Australia wins top spot as niche offshore location

But government tardy in promoting industry

Taking some of the shine off India as the undisputed leader in offshore services, Australia has rated as one of the best locations in the Asia Pacific region in a new study that lists the top 30 destinations across the globe.

The Gartner study identifies the top 30 locations for offshore services by region using 10 criteria considered important for organisations looking at a potential location for offshore or nearshore IT services.

The findings uncovered a number of surprises. For example, Australia rated as excellent in five of the 10 criteria while India only achieved that rating in two categories. But Australia could not compete when it came to savings with India winning hands down on labour costs.

However, in a frank assessment of the local market, the study accused the federal government of being "tardy in promoting an offshore IT and business process industry" in Australia.

While the study points out a number of effective programs through Austrade, it warns a lot more can be done to promote Australia's potential niche position in a global services economy.

But the government's neglect certainly didn't take the shine off the results with the study rating Australia's infrastructure as excellent and education system as one of the best in the region.

The study points out there are plenty of well established data centres located in Australia for regional and international enterprises but adds: "One area it lags in is the deployment of high speed Internet access, but the government is undertaking a AUD$1.1 billion program called Connect Australia to improve these services."

One area where Australia fared poorly was in labour, the report said: "Australia has a high-cost workforce that lacks scalability relative to Asian counterparts. The population is aging, which causses some staff shortages."

In 2006 and 2007, the cost per employee of specialist IT services was US$73,000 with salaries increasing around five per cent per year.

The study suggests Australia as an ideal destination for high levels of privacy and security adding that the link between lower risk and higher costs holds true.

Gartner research vice president, Ian Marriott, said the study was undertaken because many organisations that choose to move IT services to lower-cost countries are daunted by the task of determining which country or countries would best host their operations.

Marriott said this year, Gartner analysed 30 countries with another 35 also considered although they failed to make the top 30.

"The analysis shows that India remains the undisputed leader in offshore services, but increasingly countries such as China, Russia and Brazil are providing credible alternatives," he said.

"In 2008, Gartner predicts offshore spending to grow 60 per cent in Europe, and 40 per cent in the United States.

"The aim of the study was not to rank each country, as every organisation will have a different view of which factors are the most important for their needs, but rather help sourcing managers determine which locations are right for their organisations."

Gartner's assessment criteria covered language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy.

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