VN tops outsourcing location index in the world. — Photo worldpropertyjournal.com

HCM CITY (VNS) — Viet Nam has become the world's top outsourcing location for the first time in terms of costs, risks and operating conditions, according to a study by global real estate consultant Cushman & Wakefield.

Cushman & Wakefield's annual global report "Where in the World? Business Process Outsourcing (BPO) & Shared Service Location Index" assesses factors likely to affect the successful operation of BPO functions around the world.

In 2013 Viet Nam was not even in the list, which ranks the 36 top countries in terms of foreign direct investment in the BPO sector. It entered in fifth place last year and now tops the list followed by the Philippines, Bulgaria and Romania.

The next stage determines the parameters to assess each country against one another, and costs, risks and operating conditions are analysed to provide an insight into which markets are particularly attractive in the current global environment.

With one of the highest growth rates in outsourcing, Viet Nam has established its presence in the sector as an alternative destination for low-cost offshoring services, rising from fifth place in last year's index.

The country's government has put in place policies to promote the country as an outsourcing destination, with the services segment expected to expand rapidly.

According to Cushman & Wakefield's head of research and valuation in Viet Nam, Jonathan Tizzard, the report demonstrates the success that the Vietnamese Government has had in providing a stable business environment along with policies encouraged to raise the education and professional standards of its young and ambitious population.

Viet Nam is witnessing an influx of foreign direct investment currently, and when a flurry of free trade agreements are signed this year or next, this is expected to increase.

In addition, Government legislation making it easier for foreign companies to invest and do business in Viet Nam comes into effect in mid-2015, suggesting Viet Nam is a country that will continue to dominate headlines in the business press for the foreseeable future.

While not the cheapest outsourcing destination, Viet Nam is still very competitive when compared to other global locations and wage rises in India and China largely contributed to it surging up the ranking to take first place in 2015.

But by actual market size, despite rising costs and concerns that overheating will inevitably lead to further pressure surrounding access to skilled labour, India remains the world's largest BPO destination.

Rising one place on the 2014 index to take second position this year is the maturing Philippines market, which has become an established pillar of the country's economy.

The market in fact hit a record US$15 billion in revenue last year, leapfrogging India in terms of growth and absorbing 70 per cent of India's voice and call centre operations.

The shift in power has in part been a result of spiralling Indian labour costs and climbing rates of attrition – which stand at 26.9 per cent, the highest globally as rising wages have left companies continuing to compete for the best talent.

Strengths

The strength and attractiveness of the Vietnamese BPO industry is a young workforce comprising skilled and dynamic people with an inquiring mind and costs equivalent to just a third of India's and half of China's, according to insiders.

The local BPO market sees two German firms, Digi-Texx and GHP, having provided this kind of services for over a decade.

The major local players are Lac Viet, CMC, and Tinh Van, which have large BPO projects. FPT has opened a BPO centre in city of Da Nang to serve Japanese clients. — VNS