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News & Events
Finding New Frontiers
Friday, October 13, 2006
EquaTerra in conjunction with the University of Michigan’s William Davidson Institute is developing a Location Attractiveness Index for global service delivery of business processes.
The framework, which is currently aimed at identifying countries but can easily be extended down to the city level, looks at both the demand side (companies looking for countries in which to locate business processes) and supply side (countries looking to promote economic development). A business process is mapped along two dimensions: Industry and process area. A process, such as finance and accounting, can vary considerably across industries, hence a given location can be more attractive for a specific process across industries or specific processes within an industry.
The framework classifies process areas (call centers, accounting, HR, procurement, medical transcription, knowledge processes such as equity or market research, life science research and legal services) across three industries (financial services, pharmaceuticals and manufacturing).
The classification scheme reflects the need to better pinpoint locations as offshoring expands from broad processes such as IT and call centers to narrowly focused areas defined by company and industry. “As the scope of offshoring increases, there needs to be more detailed information to rank locations based on attractiveness for a specific business process,” says Ajay Sharma, Research Manager, William Davidson Institute.
Attractiveness of a location varies by process. For applications development and maintenance, Tier 1 cities might be preferred. Whereas, for lower skilled back office work, Tier 2-3 cities will be preferred.
For each industry and process area, the framework gathers data on demand-side attributes from a variety of sources (companies, industry groups, consultants, suppliers, academics) and supply-side attributes from country databases, international organizations such as the World Bank, International Monetary Fund and the CIA Fact Book.
Countries currently being tracked are Brazil, China, Czech Republic, India, Morocco, the Philippines and South Africa.
For each country, a Location Attractiveness Index is computed by matching demand-side attributes, weighted by importance to the company, with supply-side attributes through the use of a “ranking engine.”
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