KPMG lists 31 emerging cities for IT/BPO Industry

MUMBAI, INDIA: KPMG, the global network of professional services, has released a new report – 'Exploring Global Frontiers – the new Emerging Destinations' today in Mumbai.

According to the report, the existing favorite locations for shared services and outsourcing start to become saturated, newer cities are emerging, offering new and improved incentive packages and talent, that are better geared for the IT/ITeS industry.

KPMG has identified 31 relatively unexplored cities for IT and BPO in the report. These cities are in developing countries and includes some onshore or near-shore developed city-country pairs which may be valid competitive alternatives to the existing favorite locations such as Bangalore, NCR, Chennai, etc.

Interestingly Ahmedabad, Jaipur and Nagpur are among the emerging cities for the IT/BPO industry in India, the report says.

The report highlights that enterprises are moving offshore not only to benefit from lower costs and access to a diversified talent pool, but also to get an added 'first-mover' advantage if they tap relatively unexplored cities.

They can also acquire various incentives such as government grants due to a heavier hand at the negotiation table as 'first-movers'.

Countries in developing markets are offering lower cost destinations for outsourcing services and also access to their markets which have high growth potential.

Further the report says, some cities are also becoming actively involved, independently promoting their capabilities and available programs.

To create a 'unique selling point', specific services such as accounting, research and development and animation are being promoted.

"Over the longer run, companies are likely to pursue rationalization measure. In the IT/BPO industry, these measures are likely to focus on the search for lower cost business alternatives globally, that could also allow companies to provide diversity to their global operations,” said Edgidio Zarrella, global partner-in-charge, IT Advisory, KPMG.

“Though the 'established locations' may still be considered as the epicenters of outsourcing, entities are beginning to look at other alternative locations due to a variety of divers." Moreover, Zarrella added, "A one-size-fits-all strategy may not be appropriate with location selection. Companies should consider their needs and align their vision with what different locations offer when considering their locations assessment strategy."

The report identifies that even the best and affordable workforce cannot compensate for inadequate telecommunications infrastructure that require companies to invest millions of dollars in dedicated lines and redundancies.

Similarly, some cities with a large and affordable skill pools, lack modern commercial real estates required to house sophisticated IT operations.

On Indian cities, the report says that Ahmedabad, Jaipur and Nagpur are emerging cities for the IT/BPO industry. India is a pioneer in the global offshoring industry, clocking revenues of US $ 40.3 billion through exports in FY 2008 and employing close to two million people.

Aside from Bangalore, Mumbai, the NCR region, Chennai, Pune and Hyderabad, which are now regarded as 'emerged destinations', several smaller tier II and III Indian cities have the potential to attract IT-BPO investments, it said.