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Is Spain plus Brazil, more effective than India?

GFT Technologies AG (GFT), a leading international provider of services to the financial sector, suggests that Europe & Latin America can be a successful outsourcing alternative to India. Responding to a Forrester report (Spotlight on Spain), GFT endorses Spain’s nearshoring capabilities which, coupled with its links to Latin America, make it not just a complement to Indian offshoring, but often a complete alternative.

The Forrester report reveals that “European sourcing specialists...fail to consider the advantages that Spain has to offer”; such as “a thriving technology economy, competitive software development rates, industry innovation, and the potential to scale low-cost delivery in Latin America”. The research also revealed that the ratio between Spain’s “local IT labour pool and its total population ranks the country ahead of Europe’s familiar nearshore destinations of the Czech Republic, Hungary, Poland or Romania” [1].

Graham Underwood, Managing Director at GFT UK, explains, “Spain has a large, skilled work force and sector expertise; it’s close and has relatively low labour costs, plus the potential to scale with Latin American resources, such as Brazil. The outsourcing sector in India is suffering from a combination of attrition, wage inflation and skills shortages, meaning that its cost advantages are beginning to change when compared to European rates”. He continued, “at GFT we are increasingly seeing experienced Spanish resources used in the financial sector to support complex IT projects, such as business process redevelopment, as well as low-cost staff augmentation”.

Forrester does not see the outsourcing issue going away; claiming “there is no doubt that interest in remote IT delivery is in the rise”[2]. Similarly, GFT’s recent Global Delivery Trend Study reveals a likely increase in demand for outsourcing services in 2009. Three-quarters of respondents foresaw a need for external support in the strategy and process consulting sectors (87% & 80% respectively) and almost two thirds (59%) expected demand for IT strategy consulting to increase[3].

The Global Delivery Trend Study[4] also revealed that over half of respondents (57%) valued a closely networked team for a successful outsourcing relationship, which can be difficult to maintain over long distances. Graham Underwood acknowledges the importance of proximity for successful outsourcing; “we know that physical proximity drives collaboration, which reduces risk and the possibility of changing requirements”. GFT is also aware that shorter distances can improve soft costs, such as management overhead and improve the likelihood of a cultural fit between the two enterprises. The time zone issues enterprises face with many offshore vendors are resolved with a Europe/Latin America solution, as Sầo Paulo averages about 3 hours east of Europe (GMT-3).

In these straightened economic times, and with compliance issues driving offshoring in the financial service sector, enterprises need to be sure they have the most efficient, and therefore cost-effective, outsourcing strategy. GFT suggests it’s time to consider Spain plus Brazil as an alternative to India.

1. Forrester Research Inc. Complementing India With Nearshore Strategies: Spotlight On Spain. 27 February 2009
2. Ibid.
3. GFT AG. Successful Projects and Services in the Age of Global Delivery – Best Practices for Placement, Control, and Staffing. October 2008
4. Ibid.