24 emerging locations for establishing global business services

When companies seek to establish a new location for their support services, they often end up exploring the well-known talent hubs. However, going elsewhere can often turn out to be just as – or even more – valuable. For those seeking an ‘out-of-the-box’ view for location strategies, experts from Buck Consultants International scoured the planet to find 24 lesser known and emerging locations that potentially fit the bill.

Ask any CEO where the company should consider setting up a new location for support centers — shared services centers (SSCs), global business services (GBS), back offices, business process outsourcing (BPO) or call centers – and the big names and more mature locations will immediately be brought up.

The drawback of going somewhere where everyone goes is however that such places are often crowded. Competition for talent and infrastructure is high, and if locations are to an extent still emerging, rapid progress will likely also trigger rapid changes in cost-benefit fundamentals.

With the aim to uncover less conventional locations with a big potential, consultants from Buck Consultants International searched for out-of-the-box locations and selected eight emerging locations each within three geographical areas: the Americas, EMEA and APAC (including India and China).

To qualify as out of the box, locations must be less conventional and emerging – well-known, mature markets with intense labor competition are avoided. In addition, they must be cost-effective from an onshore, nearshore or offshore perspective. In order to offer scalability, metropolitan areas with more than 1 million inhabitants are included.

The infrastructure (for example international airport, digital hub, highways) should be available or currently under development, and other companies should already conduct software and/or support activities there.

As a result, the mature, expensive and competitive countries in Western or Northern Europe and Asia were excluded from the analysis. Also excluded are the tighter markets in Central and Southern Europe. These markets may still offer interesting opportunities, but they are no longer out of the box or emerging.

The Americas

In North America, Canada is a mature market for both software and support. Toronto, Montréal, Vancouver, Calgary and Québec City especially are mature locations. So Halifax, a software hub on the east coast of Canada, is selected. It is a smaller market, with low risk and a high quality of life. The cost of living and salaries are on the higher end compared to other global locations, but real estate costs are attractive.

The United States is a large and mature market both for software and support activities. There are 57 metropolitan areas with over 1 million inhabitants. Oklahoma City is picked as there is still room to develop. Although labor costs are on the higher end compared to the other locations, they are attractive from a U.S. onshore perspective. Plus, quality of life is high.

Mexico is a popular U.S. nearshore location, mature for both software and support. Mexico City, Monterrey and Guadalajara are the most popular. Mexico has about 20 metropolitan areas with over 1 million inhabitants. San Luis Potosí is more out of the box, as the skills are there, but not yet the heavy labor market competition as in other Mexican locations. The costs of operations are attractive, especially from a U.S. nearshore perspective, so more software and support center activities are expected.

In Latin America, Kingston, Jamaica, is a mature call center and BPO market, due to having English as the official language and being in the Eastern Standard Time zone. The city offers a favorable business environment, a well-developed infrastructure and a growing talent pool. Several multinational companies (such as Xerox, Sutherland and Scotiabank) have set up support centers in Kingston. It is only a matter of time before more international companies invest.

Colombia is hot at the moment. Bogotá is chosen frequently for both software and support activities, in part due to the attractive operating costs. Medellín is regarded as an emerging location. It is a large city with 4 million inhabitants, with lower competition and more attractive labor costs and conditions compared to Bogotá.

Brazil, a large software and support market, has more than 20 cities with over 1 million inhabitants. São Paulo, Rio de Janeiro, Belo Horizonte and Florianopolis are amongst the most popular destinations in Brazil. Recife is an interesting alternative, more for software than for support activities, as there are lower-cost options in a better time zone for the U.S. market.

Argentina is a well-known outsourcing location, especially for software activities, mainly due to the attractive costs. As Buenos Aires is the most mature market in Argentina, a good alternative is Córdoba. It has even more attractive labor costs, but as the country is dealing with hyperinflation and exchange rate risk, it’s also a higher-risk location.

Lower risk at higher costs is offered by Uruguay, where Montevideo is an interesting option. It has low risk, acceptable quality of life and there are several support centers active already (e.g. Genpact, Telus and TMF).

Europe, the Middle East and Africa

Zagreb, Croatia is a nearshore European language hub with support center potential. Zagreb has 1.1 million inhabitants speaking many of the different European languages, low risk, an acceptable quality of life and attractive labor costs, especially compared to the much higher western and northern European salaries.

In Greece, Thessaloniki is selected. The city has low risk, an attractive quality of life and attractive cost levels compared to the rest of Europe. Some larger multinationals (such as Siemens and Pfizer) have software development centers in Thessaloniki and there are several support centers (such as TaskUs and Teleperfomance) using the location’s multilingual workforce.

Turkey is a large market with 10 cities exceeding 1 million inhabitants and is a mature market for both software and support activities. Most activity is focused in Istanbul, so Ankara is a promising alternative, with less competition on the labor market. Ankara has a large labor market, acceptable quality of life and an attractive cost structure. There are some software and support centers in Ankara, and it’s just a matter of time before more international players enter.

