The global financial crisis has ironically opened up opportunities for many developing nations vying for a larger slice of the growing offshore services market, as cost optimisation has become essential for business survival. There has been significant activity in many countries over the last 12 months to strengthen or grow their positions as leading locations for offshore services, according to research firm Gartner’s latest report.

While to date India and China may be the undisputed leaders for offshoring services, the dynamic nature of the market has seen a number of contenders making progress as viable alternatives to the hitherto popular BRIC (Brazil, Russia, India, China) economies. Key factors influencing offshoring decisions include strong interest in nearshore locations, relevant language skills, cultural compatibility, time zone and travel time.

Gartner has evaluated the suitability of 72 countries and identified the Top 30 destinations to assist organizations in determining where to host their offshore IT operations. The countries were rated based on 10 criteria – 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.

Ten countries from the Asia Pacific region were represented in the 30 leading countries. These include current leader India and the greatest challenger in terms of potential scale – China. The combination of skills, existing scale and future scalability gave India an edge over other countries. Only China, Thailand and Vietnam were rated less than “good” for language skills in the region.

The rest are a mix of mature environments that offer limited cost benefits (such as Australia, New Zealand and Singapore) and emerging countries with a variety of challenges but attractive costs (such as Malaysia, Pakistan, the Philippines, Thailand and Vietnam).

Not surprisingly, Australia, New Zealand and Singapore were all rated highly for infrastructure, as was China, which has made considerable investment in this area. Australia, India, New Zealand and Singapore were rated “very good” in terms of their educational system.

On cost, Vietnam was rated “excellent” (the top score across all the countries analysed) and the Philippines was rated “very good”, along with China, India, Pakistan and Thailand. But in terms of political stability and economic environment, Malaysia and Vietnam scored “fair” while Pakistan and Thailand were both rated “poor.”

List of Gartner’s top 30 locations for offshore services in 2008, by region:

Asia/Pacific: Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Thailand and Vietnam

Americas: Argentina, Brazil, Canada, Chile, Costa Rica, Mexico and Panama

Europe, the Middle East and Africa (EMEA): the Czech Republic, Egypt, Hungary, Ireland, Israel, Morocco, Poland, Romania, Russia, Slovakia, South Africa, Spain and Ukraine