Category: Location Strategy

Everest Group Talent Demand Growth Index | India IT Services | Blog

Welcome to our monthly India IT services talent demand index. We are excited to bring you this comprehensive analysis, powered by Talent Genius™, our AI-powered insights platform purpose-built to guide IT and Business Process Services location and workforce decisions. To gain a deeper understanding of the capabilities of Talent Genius and learn how to book a demo, watch this quick 2-minute video, Introducing Talent Genius™.

Monthly India IT services talent demand tracker

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Here is our in-depth analyses of the India IT services industry demand:

March 2024

Following a 14% decline in job postings for IT services in February, the industry regained momentum, showing a 23% month-on-month increase in job postings. At a year-on-year level, talent demand grew by 20%.

Some of the most in-demand roles include artificial intelligence engineer, machine learning engineer, virtual reality engineer, and UI/UX architect, showcasing sustained demand in the India IT market for niche roles. Demand growth for specialized roles has been consistently higher than traditional IT roles, especially since the latter half of 2023, driven by the gen AI revolution.

At a city level, all the major cities experienced double-digit growth in March, except Mumbai, where the demand increased by only 3%. Tier-2/3 cities continue to consistently experience higher demand growth than tier-1 cities, pointing to increased leverage of tier-2/3 markets for IT services.

From a sourcing perspective, both service providers and enterprises experienced an increase in demand. Enterprises recorded a solid 29% increase (compared to service provider’s 9%), reflecting the strong inclination and propensity toward insourcing.

All sectors, except transportation and logistics, saw heightened demand for IT talent, with technology, communications, and retail experiencing the most traction.

February 2024

Following robust growth in January, the Indian IT services market experienced a 14% decline in February. Talent demand for IT services this month declined 23% compared to the same period last year and 50% from February 2022.

Most cities saw a decrease in demand except for Thiruvananthapuram. After showing the highest increase in January, Jaipur had the sharpest decline of 25%. Among tier-1 cities, Mumbai saw the steepest drop at 20%.

All sectors, except transportation and logistics and cyclical commodities, witnessed a decrease in talent demand, with retail, hospitality, and tourism showing the most significant declines.

Looking at role rankings, demand for artificial intelligence engineers, machine learning engineers, analytics consultants, and UI/UX architects climbed compared to the previous month, indicating continuing interest in niche roles.

January 2024

The demand for IT services in India surged by 31% month-on-month, following a 25% decline in December 2023. However, demand increased 11% year-on-year.

Roles such as artificial intelligence engineer, machine learning engineer, security engineer, and UI/UX architects experienced significant increases in demand in January 2024 compared to the prior year, primarily driven by the heightened need for niche roles in India.

All major tier-1 and tier-2/3 cities saw an uptick in monthly job postings, with Hyderabad leading with a 40% growth rate. Among tier-2/3 cities, Jaipur experienced the highest demand growth, with a 34% increase in job postings.

Demand for IT services rose across all industry segments. Healthcare and BFSI showed the most strength, with a 40% increase from December 2023.

December 2023

Demand for IT services in India hit a 17-month low due to declining spending and clients postponing projects. As a result, most Indian IT service providers are reexamining revenue and hiring forecasts. The overall demand across service providers decreased by 28% from last month and 11% from the previous year.

Many service providers slowed hiring, realizing they posted jobs too early and hired ahead of the demand. Service providers are now focusing on improving employee utilization rates and do not anticipate the job requirements returning to the original levels anytime soon. Demand for IT services also declined by a notable 20 percent across enterprises from November.

Overall, the second half was slower than the first half, with demand falling by 7% for service providers and 4% for enterprises. Service providers were impacted more as enterprises cut discretionary spending and insourced some work.

At the city level, demand for employees declined consistently across tier 1, 2, and 3 cities. After peaking in November, the workforce requirements in Hyderabad and Chennai fell significantly by 32% this month.

Demand hit its lowest point of the year across all segments. Despite relatively stable employment over the last few months, retail and healthcare had the biggest drop at 35%. While it is uncertain if this is the bottom, a full recovery is not expected in the near future.

November 2023 update

IT services demand in India increased by 9% month-on-month and 5% year-on-year. Demand for IT application data management (ADM) grew 9.5%, and IT infrastructure increased 5 percent compared to the prior month. However, the surge is expected to be temporary because macroeconomic conditions pushed IT project timelines ahead for most companies.

Talent demand increased more in tier 2/3 cities than tier 1 cities, indicating that enterprises are increasingly confident in hiring outside tier 1 cities to gain a labor cost arbitrage advantage.

The number of available positions increased in all tier 1 cities, except Kolkata, where the job postings fell for the second consecutive month. Since the prior month, job openings increased 18% in Hyderabad and 14% in Chennai, representing the highest month-on-month increase.

Among tier 2/3 cities, Jaipur recorded one of the highest month-on-month increases in open positions at 34%. All the other cities experienced increased monthly postings – except for Chandigarh and Thiruvananthapuram.

IT services demand increased across all industry segments, with service providers and manufacturing demonstrating the most strength, up 5% from October.

Demand fluctuates more for service providers than other enterprises. As clients cut back on outsourcing spending, the talent need from service providers is expected to decrease in the coming months.

October 2023 update

The demand for IT services in India declined by 9% from last month but increased by 5% year-on-year, with significant variation over the past few months. Despite the shifts, demand remains near the same level as May 2023, when IT services demand increased after being at its 12-month lowest the prior month.

Tier 2/3 cities continued to be more attractive for companies seeking employees. Hyderabad and Kolkata had the biggest monthly drop in talent demand among tier 1 cities at 15% and 12%, respectively. Employee talent needs remained the most stable in Pune, with only a 5% drop compared to the previous month.

Although demand for most roles declined, help desk engineer, data analyst, and business analyst roles continued to increase by about 5% monthly. Only the retail segment maintained net positive month-on-month growth rates at about 7%. Cyclical commodities and service providers declined the most by 12% and 7% month-on-month.

Over the past few months, India IT talent demand has been volatile across roles, cities, and industries. Talent demand is expected to continue to fluctuate as major Indian IT service providers lose contracts and enterprises explore more insourcing opportunities.

September 2023 update

The demand for IT services in India jumped by 19% on a month-on-month basis after declining for two consecutive months. The year-on-year increase of 22% pointed to a significant uptick in hiring activities this month, rebounding from the slowness over the previous few months.

On a month-to-month basis, demand again surged in tier 2/3 cities compared to tier 1 cities. The increased reliance on tier 2/3 cities suggests a growing client preference for cost-effective IT service delivery locations.

Among tier 1 locations, Hyderabad and Kolkata bounced back the strongest with 36% and 35% growth in demand on a month-on-month basis. All locations in the three top tiers showed increased IT services demand – except for Pune, which dropped slightly.

Every major industry segment, except for banking, financial services, and insurance (BFSI), returned with increased demand. Service providers led the chart with a 22% increase in job demand compared to last month. However, BFSI declined 23% from the prior month.

August 2023 update

The demand for IT services declined for two consecutive months after recording a 14-month high in June 2023. Demand fell by 16% month-on-month and 32% on a year-on-year basis. At a segment level, IT ADM and IT infrastructure declined from July.

This trend could be a result of a quick fix by employers to adjust for the hiring surge in the second quarter of 2023. If the pattern continues, employee attrition will rise. However, the demand will likely pick up in the next few months as the end of the year nears.

