Over the past decades, Asia has emerged as a leading destination for business process outsourcing (BPO). Companies are drawn to outsourcing to developing countries in the Asian region for its cost-effective solutions, which can save up to 60% on labor costs compared to Australia and other Western countries. Asia offers diverse outsourcing options, from call centers in the Philippines to contact centers in India and beyond.
Choosing the right outsourcing destination can be daunting, given the many choices when outsourcing to low-cost countries. Here's a comprehensive guide on outsourcing in Asia to help you decide for your business. It covers the top countries, their advantages, drawbacks, and current industry trends. This information empowers companies to make informed decisions about where to outsource their operations for maximum efficiency and cost-effectiveness.
The Philippines, known as the world's call center capital, is a leading destination for contact center services within the broader BPO sector. Global companies choose the Philippines for its cost-efficiency, operational excellence, and a sizable, educated workforce fluent in English and driven to succeed.
According to recent statistics, the Philippine call center industry is thriving. The country holds 10%-15% of the global BPO market, and in 2022, the market’s revenue grew by 10.3% to $32.5 billion as reported by the IT and Business Process Association of the Philippines (IBPAP). Healthcare, finance, tech, retail, and telecommunications were the main industries that drove this annual growth. It wasn’t the first time that the Philippines led in the contact center industry.
Filipinos benefit from a strong educational foundation, boasting one of the highest literacy rates in Southeast Asia, 98%, as reported by the World Bank Group. Annually, the country produces over 680,000 university graduates. As the world's third-largest English-speaking nation, the Philippines is a preferred choice for customer support, with agents trained in excellent service principles and neutral English accents.
Filipinos are proficient in written English and adept at providing non-voice services. Many BPO employees, especially the younger generation, are drawn to the flexible lifestyle of working different shifts to accommodate clients in various time zones.
Outsourcing companies in the Philippines are transparent about how they calculate and charge fees for their service. For instance, a typical call center may charge clients between AU$12-14 per hour per agent, while larger centers may charge up to AU$18 per hour. Filipino employees receive comprehensive compensation packages covering social security benefits and health insurance, ensuring fairness for clients.
Additionally, operational expenses such as building leases, equipment, and utilities are factored into the cost. While many call centers are based in Manila, some are moving to nearby provinces to reduce service costs further.
Aside from reduced cost and a competent and skilled workforce with a natural gift for customer service, the Philippine government also recognizes the outsourcing industry as one of the country’s top sources of revenue. To support the BPO sector, the government offers tax incentives, such as tax holidays.
However, these incentives may see certain adjustments in the future as artificial intelligence technology increasingly automates basic services and processes, potentially leading to adjustments in government priorities.
India has been recognized as one of the pioneers in the call center industry. The history of call center outsourcing in the country dated back to the early 1980s, but the industry gained momentum in the late 1999s. India also boasts a workforce composed of 5.4 million employees who are skilled in software development and information technology (IT) services.
India has over 3,699 BPO companies that handles 56% of the world’s business process outsourcing as of 2021. India’s IT sector achieved a 15.5% year-over-year (YoY) growth in 2022 and generated an estimated revenue worth US$245 billion in 2023. The country’s BPO industry, particularly its IT sector, contributed 7.5% to India’s GDP in the same year.
When it comes to academic excellence, India is a force to be reckoned with. Students acquire technical and programming know-how at an early age and go on to develop their skills to advanced levels. In 2023, the World Economic Forum said India produced the most STEM (science, technology, engineering, and mathematics) graduates due to its population of around 1.4 billion people—the largest in the world.
India’s English proficiency is also impressive. In 2022, the country scored 504 on the EF Education First’s Standard English Test (SET) and ranked 9th in Asia, making it a strong contender as an outsourcing location for global markets.
Labor costs in India are lower than in developed countries. For example, the pay rate for software developers is between $29-$32 per hour compared to the $46-$70 hourly rate in the United States. This significant difference in labor costs can give you more room to manage your budget—not to mention larger profits—as you partner with outsourcing companies in India.
Significant cost savings and world-class IT talent and infrastructure make India a top destination for your outsourcing needs. However, India’s status as a fast-developing nation may increase labor costs among middle-class earners, especially in regions with many foreign investments.
China is no longer just known in the manufacturing industry. In recent years, the country has started providing outsourcing services because of its large pool of highly educated talent, especially in e-learning, mobile apps, animation, gaming software, and offshore engineering. With its skilled workforce, China can keep costs low, making it possibly the cheapest option in the industry.