Georgia (in Europe, not the U.S. state) is marketing itself internationally, especially for support activities. Tbilisi is an upcoming software and support hub especially for low cost European nearshore activities. There are large call centers and a few support centers active in Tbilisi at the moment from companies such as Majorel, Teleperfomance and BDO.

In North Africa, Morocco is a mature software, support and BPO market and has 10 cities with over 1 million inhabitants. Fès is included as there is still room to develop without strong labor market competition and cost levels are attractive, especially for European services.

Another North African option is Egypt. Egypt’s potential for software and support activities is now finally utilized. As most investments go into Cairo, Alexandria is more out of the box. Quality of life on the Mediterranean coast is high. It has more than 5.5 million inhabitants, an attractive cost structure (junior gross salaries are below US$500 per month) and limited competition on the labor market.

There are a handful of international support operations in Alexandria (such as Vodafone, IBM and Xceed), and it is just a matter of time before more international companies will follow.

In Sub-Saharan Africa, Ghana is of British heritage, in the UK time zone and English is the formal language. Accra has acceptable risks and quality of life with gross monthly salaries for junior roles below US$500 per month. Mainly due to the lack of modern Class A office space, commercial rent is higher. The first larger international support centers in Accra (e.g. Xerox and Nestle Global Business Services) are proving its potential.

Finally, Kenya offers English as a formal language along with other European languages such as French. Nairobi is a mature market for BPO but emerging for software and support, with acceptable risk and quality of life and very attractive cost levels. Microsoft in 2019 launched its first Africa Development Centre (ADC) with a five-year, $100 million investment at two initial sites in Nairobi and Lagos, Nigeria, where the company planned to hire as many as 500 people by 2023.

Asia-Pacific

India, a large, popular and mature software and support market, offers no fewer than 48 metropolitans with over 1 million inhabitants. Digital business services firm Teleperformance in summer 2023 said it plans to hire as many as 60,000 in India over the next two years to bring its head count in the country to 150,000, and opened a 500-job site in Hyderabad in August. But other locations are ready too.

Kolkata, West Bengal (Northeast India) has a large labor pool, English speaking skills, attractive cost levels and lower labor market competition compared to other popular Indian cities. Traditionally, West Bengal was less business oriented, but in 2022 it was identified as the easiest state in which to do business in India, and multinational companies are currently building up their presence there.

Also in India, but all the way south in the tropical region, is Trivandrum. The state of Kerala was also not known for its business orientation. However, the city has 1.7 million inhabitants, a nice climate, a relatively good quality of life (especially for Indian standards), acceptable risks and very attractive cost levels. The first software and support centers (from Nissan and Allianz) are entering the market.

China is a huge and important software and support market. There are 155 cities (!) with over 1 million inhabitants. The coastal cities tend to be very expensive and competitive, so new investments now focus on more central locations. Chongqing is a good example. It has 31 million inhabitants, medium risk levels, lower quality of life but attractive costs.

The Chongqing Municipal Commission of Commerce reported in 2021 that 2020 welcomed 287 new foreign-invested enterprises in Chongqing, a year-on-year increase of 28.7%, with contractual foreign investment reaching nearly $5.8 billion, a yearly increase of 84.97%. As China is no longer used as a hub for APAC services and most companies only serve China for China, only one location in China is included in this overview.

Vietnam is also a popular software market, especially Ho Chi Minh and Hanoi. Da Nang is centrally located between the two other markets, with new highways being developed, Da Nang could be an interesting upcoming software location.

The Philippines is a large and popular market for U.S. support activities. A lot of American companies are trying to find “the next Philippines” as the most popular markets of Manilla and Cebu are becoming competitive. Therefore, two less mature locations in the southern part of the Philippines are interesting.

Davao City, with 2.4 million inhabitants, has some BPO players active, but enough room for development for other support activities. The same goes for Metro Cagayan de Oro: It has 1.7 million inhabitants, acceptable quality of life and attractive cost levels. As a result, more international support activities are expected to land there.

Last is Indonesia, an upcoming market both for software and support activities. As most attention goes to Jakarta, Surabaya is an emerging alternative. Surabaya is a port city and the country’s second logistics hub. The metropolitan area has 10 million inhabitants, with lower risk, better quality of life, lower cost and less competition on the labor market compared to Jakarta. More international companies are expected.

The second and last location in Indonesia is Nusantara. Following the examples of Brazil and Malaysia, Indonesia has an ambitious project to relocate the capital city. In order to build a new Indonesia, a new government capital is being built right in the geographical center of the country, 1,250 kilometers from Jakarta and in the primary rainforest of Borneo. The new capital is to be inaugurated in August 2024. Next to the government offices, a green “new smart metropolis” is planned. As a result, Nusantara is regarded as an out-of-the-box location, especially for green software development activities.

Concluding remarks

The 24 identified locations all have different pros, cons, costs and conditions. Companies also have their own specific sets of criteria, needs, wants and ‘nice to haves’. A decision on where to establish a support centre should therefore factor in all these kinds of considerations. Finally, the 24 locations are meant as a teaser, as there are undoubtedly many more options across the globe.