Tier 1 cities continue to experience a higher decline in demand than tier 2/3 cities on a month-on-month basis, indicating the preference by enterprises to leverage low-cost talent from tier 2/3 cities.

At a city level, Kolkata witnessed the sharpest decline in demand at 47% and had an all-time low in the last 20 months. Among leading tier 2/3 cities, Kochi and Thiruvananthapuram showed the least decline in month-on-month demand.

The surge in demand by industry sectors halted, with consumer packaged goods registering the greatest decline since July. Business and professional services also reversed the growth trend.

A slightly higher decline in month-on-month demand across service providers that has continued for several months now clearly indicates increased insourcing by enterprises.

July 2023 update

While the month-on-month view showed a 9% drop in the IT services talent demand trend in India, demand grew 17% over the prior three months and by 32% year-on-year.

Tier 1 cities witnessed a relatively higher decline than tier 2/3 cities month-on-month, showcasing the increased leverage of tier 2/3 Indian cities. This trend is consistent across most tier 1 and tier 2/3 cities. Jaipur and Coimbatore are the only exceptions across tier 2/3 cities, showing 10% and 3% growth, respectively. Among tier 1 cities, Mumbai and Kolkata witnessed the highest decline, while Pune recorded the lowest decline of approximately 2%.

Service providers witnessed the highest decline of all industry verticals for IT services demand over the past year. Business and professional services and consumer packaged goods saw a slight uptick in demand.

June 2023 update

The demand for IT services in India showed further recovery and grew by 15% compared to May 2023. For the first time in the last six months, demand also showed growth on a year-on-year basis (21% growth compared to June 2023). At a segment level, both IT ADM and IT infrastructure segments witnessed 14-month high demand levels in June 2023, with IT infra talent demand growing 40% on a year-on-year basis.

The growth trend, which started in May, is solidifying and was consistent across all cities, though the extent of recovery varied. Chennai saw a modest recovery, whereas Mumbai saw a significant spike in demand. We believe the demand surge in Mumbai may not be entirely due to net new demand but could be due to talent management/attrition challenges arising from the hybrid/in-office model and the need to back-fill resources.

The demand from service providers continues to grow, and we believe there is more focus on hiring laterals this year compared to the previous year, which saw a significant uptick in campus hiring. This increase could also be due to multiple large deals that are at play in the market and providers hiring in anticipation of winning large business in the medium term.

May 2023 update 

The demand for IT services in India showed a recovery in the month of May, growing by 34% compared to the previous month and staying flat compared to 2022. This spike compared to March and April could be attributed to buyers placing demand ahead of the summer in key onshore geographies, which tend to be slower from a business perspective. The increase in demand was consistent across both tier-1 and tier-2/3 cities; however, the recovery was much steeper for tier-1 cities (growing 14% YoY) compared to tier-2/3 cities (shrinking by 20% on a YoY basis). Among the tier-1 cities, all showed an uptick in demand; however, Pune set a demand record of a 17-month high. The service provider segment, while it showed recovery compared to the previous month, on a YoY basis, registered a 7% decline in demand. On similar lines, BFSI and technology & communications verticals continue to show a declining demand trend on a YoY basis. 

April 2023 update

The demand for IT services in India further shrunk by 17% in April, reaching a 16-month low, and declined by 29% on a year-on-year basis. The impact of the anticipated global economic slowdown is clearly visible in the latest demand trends. 

The declining trend is consistent across both tier-1 and tier-2/3 cities. Among tier-1 cities, Chennai, followed by Delhi-NCR, witnessed the highest decline. Tier-2 cities saw an even higher decline on a year-on-year basis at 32%. At this point, the demand for IT services talent in India is almost 50% of the demand in January 2022. However, this trend needs to be observed over a slightly longer period. If this trend continues for a few more months, the already reduced attrition numbers are likely to come down further. 

Being the first month of the new fiscal year for many leading India-heritage service providers, this indicates a not so good start to the year 2023-24, and declining talent demand is deeply correlated to reduced business growth.

March 2023 update

After five consecutive months of demand growth/stability, the demand for IT services in India dropped significantly (21%) in March and by 36% on a year-on-year basis. The declining trend in March was consistent across all tier-1 cities, though Mumbai witnessed the lowest decline among all tier-1 cities. 

The demand in tier-2/3 cities also reduced by 26% on a year-on-year basis. This overall declining trend is expected as Q1 2022 witnessed a significantly higher demand due to attrition and talent wars faced by the industry, and with the current economic environment, most companies are not in an expansion mode.  

Stay tuned for regular monthly updates as we monitor the landscape of the India IT services industry demand market. We’ll continue to provide the latest insights and trends, so you stay well-informed on locations and workforce developments.

Egypt: A Safe Bet in the MEA Region in Unstable Times? | Blog

Given the current unrest in the Middle East and Africa (MEA) region, Egypt can potentially be a reliable choice for businesses seeking stability. Egypt’s support for US interests and its impartial stance in conflicts make it an appealing option for ally-shoring. To better understand the pros and cons of selecting Egypt for service delivery now, keep reading.

The MEA region is currently experiencing significant turmoil characterized by ongoing conflicts in Syria and Yemen, strained relations between Israel and Iran, and persistent tensions between Lebanon and Israel.

The Israel-Hamas conflict that began on October 7 has further intensified the regional instability, leading many global companies to temporarily close offices or implement remote work policies. For example, Bank of America closed its Tel Aviv office, while Citigroup and JP Morgan Chase instructed employees to work remotely.

The prevalence of gray swan events in the MEA region has noticeably risen and become more common, leading to the increased likelihood of unforeseen events. As a result, organizations need to find innovative solutions to maintain stable operations in the MEA’s complex geopolitical landscape.

Considering this challenging situation, a compelling hypothesis emerges: Egypt could be a viable alternative for organizations seeking stability. Owning to its neutral stance in the conflict, Egypt has remained stable with no reported service delivery disruptions or harassment of foreign nationals or tourists. To navigate this complex landscape, Egypt must balance its domestic politics – the geopolitical game of thrones – while pursuing economic growth.

From a global services perspective, Egypt offers several advantages. It has become a key player in the MEA region, attracting various organizations from diverse sectors. Egypt’s service delivery value proposition includes a large, educated, and multilingual workforce of approximately 250,000 full-time equivalents (FTEs), capable of supporting over 20 languages in both voice and non-voice business process services (BPS).

In the relatively less mature MEA region, Egypt stands out as a global services delivery hub, hosting global enterprises and providers offering diverse services, including customer experience management (CXM). Egypt is also expanding its services into IT and technology solutions, exemplified by Luxoft opening a center in New Cairo in the third quarter of 2023.

Additionally, Egypt can serve as a strategic satellite hub for companies seeking to diversify from potentially risky locations in the MEA region. This is primarily due to sharing the same time zone with Israel, which facilitates collaboration.

Moreover, Egypt is experiencing growing demand for BPO talent, surpassing other prominent offshore/nearshore locations, as illustrated below, which demonstrates its increasing delivery capabilities.

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Learn more about Everest Group’s artificial intelligence (AI)-powered insights platform, Talent Genius.

The complications with Egypt

At the same time, Egypt possesses its share of economic and political challenges. The country has been confronting multiple macroeconomic obstacles as the economy recovers from the double whammy of reduced tourism due to COVID-19 (impacting a massive income source for the country) and the global uncertainties exacerbated by the Russia-Ukraine conflict.

