The 25 most dangerous places for offshore outsourcing

Published 2 March 2009

Are you thinking about outsourcing your company’s back-room work to companies in Bogota, Bangkok, or Johannesburg? Think again; here is a list of the 25 worst outsourcing cities

If you are planning on having an outsourcing contract for work in Bogota, Columbia, Bangkok, Thailand, or Johannesburg — let alone if you already have such a contract in place — you should be aware that these cities rank as the riskiest offshore outsourcing destinations in the world. Locations in India and Brazil also made this inauspicious list. Where do you outsource?

CIO’s Stephanie Overby  writes that after a year that saw terrorist attacks in Mumbai, kidnapping for profit in Mexico, and the unexpected meltdown of Satyam, one of India’s biggest IT services firms, corporate boards of American corporations would demand something else from the company’s CIO: rather than get things done “better, faster, cheaper,” CIOs would be asked to get things done in a manner which is “safer, more stable, more secure.” “Interruptions to U.S. business customers have upset the sense of security that made Indian offshoring, in particular, an uncomplicated buying decision,” says Doug Brown, principal of outsourcing research firm the Brown-Wilson Group and co-author of the recent report 2009: The Year of Outsourcing Dangerously. “CIOs are putting continued hold on offshore projects that were routine just a year ago and analyzing alternatives that mitigate unresolved risks.”

Overby writes that promising locations like South Africa, Columbia, Malaysia, Thailand, and Mexico have done little in terms of government initiatives or social change to allay client fears about their safety as an outsourcing destination, says Brown. Some countries with more established IT export businesses, like the Philippines and Brazil, have been slow to progress. India’s “tier II” cities, once poised to take business away from the likes of Bangalore,  have not made the infrastructure and social improvements necessary to compete. “India’s track record does not bode well for fast development, which is allowing other locations such as Latin America and central and eastern Europe to leap ahead,” says Brown.

In fact, a few emerging offshoring locations have made strides in mitigating risks inherent to their countries while still keeping costs low, including Poland, the Czech Republic, Chile and Egypt, Brown adds.

Still, “risk factors for offshore outsourcing like terrorism, potential war, disaster, network breaks, environmental disregards, crime and disease make contingency plans a 2009 necessity,” says Brown. The trend emerging today, he says, is for IT outsourcing customers to seek out solutions closer to home-near shore or in the same country-where potential problems can be more closely managed.

The 25 riskiest outsourcing hubs in the world
(Rankings based on mean scores in ten areas of risk as reported by The Brown-Wilson Group’s “2009: The Year of Outsourcing Dangerously”)

  • Bogota, Columbia
  • Bangkok, Thailand
  • Johannesburg, South Africa
  • Kuala Lumpur, Malaysia
  • Kingston, Jamaica
  • Delhi/Noida/Gurgaon, India
  • Manila/Cebu/Makita, Philippines
  • Rio de Janeiro, Brazil
  • Mumbai, India
  • Jerusalem, Israel
  • Curitiba, Brazil
  • Dalian, China
  • Juarez, Mexico
  • Brasilia, Brazil
  • Chandigarh, India
  • Colombo, Sri Lanka
  • Ho Chi Minh City, Vietnam
  • Quezon City, Philippines
  • Accra, Ghana
  • Pune, India
  • Chennai, India
  • Hanoi, Vietnam
  • Bangalore, India
  • Hyderabad, India
  • Kolkata, India

Worst outsourcing hubs by category

The worst three cities for

Corruption and organized crime

  • Bogota, Colombia
  • Juarez, Mexico
  • Johannesburg, South Africa

Heightening trans-national and geopolitical issues

  • Delhi/Noida/Gurgaon, India
  • Jerusalem, Israel
  • Colombo, Sri Lanka

Unsecured or unprotected networks and infrastructure

  • Bogota, Colombia
  • Bangkok, Thailand
  • Kingston, Jamaica

Unstable currency

  • Bangkok, Thailand
  • Bogota, Colombia
  • Johannesburg, South Africa

Personal crime rate/police-to-citizen ratio

  • Bangkok, Thailand
  • Johannesburg, South Africa
  • Rio de Janeiro, Brazil

Environmental waste and pollution

  • Bangalore, India
  • Chandigarh, India
  • Kuala Lumpur, Malaysia

High terrorism/rebel target threat

  • Mumbai, India
  • Delhi/Noida/Gurgaon, India
  • Jerusalem, Israel

Legal system immaturity

  • Bangkok, Thailand
  • Bogota, Colombia
  • Kingston, Jamaica

Weather/climate threats

  • Kingston, Jamaica
  • Manila/Cebu/ Makati, Philippines
  • Bangkok, Thailand

You may also want to consult the Black Book of Outsourcing.