The outsourcing market in China has seen consistent results, with industry revenue projected to reach USD $38.38 billion in 2030. This sector is expected to expand at a compound annual growth rate (CAGR) of 11.3% from 2022 to 2030.
China’s educational programs give it an advantage in outsourcing. The country’s Education Modernization 2035 plan aims to increase its investment into STEM education, leading to over 5 million STEM graduates, the highest number in the world.
Engineering is a leading course among the Chinese, producing countless graduates each year, many of whom also have PhD degrees in engineering. Chinese nationals also study in top universities in the United States, Canada, and the United Kingdom and then come home to work, adding to the country’s pool of high-quality talent.
The Chinese have also been improving their foreign language skills by adding English classes to their educational system to be at par with their counterparts in the Philippines and India.
Despite regional differences in wages, China is still believed to charge 30% to 50% lower than India. Some years back, a fresh engineering graduate would earn AU $345–$415 per month in China, while someone with the same job role in India would have a monthly wage of AU $1,040–$1,385. However, higher-level IT jobs in China and India don’t have a huge salary gap with the software industry in the East Asian country, seeing an annual increase of 15% in recent years.
China has many engineers and technologists, and it also has special economic zones designated for foreign businesses. This makes the country a well-suited environment for developing software and IT-related solutions for companies that need outsourcing services. On the flip side, China isn’t the most efficient in protecting intellectual property rights, which may put your company or customer data at risk.
Thailand offers some of the best outsourcing benefits for companies relocating their functions to Asia, including data privacy and security. In this country, outsourcing providers strictly follow the policy of anonymity through their nondisclosure agreements with companies in other parts of the world. Thailand enacted the Personal Data Protection Act in 2019.
In 2023, Thailand ranked 9th as an offshore location in Kearney’s Global Services Location Index (GSLI). The 2023 GSLI focuses on talent regeneration, assessing how quickly countries re-skill and redeploy their workforce in response to market changes and technological disruptions. Today, Thailand remains a top destination for IT outsourcing in Southeast Asia.
Although only a small percentage of Thailand’s population is proficient in English, it does not necessarily mean it lags in the outsourcing race. The country’s literacy rate is 93.77%, with hundreds of thousands of university graduates yearly.
Affordable property and labor costs are common in Thailand. In 2023, the country’s average annual salary was approximately 1,170,000 THB or around USD $31,879.25, just over half of what workers in the U.S. earn yearly. Living expenses are also cheaper in Thailand, so BPOs can keep their outsourcing rates low.
Thailand knows that it has to improve its English proficiency to be more competitive. Thailand ranked as the 74th best non-native, English-speaking country in the world. Although Thailand may be struggling in this area, it excels in technical skills, which are a top requirement in mobile app development, web design, and software quality assurance, to name a few.
IT outsourcing in Vietnam may be a developing industry, but the country has been recognized as the most improved in software development outsourcing. Vietnam ranked 7th as a destination for IT sourcing services in Kerney’s Global Services Location Index (GSLI). Multinational companies like LG Electronics, Panasonic, and Toshiba found Vietnam competitive enough to provide tech services for them, with rates much lower than global standards.
The percentage of growth in the country’s IT industry has been consistent in the last 10 years or so, with many countries recognizing Vietnam’s skilled workforce.
Aside from a high literacy rate of 95.8%, Vietnam has a tech-savvy population. In 2016, Neil Fraser, a software engineer at Alphabet Inc.—the parent company of Google—visited local schools and saw how computer science students solved challenging problems that would be suitable for a Google hiring interview.
The employee turnover rates in the country are low, with most Vietnamese choosing to work locally instead of leaving the country for greener pastures.
One of Vietnam’s strengths as an outsourcing country is the price-quality ratio it offers to clients. Whether the work involves software development or web design, you can obtain top-notch services at half the price it will cost you if you are to outsource to other parts of Asia and the rest of the world.
Vietnam fares low in terms of English proficiency, occupying the 52nd spot in the global ranking of the best non-native, English-speaking countries in the world. As such, English training courses are being planned for Vietnam’s IT personnel, but this may strain the country’s efforts to be a top destination for outsourcing services.
Asia's top outsourcing countries can help your business cut costs, find the right talent, and expand globally. Choosing among the best may seem overwhelming, but rest assured you're in good hands.
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