In 2022, the Egyptian Pound lost approximately 50% of its value and remained one of the worst-performing currencies in the first half of 2023 due to a lack of foreign reserves. It is expected to further depreciate by the end of 2023, putting pressure on policymakers to devalue it even more.

Other economic indicators paint a grim picture, with urban consumer inflation reaching 38% in September 2023. Egypt’s high debt-to-GDP ratio led Moody’s to downgrade its government bonds to the substantial risk Caa1 bracket, seven rungs into junk territory in October. The International Monetary Fund (IMF) has imposed stringent terms for Egypt to address the economic crisis, including selling state assets and further currency devaluation.

This presents a challenge for Egyptian policymakers, as upcoming year-end elections may make currency devaluation and asset sales unpopular with the public, even though Abdel Fattah El-Sisi is predicted to secure a third term as president.

Ally-shoring – a prudent choice during uncertain times

Against the backdrop of these economic woes, global geopolitics have been marked by black swan events since 2020. These include the Hong Kong national security law, the COVID-19 pandemic, the Russia-Ukraine conflict, and the ongoing Israel-Hamas tensions in the MEA region.

This has made the already complex MEA region more challenging to navigate. Ongoing conflicts in countries like Syria and Yemen and the Israel-Hamas dispute further complicate matters. As a result, the much-anticipated Israel and Kingdom of Saudi Arabia peace deal is on hold, and the United States’ detente with Iran, particularly regarding oil supplies, faces threats that could impact the global economy.

In response to these uncertainties, organizations are turning to “ally-shoring” as a strategy. Ally-shoring involves establishing delivery centers in allied nations to build lasting relationships that protect both economic and national security interests. U.S. companies have increasingly embraced this approach, with Mexico in Latin America and Portugal and Spain in Europe becoming popular choices. The Ukraine conflict and trade tensions with China have partly contributed to this shift.

The situation could potentially result in a higher penetration of US-headquartered companies in Egypt in the near and medium term. Let’s explore the reasons for this possible trend:

  • First, a longstanding military alliance exists between the U.S. and Egypt, facilitating the smooth movement of US military assets via the Suez Canal
  • Second, shared concerns about Iran’s regional influence and its support for proxy terrorist groups contribute to this choice
  • Third, Egypt’s limited likelihood of actively participating in conflicts, given its struggling economy and dependence on Western economic aid, positions it as a stable option
  • Lastly, Egypt’s proactive efforts to attract companies, particularly in the IT sector, as part of its 2030 vision, have led to impressive growth, with a 16.7% increase in 2021/2022 and a 5% contribution to GDP, despite global economic challenges. These growth indicators are driven by digital infrastructure investments and improved business conditions, making Egypt attractive for companies looking to establish centers in the region

In the near future, Egypt’s business environment appears stable, although concerns persist related to its neutral stance in ongoing conflicts, potential refugee issues, and economic challenges. Nevertheless, the overall risk to business operations remains low. Pro-Palestine protests in Egyptian cities have been peaceful and have not disrupted daily activities. Egypt’s role as a mediator between the West and the Arab world through the Rafah border is noteworthy, but its likelihood of becoming a major player in conflicts remains low.

The outlook

Egypt’s alignment with US interests and its neutral stance in conflicts make it an attractive ally-shoring option. However, businesses should be mindful of Egypt’s economic challenges, including a depreciating currency and high inflation, exacerbated by political pressures due to upcoming elections. Despite these threats, Egypt offers a strategic advantage, supported by a growing global services sector and government initiatives for business development in these uncertain times.

Everest Group’s dedicated team of analysts tracks 30-plus cities in India and more than 300 cities globally from a global services perspective. If you have questions or would like to discuss global services destination topics, please reach out to [email protected] or [email protected].

Contact us to learn more about popular global services locations.

 

Key Issues 2023: Assessing the Global Services Industry’s Performance Against Expectations | Blog

The global services industry’s confidence waned in 2023 after a banner post-pandemic year. Leaders were more cautious and prioritized cost optimization. To gain valuable insights into how the year unfolded compared to expectations, read on.

Participate in the Key Issues Survey 2024 to better understand the current thinking of industry leaders across the globe.

Coming off a bumper year in 2022 with double-digit growth driven by pent-up demand after the pandemic, the global services industry entered 2023 with macroeconomic uncertainty clouding the forecast.

As a result of these concerns, global leaders adopted a more cautious stance going into this year, according to Everest Group’s annual Key Issues survey of over 200 global leaders across industry enterprises, Global Business Services (GBS) centers, and providers.

In the survey, price and cost margin pressures ranked as the top business challenge expected in 2023, and subsequently, cost optimization emerged as the highest business priority for the year.

As 2023 nears an end and leaders start planning for 2024, let’s reflect on how the year fared against global services industry expectations of the industry.

1. Macroeconomic uncertainty subdued industry growth in 2023

In the face of macroeconomic uncertainty, most industry leaders felt cautiously optimistic about 2023. True to their expectations, results from the first three quarters of this year indicate subdued industry growth similar to the pre-pandemic numbers. A mix of macroeconomic concerns, rising prices, fiscal tightening, and geo-political tensions have resulted in a slowdown in customer demand and growing margin pressures on the global services industry. While revenues grew, the escalated cost and price pressure resulted in stagnant or even declining operating margins for most providers, as presented in Exhibit 1.

Exhibit 1: Key financial metrics for providers for 2022-23

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2. Talent demand and supply mismatch eased but remain challenging for niche skills

With attrition at an all-time high and growing industry demand, talent supply continued to fall short of the demand in 2022. The talent/skill shortage was the top concern industry leaders highlighted as part of the Key Issues Survey 2022. However, as the industry prepared for the looming uncertainty in 2023, these concerns took a back seat. In line with the industry expectations, the talent situation eased in 2023. Data for the first half of 2023 show that attrition rates have declined, and most delivery geographies are reporting a narrowing talent demand-supply gap. An assessment using Everest Group’s proprietary Talent GeniusTM tool indicates talent demand for delivery of IT and contact center services has declined substantially compared to 2022, as shown in Exhibit 2.

Exhibit 2. a: Talent demand across select countries for delivery of IT services indexed to January 2022 (Jan 2022 = 100)

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Exhibit 2. b: Talent demand across select countries for delivery of contact center services indexed to January 2022 (Jan 2022 = 100)

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However, this improvement in talent supply has not applied to all global services, especially those requiring niche skills. Digital and next-generation technology services continue to witness a mismatch between talent demand and supply. This disparity is especially true for emerging skills like generative Artificial Intelligence (AI), where talent supply is even more limited. Preliminary estimates by Everest Group show that only 1% of AI talent has expertise in generative AI, pushing companies to focus on upskilling and reskilling their employed talent pools to bridge this gap.

3. Offshore locations and tier 2/3 cities are being considered to optimize costs

To manage growing cost pressures, a key strategy for global leaders entering 2023 was continuing to leverage offshore locations and exploring alternative delivery strategies, such as leverage of tier 2/3 cities. Global services trends in 2023 resonate with this approach. Offshore locations like India continue to be the destination of choice for global service delivery, given the significant cost arbitrage opportunities. Similarly, enterprises and providers alike are more enthusiastically exploring tier 2/3 locations driven by needs of cost savings, talent access, employee preference, and market competition management. Exhibit 3 shows how the leverage of tier 2/3 cities witnessed growth in 2023.

