The Asean (Association of Southeast Asian Nations) countries will need to band together if they want to succeed in competing with India and China for their share of the global offshore outsourcing market, according to a new study.
Conducted by Canadian-based research firm XMG, the study showed that the strongest contenders of the 10-member Asean--namely Singapore, Malaysia, the Philippines, Indonesia and Thailand--would have to pool their manpower capabilities together in order to compete.
Benedict Ferrer, a senior analyst at XMG, said in a statement: "The population figures alone show that each individual Asean country alone cannot compete with India or China...combining the manpower of the Asean countries through cooperation [will allow] Asean to emerge as a key center for offshore delivery services matching that of India and China."
The Asean countries combined have a workforce of 223 million people capable of supporting IT, compared to India's 406 million and China's 768 million, according to XMG.
Noting that Asean member countries typically try to out-compete each other, XMG Chief Analyst Lauro Vives said: "Intra-ASEAN trade still dwarfs that of trade with non-Asean countries at a ratio of almost 1 to 3, indicating that most Asean member countries are more inclined to actively compete with their neighbors for a slice of the global market."
The research study found that the Asean countries have developed "fairly similar trading capabilities", with the effect of competing with and "cancelling each other out", rather than fitting into complementary roles for regional integration.
An example of this, XMG noted, is the move by several Asean countries to develop their own IT services outsourcing capabilities, such as the Philippines' Cyber-Services Corridor, Malaysia's Multimedia Services Corridor, Singapore's Next-Generation National Broadband Network, and Thailand's National Spatial Data Infrastructure.
According to previous XMG research on global location attractiveness among Asean countries, Malaysia holds the top spot for KPO (knowledge process outsourcing) due to its highly educated and concentrated workforce. The Philippines ranks first in call center services due to its English-proficient call center workforce, while Indonesia ranks first in IT due to its manpower availability, and Thailand and Vietnam rank fourth and fifth for BPO (business process outsourcing) readiness, respectively.
Although these Asean countries ranked among the top 25 countries in terms of their attractiveness for offshore and outsourcing services in 2006, they still pose, from a geopolitical assessment, a high risk for businesses, particularly amongst multinational companies, XMG said.
Only Singapore and Malaysia received the green light for minimal risk. Thailand and Indonesia, on the other hand, were highlighted as high risk due to terrorism and government political instability.
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