Business Facilities -November 2008

INTERNATIONAL PROFILE Asia shoring industry will be one of the few remaining bright spots in the aftermath of the U.S. economic crisis. Leading offshore destinations such as India and the Philippines, along with other developing locations in East and South Asia, will continue to attract business from around the world during the next decade, according to the firm’s analysis, conducted in October. Still, the slowing economy will take its toll on the rate of growth of offshoring. In 2007, XMG predicted offshoring to grow by 34.7 percent through 2010, but new economic conditions bring that forecast down to 24.2 percent. The decline is due mostly to expected reductions in captive, or U.S. company-owned operations offshore, as companies look to monetize assets by selling their captives to third-party vendors. Certain factors will make offshoring more appealing, according to XMG, which expects the long-term strengthening of the U.S. dollar to result in an improved quality-to-cost ratio for sending functions to Asia. Also, as the economy forces financial, insurance and manufacturing companies to slash jobs, that will increase Singapore boasts one of Asia’s most developed and successful economies. the potential talent pool for business process third-party vendors with a healthy sales pipeline. During the last three years, India, China, the Philippines and Malaysia have garnered a substantial share of global offshoring revenues, totaling $40.39 billion in 2006 and $54.98 billion in 2007. The leader by far is India, whose revenue from offshoring is projected to more than double, from $34.19 billion last year to $74.25 billion in 2010, according to Vikki Mapua, research manager with XMG. China will be second in the market, with revenue estimated at $42.38 billion from offshoring by 2010. The growth is due to IT and IT-related services, and non-voice BPO and KPO (business process and knowledge process outsourcing). The Philippines’ offshoring revenue is expected to grow to $9.3 billion in 2010 as its market share increases for voice services such as sales, customer care and technical support. Malaysia, focused on ITrelated and BPO offshoring, is projected to reach $5.28 billion in the next three years, according to Mapua. Malaysia, she says, has highly specialized, technical people, thus giving the industry a strong backbone for both captive and outsourced services in BPO, KPO, software development and engineering. India is the most inexpensive place to set up a business, followed closely by Malaysia, and then the Philippines and China, and all four countries have made significant strides to reform their fiscal incentives and tax rates, Mapua says. All four nations are increasing the number of SEZs, offering greater savings through import tariff waivers, discounted utility rates and access to government incentives. The bottom line for offshoring is that, regardless of the economic conditions, the technology service sector will continue to prosper. “No matter what the economic situation dictates, the sought after resource will always be people and expertise,” says XMG Chief Analyst Lauro Vives. “As services become the growth segment in this industry, people will become the greatest export in several offshore countries.” During the past decade, Asia’s more advanced economies ascended to positions of global prominence and emerging nations made strides of their own. Economic growth and more open markets reduced poverty throughout the continent. By 2012, the World Bank estimates that 95 percent of East Asia’s residents will live in middle-income countries. These nations are moving from being low-cost suppliers to middle-income consumers, further driving economic growth. Asia, including the oilwealthy nations of the Middle East, contributed about 20 percent of the global GDP in 1980, and now contributes 40 percent, according to the World Bank. Asian nations, particularly exportdependent ones, will feel the emerging global turmoil, but according to Rabin, they are in a much better position than they were during the crisis of a decade earlier, thanks to larger cash reserves and an understanding of necessary policies. 34 NOVEMBER 2008 PHOTO CREDIT: KWR INTERNATIONAL, INC.

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Business Facilities -November 2008 Contents First Word Sanpshots Corporate Moves: Utah Kodak Develops a Megasite in Upstate New York Anatomy of a Deal: Studley Finds a New Space for Myspace Metro Spotlight: Johnson City, TN A Renaissance of Growth in Medical Plastics The Lone Star State Flexes Its Muscles Asia: A Portrait of Growth Sky's the Limit for High-tech in Arizona Corporate Moves: Pennsylvania Ohio Leads the Way Alabama's Tide Rolls to the Future IEDC 2008 Award Winners Advertiser Index Introducing Navigator Livexchange

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