Exhibit 3: Trends in center setup across Tier 1 and Tier 2/3 locations (2022-23)

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4. Provider bill rates increased but at lower levels than expected

Despite the prevailing macroeconomic pressures, providers maintained optimism about bill rate increases in 2023, although they were expected to be at a lower rate than in 2022. Unlike other economic downturns, provider bill rates have continued to show positive growth despite the growing cost and price pressures in the first seven months of 2023. However, with the macroeconomic scenario hitting much harder than expected, input-based pricing has been subjected to hard negotiations. This has led to muted growth (0.5-2%) in bill rates across different functions, much lower than provider industry expectations going into 2023. For example, provider bill rates for traditional applications skill delivery in offshore regions grew by only 0.5-1% compared to the expected growth of 2-5% from January to July 2023.

5. Provider portfolios underwent significant rebalancing and consolidation to ensure better deal terms

Enterprises reported much lower satisfaction with providers in 2022 compared to 2021 when providers played a key role in supporting enterprises in navigating the pandemic. The leaders cited a lack of innovation and communication as the key reasons behind this dissatisfaction. Consequently, procurement leaders expected a significant change in their provider portfolios. Additionally, with macroeconomic concerns clouding all strategies, enterprises looked to consolidate and rebalance provider portfolios to negotiate better deal terms with limited providers. As expected, 2023 witnessed a shift in provider portfolios, with major providers winning deals that had vendor consolidation components.

6. Investments in strengthening the digital core are a priority over moonshot endeavors

Prioritizing resilience through uncertainty, the focus of the global services industry continues to be on pragmatic digital investments like cloud solutions, cyber security, analytics, and automation. While the advent of newer technologies like generative AI has created an industry buzz, the primary focus continues to be on strengthening the digital core and building a resilient technological foundation. Most industry verticals continue to wait and watch before diverting constrained resources to newer projects with limited use cases and industry adoption.

As 2023 comes to a wrap, the global services industry is at the forefront of another transformative shift – the need to create value and the need to create it fast. This becomes especially imperative as technological advancements like generative AI threaten to shift the industry’s current equilibrium and potentially start the next phase of a technological revolution. The global services industry must adapt swiftly to stay ahead of the curve.

Participate in our Key Issues Survey 2024 to capture the pulse of Information Technology and Business Processing industry leaders across the globe and uncover major concerns, expectations, and key global services trends that are likely to amplify in 2024. To discuss further, or for any questions, reach out to Ravneet Kaur or Hrishi Raj Agarwalla.

Don’t miss the Key Issues 2024: Creating Accelerated Value in a Dynamic World webinar to gain valuable insights into 2024.

The Shifting Landscape of Tech Talent: Challenges and Prospects in Ireland | Blog

Ireland’s allure as a top destination for tech talent is fading. This mature delivery hub for nearshore IT services still has much to offer but will have to overcome key obstacles to regain its appeal among international technology professionals. Gain market insights and forecasts for Ireland’s tech talent in this blog. To discuss this topic further, contact us.

In recent years, Ireland has been a magnet for job seekers worldwide, luring talent from diverse nations such as England, India, Brazil, the United Arab Emirates, Turkey, Sri Lanka, and Bangladesh. The country’s appeal as a destination has been fueled by abundant job opportunities, excellent quality of life, simplified work permit processes, and enticing government initiatives such as the Critical Skills Employment Permit and the Start-up Entrepreneur Programme (STEP). However, against the backdrop of a tech sector slump and a demand-supply disparity, Ireland is gradually losing its allure for foreign technology professionals.

Ireland has been a popular location for global companies looking to offer IT service delivery to nearshore Europe. Ireland’s diverse offerings encompass application development, infrastructure management, and other digital services. The nation’s strong talent proposition is underscored by 52,000 tertiary graduates and a thriving information technology and business processes (IT-BP) workforce, totaling 157,000 employees. The cities of Dublin, Cork, and Galway serve as prominent IT-BP hubs, contributing about 80% of the nation’s center setups, with global business services (GBS) making up the majority share at 75% of the total center setups.

While Ireland has been a preferred choice for job seekers, its appeal is waning among overseas technology talent due to various reasons. A surge in remote work options, prompted by the post-COVID era, has opened up alternate global work setups. Concurrently, factors like high living costs, housing constraints, a technology workforce demand-supply gap, and muted global tech sector growth contribute to this trend’s acceleration. Additionally, metro areas like Dublin confront issues with a dearth of international schools and high-income tax rates. Government efforts to alleviate these concerns are geared towards improving living standards through sustainable pay increases.

While programs such as Ireland’s Critical Skills Employment Permit and STEP are designed to attract and retain foreign talent. However, the acceptance and success of remote work have reshaped the scenario, making local talent shortages a thing of the past. Technology companies are tapping into the global talent pool through remote hiring, sidestepping relocation challenges.

These growth-related challenges are reflected in our ongoing tracking of IT job demand in Ireland through Talent Genius™, an interactive platform for insights into IT and business process services decisions. The talent demand for IT services has seen a relative reduction since January 2022, as illustrated below. This decline was most pronounced in the last quarter of 2022, driven by tech sector contraction, economic uncertainty, and job cuts. Although some signs of recovery appeared mid-year, the market dynamics have shifted from employee-led to employer-driven, reflecting cautious hiring practices.

Monthly tech talent demand (job postings) for IT services (indexed to January 2022)

January 2022 = 100

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Ireland boasts an operating cost advantage of 20-25% over London for IT application development and maintenance (IT-ADM) services. Nonetheless, tech salaries have remained steady in the first quarter of 2023 compared to the fourth quarter of 2022, reflecting a competitive yet inflexible market due to talent oversupply. Layoffs and conservative hiring practices have suppressed salary competitiveness. But as the market stabilizes, salary stickiness is expected to improve.

As global dynamics shift, Ireland’s position as a tech talent magnet has encountered new hurdles, and the inflow of international tech talent to Ireland is likely to decline in the short term. Nevertheless, with an upward trend in job numbers and signs of a tech sector revival, the second half of 2023 will hold pivotal insights into the future of Ireland’s technology workforce. Addressing challenges related to remote work, housing, taxation, and competitiveness is crucial to regain its appeal as a tech employment destination.

Be on the lookout for more talent information on other nations by clicking on our interactive platform, Talent Genius. Connect with Sakshi Garg or Aarushi Raj to discuss the latest trends in tech talent.

Will India’s Silicon Valley Lose Its “Top Global Services Destination” Crown to the City of Pearls? | Blog

With its high-quality talent, state-of-the-art infrastructure for delivering advanced technological services, and strong government support, Hyderabad has ascended as a top global services destination. These factors have helped the city gain a competitive edge and establish itself as a hub for innovation and excellence. But does Hyderabad have what it takes to surpass Bangalore as the foremost global services destination in the future? Let’s delve into this question in this blog.

During a client meeting in Hyderabad earlier this month, our analyst team arrived a little earlier than expected and was immediately struck by the futuristic ambiance of the impressive facility. It felt like we had stepped into a scene from a sci-fi movie. Face-scanning machines warmly greeted employees at the entrance, lush greenery adorned office walls, breathing life into the space, and solar panels powered the entire establishment. The energy was palpable as confident associates eagerly looked forward to the start of the work week.

In contrast to the thriving atmosphere we saw in Hyderabad, the environment in Bangalore is comparatively subdued as India’s capital city seems to be grappling with the impacts of the economic downturn. The two cities present a stark juxtaposition in terms of their future growth trajectories.

