s cost analysis shows Dubai’s costs to be only 30-35 per cent higher than India’s. And this is for direct costs only - infrastructure, people, telecommunications. When other facts are considered such as the quality of life, connectivity to other parts of the Middle East and the rest of the world, and the quality of infrastructure, the differential is likely to be much smaller.”

Dubai appears to be in (more…)