WHILE Singapore is gearing up to become a major hub and provider of high-end business process outsourcing (BPO) and shared services, analysts differ on their perception of how much success the country can have as a BPO destination.
The Economic Development Board (EDB) of Singapore believes the country is well on its way to becoming a destination of choice for offshore services and is well-positioned to ride the offshoring wave just as it did the manufacturing wave in the 60s, 70s and 80s.
However, Arno Franz, partner and Asia Pacific managing director of Technology Partners International (TPI), remains sceptical of Singapore's ability to become a major offshoring destination. He feels Singapore's cost structure is simply too high for it to become a major player in outsourcing. He points out that the country had lost a lot of its IT business to China over the past few years due to cost issues.
Mr Franz feels Singapore can only play a very limited role as a hub in multi-location sourcing. 'I simply do not see what they (Singapore) offer. The sourcing providers will do this not on location and most of the sourcing providers have operations in Singapore to support the financial industry there, not to support broader sourcing strategies.'
However, Sujay Chohan, vice-president and research director of Gartner, feels different countries offer different strengths in BPO. 'Some countries have a strength that is in demand today, for example low cost,' he said. 'Singapore should not be compared to India or the Philippines, or for that matter even with China from a BPO perspective.'
According to him, 'Singapore has certain high end skills which the market may not be ready for yet. The hub concept has made Singapore what it is today, so extending it is good.'
Management consultancy AT Kearney's 2004 Offshore Location Attractiveness Index, which is widely followed by companies seeking to outsource, rates Singapore as the fifth most attractive destination for offshore ventures, behind India, China, Malaysia and the Czech Republic.
It says Singapore offers excellent education and infrastructure, and gives high ratings for economic and political stability, IP (Intellectual Property) security and aggressive government promotion of the ICT sector. These continue to reinforce Singapore's position as a favourite location for regional service functions.
AT Kearney feels that given Singapore's small size it 'will likely remain a high-end niche player in the long term, and an important candidate for companies considering offshore hubs'.
Source: Asia One