This positive outlook for Hyderabad has become a common sight across multiple Global Capability Centers (GCC). The city has shown admirable growth and resiliency during the past two years, recording one of the country’s highest growth rates for global service delivery. Remarkably, Hyderabad surpassed Bangalore for GCC delivery setups during H1 2023, highlighting its exceptional performance in this sector. Let’s explore the implications of this further.

GCC delivery center set-ups in 2023: Hyderabad versus Bangalore

Learn more about Everest Group’s AI-powered insights platform, Talent Genius™.

Since the early 1990s, when India started its services journey, Bangalore has been the top city, attracting maximum interest for global services delivery. Other tier-1 Indian cities, such as Delhi NCR, Hyderabad, Mumbai, and Pune, also have recorded impressive growth.

However, it was not until H1 2023 that the “City of Pearls,” Hyderabad, surpassed Bangalore, the “Silicon Valley” in GCC setup activity. During this period, more than 40 global companies established or expanded their Acceleration Centers, Centers of Excellence (CoEs), Centers of Innovation, and R&D centers in Hyderabad.

This trend is also reflected in the growth of technology jobs in the city. Hyderabad’s share of tech jobs, as a percentage of overall technology jobs in India, has surged from 33% to 44% during 2021-22. Simultaneously, the demand for non-tech services continues to grow, reflecting strong investor sentiment.

Hyderabad has traditionally been a stronghold for pharmaceutical enterprises. However, the city’s appeal has now expanded beyond this industry. Over the years, the city has also attracted multiple Fortune 500 giants from aerospace, manufacturing, retail services, pharmaceuticals, and professional services industry verticals.

The diversity extends beyond industries alone and also encompasses the types of services being delivered to clients from these centers across the globe. For example, Goldman Sachs is expanding its delivery footprint for engineering services and business innovation by employing over 2000 full-time equivalent employees (FTEs), FedEx is establishing a center of innovation for supply chain optimization, and Lloyds Banking Group is utilizing the location for delivering cybersecurity services. Other organizations such as Apollo Tyres, DAZN, Ocugen, Pi Square, and Warner Bros. Discovery also are leveraging the location for a wide variety of services.

Alongside this diversity, the city is displaying future readiness. These enterprises have delivered an increased concentration of technology, encompassing a wide range of advanced services such as animation, Artificial Intelligence (AI), cloud computing, Internet of Things (IoT), Machine Learning (ML), Natural Language Processing (NLP), Robotic Process Automation (RPA), visual effects (VFX), Augmented Reality (AR), and Virtual Reality (VR).

Hyderabad’s winning formula

Hyderabad’s proposition has been anchored on two critical factors – high-quality talent and world-class infrastructure. The city has witnessed growth in both the quality and quantity of talent, fueled by its reputation as an educational hub that houses globally-recognized institutions such as ISB, IIIT, and BITS Pilani.

This skilled talent pool has contributed to the growth of various industries, including IT, biotechnology, pharmaceuticals, and finance. Efforts by both private players and the government to enhance skill development and increase the talent pipeline are underway, such as the collaborative postgraduate diploma (PGDM) program by IMT Hyderabad and HCL Technologies.

Hyderabad’s state-of-the-art infrastructure and seamless connectivity, including a well-developed road network and an expanding metro rail system, have improved commuting and accessibility. In contrast to Bangalore’s high cost of living and infamous traffic congestion, Hyderabad offers a more affordable lifestyle without compromising quality.

The unwavering government support has amplified the impact of both Hyderabad’s talent and infrastructure. The state government has implemented multiple initiatives to improve the conduciveness of the city’s business environment and foster growth.

One notable example is setting up “Hyderabad Pharma City,” the proposed world’s largest integrated pharmaceutical industry cluster that already has received interest from 500 companies. Additionally, the government’s “Hyderabad Vision 2023” plan prioritizes infrastructural development, skill enhancement programs, and improving the ease of doing business.

The commitment to fostering a conducive business environment is evident by the regular engagement between state ministers, especially K.T. Rama Rao, Minister of IT of Telangana, and top corporate executives. Several announcements of new center setups and expansions, including those from Mondee Holdings, Storable, Rite Software, Tekgence, Zapcom, and Charles Schwab Corporation, resulted from the minister’s trip to the United States this May.

A trifecta of unique factors – high-quality talent in a diverse ecosystem and state-of-the-art infrastructure to deliver advanced technological services backed by unyielding government support – has propelled Hyderabad’s ascent and contributed to its competitive edge.

This leads us to address the elephant in the room, “Will Hyderabad dethrone Bangalore as the top global services destination for enterprises in the coming years?”

In our view, Bangalore is and will continue to operate as the largest and most mature global services destination in India for the short term, riding on its solid talent proposition, especially the ability to support niche and emerging technology skills.

However, when gazing into the crystal ball and contemplating the next 7-10 years, we see Hyderabad in a captivating race, with Bangalore positioning itself as a formidable competitor for the crown of the “Top Global Services Destination in India.”

Everest Group’s dedicated team of analysts tracks 30-plus cities in India and more than 300 cities globally from a global services perspective. If you have questions or would like to discuss global services destination topics, please feel free to reach out to [email protected], or [email protected]

Contact us to learn more about popular global services locations.

Don’t miss our webinar, Masterclass in Managing Your Locations Portfolio and Workforce Strategies, for valuable insights and actionable advice to optimize your locations portfolio and maximize returns.

Introducing Talent Genius™: The AI-powered Insights Platform for Workforce and Location Strategies | Blog

Making the best location and workforce decisions to optimize for risk, cost, and talent pipeline sustainability is critical in the constantly changing global services market. Having uniquely targeted, up-to-date data and insights to develop strategies and future plans are now key to success. Read on to learn about Talent Genius™, Everest Group’s new interactive, on-demand platform delivering the insights and intelligence IT and BPS organizations need today.   

Uncovering the right talent and locations amid economic uncertainty, shifts in geopolitical climates and monetary policies, inflation, attrition, and skill shortages is one of the biggest challenge Information Technology (IT) and Business Process Services (BPS) industries must overcome today.

The wrong workforce and location strategies in an unstable market could lead to suboptimal costs and waste, a lack of long-term growth and sustainability, continued challenges in acquiring and retaining talent, the inability to deliver on organization or client commitments, and overall increased risk. It is critical organizations have market visibility to build the right strategies, but they lack the data they need to make confident location and talent decisions.

That’s where Everest Group’s recently launched Talent Genius™ comes in.

This dynamic, Artificial Intelligence (AI)-powered insights platform has been purpose-built to guide IT and BPS location and workforce decisions with the most comprehensive, reliable, and current location and talent data. With Talent Genius, global IT and BPS firms can build, monitor, and optimize their location portfolio and talent hubs by staying on top of talent market trends.

With Talent Genius, business leaders can find the guidance needed to understand the latest market trends and get a step up when planning for the coming years. The interactive, on-demand platform identifies and analyzes key trends in the global labor market so leaders can quickly develop data-driven location and workforce management strategies.

Let’s take a closer look at this new solution.

How does Talent Genius work?

Everest Group is committed to creating sustained value for the IT and BPS sectors by applying practical research to specific workforce problems. Talent Genius combines Everest Group’s years of extensive location and talent insights with ongoing market research. It offers a range of data-driven insights and analytics to help global organizations understand the rapidly changing talent market and make well-informed talent and locations decisions.

Through intuitive dashboards, IT and BPS firms get a clear view into locations around the world for country and city assessments, demand hotspots and trend monitoring, salary benchmarking, language skills scalability, peer demand and hiring trends, and peer employer brand perception.

Talent Genius offers organizations the capability to be competitive, future-ready, and confident as they build their talent and location strategies with the ability to:

  • Evaluate 100-plus cities and more than 30 countries for economic, geopolitical, and competitive risk, wage inflation, attrition, and IT and BPS talent supply and demand
  • Assess talent demand as markets change by function, roles, skills, and city or country, and select from 25-plus languages to quickly identify the right markets for specific needs
  • Optimize for cost as budgets fluctuate while attracting and retaining talent by offering competitive salaries and choosing the right locations to grow
  • Detect competitive hiring opportunities and threats to determine where competitors are hiring and the functions and roles they’re hiring for
  • Understand how competitor employees perceive important factors such as compensation, benefits, and career growth and get an inside look into how employees perceive your organization compared to competitors

Using this tool, location and talent strategy leaders can easily determine where they should expand to optimize costs while improving access to talent. They also can assess if they are in the right countries and cities to maintain a robust, risk-managed portfolio.

Why you’ll get the right data and outcome with Talent Genius

As the leading research firm in the global service space, Everest Group has decades of experience partnering with global IT and BPS organizations to provide location and talent insights to enable confident decisions.

With Talent Genius, IT and BPS companies can prepare for the future with clarity and confidence. Powered by deep research and a client-first approach, Talent Genius is more than just a software platform. IT and BPS organizations can also directly engage with Everest Group analysts for further insights and support. The unique combination of on-demand data and expert insights ensures organizations have the right level of support to make the best decisions, while still providing the analyst support and guidance Everest Group is known for.

Talent Genius will become IT and BPS organizations’ competitive advantage to create a more agile, data-driven location portfolio. From workforce management strategies to global talent sourcing, Talent Genius offers the data and insights needed to make informed decisions.

“The global services market runs on the power of talent. It’s critical that organizations make the right decisions when it comes to creating and optimizing their workforce and location strategies. That is why we are excited to expand our services portfolio with this new cutting-edge location and talent intelligence tool. With Talent Genius, at the click of a button, our clients will have the highly-contextualized, expert-vetted information they need to confidentially make those decisions. With our commitment to innovation and excellence, we are certain that this new offering will provide unparalleled value to our clients. – Everest Group Vice President Sakshi Garg.

Learn more about Talent Genius or contact us to book a demo.

Financial Services Trends Fueling Outsourcing Opportunities in Emerging Markets | Blog

With customer demand for financial services rising across geographies, looming recessionary fears and competition is leading enterprises to expand beyond North America and enter developing markets such as the UK, Europe, Latin America, Asia Pacific, the Nordics, and the Middle East. Read on to understand the geographical differences, financial services trends driving growth, and the outsourcing opportunities in these regions.

Fueled by high volumes, new technological products, and enhanced customer experience, demand for financial services is rising across developing geographies. Banks, lenders, FinTechs, and other banking and financial services (BFS) enterprises are expanding into new markets following the rising customer demand.

The saturated and competitive North American market and high-cost pressures, against the backdrop of the looming recession, are forcing enterprises to move beyond traditional markets and enter new geographies to increase their customer base. Let’s take a look at where they are headed.

The UK and Europe, along with nascent geographies such as Latin America, Asia, Australia, and New Zealand (ANZ), the Nordics, and the Middle East, are some of the geographies identified for rapid development by enterprises that have unique factors driving end customer demand.

But like the rest of the world, these markets have been impacted by the pandemic and domestic challenges that have reshaped business models and environments. Outsourcing service providers can identify these pain points and leverage capabilities to provide support.

 Picture1 

Financial services trends driving outsourcing demand by enterprises in upcoming geographies

A few major trends impacting the enterprises in these geographies, where third-party providers can offer support:

  • Environmental, social, and governance (ESG) – While a board room discussion for BFS enterprises across geographies, enterprises in Western Europe and the UK are leading other geographies in the charge for ESG adoption because of high regulatory pressure
  • Super-apps and buy now pay later (BNPL) – As a result of increased technological advancement in these geographies and enhanced experience demanded by end customers, these financial services trends are making waves in Asia Pacific and Latin America
  • Embedded finance and neo-banks: Traditional banks are setting up their own digital banking arms to cater to the pandemic-induced demand spike. From nearly US$47 billion in 2021, the global neo-banks market is poised to be valued at US$2.05 trillion in 2030, growing at a CAGR of 53.4%

Enterprises increasingly are leveraging third-party provider support to build scale and ramp up services in these growth areas, but various internal and external factors impact the ease of outsourcing in the respective geographies.

How can service providers help enterprises in making outsourcing decisions? What factors are pushing financial services firms to outsource? 

Factors like high volumes, technology, and cost margins act as demand drivers for outsourcing from these geographies, as illustrated below.

Picture2

Let’s take a closer look at some of the geographies that are uniquely placed based on their outsourcing maturity:

  • Nordics, Western Europe, and the UK – High costs and wages act as major demand drivers for these areas, but tight talent markets create high-cost pressures to scale. The UK and Western Europe also face vendor consolidation issues
  • Asia Pacific and Latin America – Enterprises based in these regions have to grapple with regulatory challenges and the political environment to varying degrees. Latin America is faced with political and economic uncertainty.

Geographic segments

Based on Everest Group’s assessment, the emerging geographies for BFS have been segmented into the following three categories:

  • Leaders: UK and Western Europe: have high or full provider coverage in outsourcing and operate in highly competitive markets
  • Major Contenders: Asia, ANZ, and Nordics: offer high outsourcing potential and scope and less competition
  • Aspirants: Middle East and Latin America: have high potential but low outsourcing penetration because they are riddled with challenges such as complex regulations, rigid culture, low volumes, etc.

Service provider strategies to seize opportunities in emerging geographies

Each region has unique outsourcing-related differences that should be met with targeted approaches. Service providers willing to make inroads into these geographies must carefully assess the demands and challenges enterprise face. Talent and skill availability, geopolitical risks, and regulations can be obstacles to outsourcing for enterprises and impact costs.

In our report, Emerging Geographies’ Specialized Banking, Mortgage, and Risk and Compliance Needs, we detail these specific nuances and provide recommendations for service providers to approach and expand coverage in each geography.

Some takeaways from our research include:

  • Enterprises in Asia need a customized, comprehensive services suite to address regional requirements
  • Providers should increase their focus in ANZ on the underserved mid-tier and smaller banks buying segment
  • Uruguay and Peru are the outsourcing locations to watch in LATAM
  • Know Your Customer (KYC) and related procedures are in demand in the Middle Eastern market
  • Outsourcing demand by enterprises will increase in the financial crime and compliance area in the Nordics
  • In the UK, traditionally less outsourced segments such as commercial lending and payments are witnessing an uptick
  • The Western European market is observing the need for ESG operations support from mid and smaller banks in countries such as France and Germany

Please reach out to Sameer Das, Shrey Jain, and Sahil Chaudhary to gain additional insights into the research and to discuss financial services trends.

Outsourcing “Down Under”: The Impact of a Recession in the Australian Market on Banks | Blog

With Australia facing a looming recession, outsourcing is emerging as a solution for banks and financial institutions to navigate economic uncertainty, improve efficiency, and find expert talent. Read on to learn more about the impact of an Australian recession on the industry and opportunities for service providers.   

The Australian market is not immune to a recession

While the Australian economy has avoided a recession for the past 27 years, it may not be able to withstand the current environment. Its long history of stability can be attributed to relatively stronger population growth than other developed countries, with Australia recording an average 1.37% growth rate between 1992-2017. Clear-eyed decisions by the Reserve Bank of Australia (RBA) on when to follow the US on rates, plus a large reserve and export of minerals and other natural resources, also contributed to Australia ducking a few recessions.

But comparing the Gross Domestic Product (GDP) per capita for the US and Australia from 1970-2021 shows a similar pattern that could signal an economic slump.

Although the American reaction to financial crises seems exaggerated compared to the Australian market, the direction is very similar, with a strong correlation coefficient of around 99% and a coefficient of determination of around 98%.

Correlation doesn’t imply causation, but we can reasonably infer that they tend to move in similar directions or at least are impacted by similar global trends, showing that Australia isn’t as shielded from the global recession as the world wants it to be, at least at a per capita level.

Picture1 2

Key drivers for the slump

The Australian recession (at least in per capita terms) is slightly complex. Unlike other countries globally, one key driver isn’t behind the economic downturn. Instead, the following hindrances are impacting its economy to varying degrees:

  • Higher energy costs – Supply-side energy price inflation has a greater impact on Australia because of its 71% dependency on fossil fuels. The Consumer Price Index (CPI) rose 1.8 rose in the quarter and 7.3% from the prior year
  • Increasing wages – As the labor market tightens, wages increased 2.9% in the private sector in the third quarter of 2022 and 11% from last September. But the increases won’t compensate for rising goods and services prices
  • Dropping real estate prices – Even though the number of residential properties rose, the total value fell $359 billion to $9,674 billion this quarter with the average prices falling $36,800 to $889,800

The RBA has been closely observing this situation and is attempting to counter inflation by increasing interest rates, which will lull the economy into a slower state. Interest rates have risen to 3.1% from an almost negligible rate of 0.1% in December 2020. This will greatly hamper consumption and investment spending. Non-discretionary spending increased by 21% in October 2022 from the previous year.

In addition to this, Australian businesses are being marred by the talent crisis, with almost a third (31%) of businesses finding it difficult to find suitable staff and almost half (46%) of businesses experiencing declining operating profits.

Will banks suffer?

In one word: Yes. Financial services have been significantly impacted by the Australian recession. While the Australian banking sector still is dominated by the big four banks (NAB, CBA, Westpac, and ANZ), their share has been declining over recent years with the emergence of tier 2 banks and nonbank financial companies. Operations have been difficult for banks, with almost 20% facing difficulty in finding suitable staff and the cost of doing business rising exponentially.

Rising interest rates also will contribute to lower mortgage originations and refinancing. With consumers having less personal income combined with higher interest costs, residential property investment and mortgage volumes will suffer. Falling property prices also will impact consumer wealth. Apart from originations, financial institutions’ cash inflow will suffer as delinquency rates rise since most loans in the Australian market are variable rate loans.

Also, most transactions now are made using electronic payment methods rather than cash, and checks rarely are used anymore. With the growing trend of using credit cards and increased offerings for buy now, pay later (BNPL), default rates may rise in the future. BNPL also faces challenges under the National Consumer Credit Protection Act, which bans unsolicited credit limit increases and requires background checks for most consumer lending.

Outsourcing as a strategy

Historically, Australia has been an insourced market due to government regulations, job loss concerns, quality issues, and high-profit margins for banks. However, a local talent shortage, high wage inflation, and shrinking profit margins have reversed this trend.

Outsourcing has recently emerged as a popular workforce solution, with 10% of all firms and 22% of large firms considering outsourcing functions in the next three months. This is due to 59% of firms finding applicants’ qualifications insufficient.

Increasing demand for domain-specific expertise, especially in the area of Financial Crime and Compliance (FCC), has made it difficult for firms to find affordable experts. This has led to increased outsourcing interest, even among smaller enterprises. The growing need for technology and expertise in FCC is exemplified by recent cases, such as Westpac’s anti-money laundering (AML) law breaches and the Commonwealth Bank of Australia’s settlement of a $480 million compliance breach case in 2017.

In response to the need for compliance with growing regulations, digital-oriented solutions are in increased demand, and providers are finding success in helping banks improve operations. For example, one bank improved loan origination efficiency by 30% and freed up employee time by transforming its lending operations with the help of Accenture. The National Australia Bank also brought in Accenture to address its financial crimes compliance shortfall and identify high-risk customers.

An effective outsourcing strategy can help banks navigate the current economic recession and achieve cost efficiency with minimal investment and a quick transition time.

How to enter the land down under?

Recognizing that the needs of Australian enterprises differ from those in the US is essential. In this market, digital business process services and digital integration in operations are in growing demand.

However, implementing technology at a surface level will not be effective in Australia, as major banks have previously tried this approach with negative results, making them cautious this time. With stringent regulations, pre-existing products must be modified to meet each financial enterprise’s specific size and sector requirements.

Service providers can utilize their existing global delivery network to gain a foothold in the Australian business process services industry. By offering cutting-edge technology and custom solutions that cater to each client’s unique needs, they can provide more efficient and effective services.

Offshoring can be leveraged for transaction-intensive processes, enhanced with automation and analytics to provide intelligent insights. Modern offerings like business process as a service (BPaaS) can also be utilized, and providers can form partnerships to address gaps in their offerings.

While outsourcing can offer a solution for some functions, critical activities such as payments, mortgage administration, and anti-money laundering (AML), among others, often require complex judgment and technology dependencies and are typically managed by onshore control operations with experience in the Australian market.

To gain additional insights and discuss the impact of the recession on the Australian market and outsourcing’s potential in the Australian banking industry, reach out to [email protected].

Learn about the pricing shifts of outsourcing services caused by the current market in our webinar, Will 2023’s Economic Environment Level Outsourcing Price Increases?

India’s Tier 2 and 3 Cities: The Next Hotbeds for Growth | Blog

While India’s tier 1 cities have dominated global services delivery for more than two decades, the country’s tier 2 and tier 3 cities are gaining traction to become the next hot spots. Read on to learn why these locations are grabbing the attention of investors and enterprises.   

India has operated as the largest behemoth for the global services industry since outsourcing’s start, driven by an almost unparalleled talent-cost advantage and conducive business environment. Tier 1 cities, such as Bangalore, Hyderabad, Delhi-NCR, Mumbai, and recently Pune and Chennai, have seen most of the growth and continue to attract firms seeking complex skillsets.

However, the triple whammy of high turnover, shrinking pipelines, and rising inflation kept the talent market in flux for most of 2021-2022. As these cities near saturation, tier 2 and 3 cities are emerging as the new growth hubs.

A spate of infrastructural developments has put these cities on the global map for attracting investment. Widespread adoption of hybrid working, satellite offices, co-working models, and plug and play workspaces increase the potential for hiring from tier 2 and 3 cities.

Enterprise preferences for diversifying workforces and leveraging gig models, and reverse migration from metropolitan cities to hometowns post-pandemic further fuels the growth of tier 2 and 3 cities.

While tier 1 cities occupy more than four-fifths of the global services industry, the collective market share for tier 2 and 3 cities has notably increased from 11% to 18% from 2019 to 2022, as shown below:

Picture1 2

Let’s explore the race of cities within each tier:

Tier 2 cities

Ahmedabad and Kochi lead the tier 2 city clusters offering a moderately large talent base (79,000-plus graduates) and medium market maturity for most functions. This area has the most established global services delivery ecosystem but the least cost arbitrage among tier 2 cities. GIFT city in Ahmedabad has particularly gained traction due to dedicated government initiatives to attract investment. Jaipur, Indore, Coimbatore, Chandigarh, and Thiruvananthapuram follow next with a healthy mix of IT and business process services (BPS) delivery leaders such as UST and Wipro scaling up to 2,000-plus full-time equivalent (FTE) employees in these locations. After that are Bhopal, Lucknow, Nagpur, and Vishakhapatnam, which are characterized by smaller pools (limiting the availability of mid-to-senior talent and scaled ramp-up) and a larger share of domestic delivery.

Tier 3 cities

Bhubaneshwar and Vadodara lead the tier 3 cities segment offering a moderately-sized talent base (35,000-plus graduates) and low to medium market maturity for IT-BPS functions. The government is investing in IT and digital initiatives in a bid to attract more major companies to Bhubaneshwar, Odisha’s capital city. An IT and IT-enabled Services (ITeS) park is being built in Vadodara through a collaboration between the Gujarat government and Larsen & Toubro (L&T) aimed at creating some 10,000 jobs by 2027. Other tier 3 cities, such as Mysore, Madurai, Mangalore, Nashik, Raipur, Tiruchirappalli, and Vijayawada, offer a smaller talent pool with a lower scalability potential of approximately 250 FTEs.

Overall, we are bullish on the long-term prospects of India retaining its position as the mecca for global services delivery. We expect tier 1 cities to continue to flourish and tier 2 and 3 cities to drive the next growth wave for the global services industry.

To learn more about the relative attractiveness of different cities in India, please read our latest report, India’s Services Delivery Overview – Tier-1 Hubs Continue to Grow, Tier-2/3 Speeding Up.

To discuss the global services industry, please reach out to Parul Jain ([email protected]) and Aarushi Rishi Raj ([email protected]).

To learn about global services delivery in LATAM, watch our LinkedIn Live session, Locations and Talent Strategy – Let’s Talk: Nearshoring to Costa Rica.

Can Joint Innovation and Public-private Partnerships Prove to be the Noah’s Ark for Africa? | Blog

Almost 200 countries came together at the Climate Change Conference (COP 27) in Egypt last month to take action toward achieving the world’s collective climate goals. Among the event highlights was the establishment of a fund to assist the nations most vulnerable and impacted by the effects of climate change. Read on for key takeaways from COP 27 and implications for the Global South.

The much-anticipated conference, dubbed the Africa COP, marked 30 years since the adoption of the United Nations Framework Convention on Climate Change (UNFCCC). While much has transpired and the planet has come a long way in its fight against climate change since then, some nations have been left behind in achieving their carbon goals and are not experiencing the intended benefits.

Developing nations have long sought financial assistance to rebuild their social and physical infrastructure, but the World Bank and other publicly-funded lending institutions have failed to fulfill these growing needs. To address this issue, the UNFCCC, backed by the United Nations Environment Program and several attendee governments, launched a five-year work program to fund and promote smart technology solutions in developing nations, opening ground for tech providers to display their capabilities in the space.

COP 27 proved to be an instrumental platform for service providers and Big Tech players to engage in sustainability conversations and highlight their contributions towards the planet and its people.

The bridge towards a sustainable future must be pillared by collaboration and joint innovation in technology. Partnerships can be seen as the key to climate adaptation and mitigation. Many of these collaborations focus on marrying Artificial Intelligence (AI) and satellite technology. Some examples include:

  • IBM is partnering with UK’s Science and Technology Facilities Council, among others, to leverage innovations in indexing multidimensional climate data to rapidly discover climate-relevant information from aerial imagery, maps, Internet of Things (IoT), drones, light detection and ranging (LiDAR) scanning, satellites, weather predictions, and climate change projections
  • Microsoft collaborated with Planet Labs PBC and The Nature Conservancy to build the Global Renewables Watch – a first-of-its-kind living atlas intended to map and measure all utility-scale solar and wind installations on Earth using AI and satellite imagery
  • Using high-quality geospatial data for disaster predictions and mitigation is very common in the more developed countries, whereas the Global South often lacks the resources and talent to generate and analyze reliable climate data. Partnerships among various stakeholders can bridge the climate data gap. Microsoft has committed to democratizing climate solutions in Africa by combining its AI prowess with Planet Labs PBC’s satellite imagery

The Loss and Damage Fund marked a momentous win for the Global South

As organizations do their part to help the Global South, COP 27 set a milestone by recognizing the disproportionate exposure of the poorer nations in Africa, Asia, and Latin America to climate change consequences. Established after years of appeals by the developing nations to compensate for losses due to climate disasters, the fund is viewed as a major political step to provide the appellants with a sense of justice and rebuild trust among nations.

Let’s take a look at other key implications for the Global South:

  • Africa’s climate needs remain underfunded – While a step in the right direction, the Loss and Damage fund needs to be backed by effective policies and infrastructure to be beneficial. Historically, the funds promised by developed nations toward climate impact haven’t been fully disbursed or equitably distributed. The Climate Policy Initiative (CPI) noted that of the meager 25% of global climate investments that crossed the borders towards developing nations, Sub-Saharan Africa mobilized only 3% despite being the most vulnerable to climate adversities
  • Global efforts and African needs are misaligned – Africa’s situation calls for urgent climate impact adaptation, but global climate funds and collaborations announced by service providers are only directed towards mitigation of climate impact
  • African leaders will rethink their engagement with multilateral initiatives – African nations will further their strategies for adaptation and energy generation considering their primary concerns of poverty alleviation and economic development. Thus, the African region ranks as an attractive climate-related investment opportunity for private players. According to CPI data, private finance comprises half the global climate finance yet stands at just about 14% in Africa
  • ESG regulations in Africa will become more stringent – As African nations advance in their sustainability journeys and try to attract foreign private investment, they will follow the global trend and strengthen their ESG regulations. Among many countries planning to launch such frameworks this year, Uganda referenced a “sustainable financial system” in its recent five-year plan

This opens several opportunities for service providers and consultants as more enterprises will require their expertise to transition to sustainable models. The increased volumes of ESG data generated will create opportunities for data analytics players, helping to bridge the climate data gap.

The world remains bullish on Africa’s future

COP 27 concluded on an optimistic note as technology, transparent funding, and developing nations’ needs became central to the climate resilience discussions. Innovative solutions across sectors are moving stakeholders closer to achieving their climate pledges.

Organizations are collaborating and prioritizing community impact in developing nations. Public-private partnerships toward sustainable models will make technology and welfare more accessible in these regions. With changing geo-political scenarios, Africa will prove to be an attractive opportunity for various investors and service providers.

To discuss further, please reach out to Rita Soni and Ambika Kini.

Rita Soni, Principal Analyst, Impact Sourcing & Sustainability Research

Email ID: [email protected]

LinkedIn: https://www.linkedin.com/in/ritansoni/

Twitter: https://twitter.com/ritaNsoni

Ambika Kini, Senior Analyst

Email ID: [email protected]

LinkedIn: https://www.linkedin.com/in/ambika-kini/

 

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