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While a sluggish recovery continues to create the kind of pressure for economies that drive business outsourcing, an increasingly complex global economic environment has led to major changes in the ranking of the most attractive offshoring destinations, according to the most recent 2011edition of the global management consulting firm A.T. Kearney's Global Services Location Index.

Asia dominates the top ten positions on the Global Services Location Index. Once again, a combination of human resources and low cost have placed India, China and Malaysia in the top three spots - positions they've occupied since the very first Global Services Location Index in 2003. Indonesia (5), Thailand (7), Vietnam (8) and the Philippines (9) are also among the top 10. The different strengths of these countries vary from India, with a deep and broad skill base, to Vietnam, which ranks as the most financially competitive country in the index.

At the same time, currency movements has helped boost states whose costs had formerly kept them far down on the list, including the Baltic States, United Kingdom, Mexico, and the United Arab Emirates. While many European countries were badly hurt by the financial crisis, all three Baltic countries engaged in a process of "internal devaluation," cutting wages and expenditures, and as a result were able to offer highly competitive cost structures as well as saw their ratings climb - Lithuania went up to 14th in the ratings from 21st position in 2009.

The Global Services Location Index analyzes and ranks the top 50 countries worldwide for locating outsourcing activities, including IT services and support, contact centers and back-office support. Each country's score is composed of a weighted combination of relative scores on 39 measurements, which are grouped into three categories: financial attractiveness, people and skills availability and business environment.

According to A.T. Kearney analysts, in addition to economic changes, “the nature of outsourcing itself is in transition. The old model involving multi-year contracts, custom code, and on-site systems integration workers is beginning to give way to a new model in which outsourcers provide standardized software solutions on a per-use basis. The past two years have seen a number of outsourcers building and/or acquiring the capabilities required to survive this shift.”

"Regardless of changes in the outsourcing industry business model and other temporary setbacks, we believe the era of globalization of services production has only just begun," said Erik Peterson, Managing Director of A.T. Kearney's Global Business Policy Council. "IT and BPO offshoring are early manifestations of a larger trend that, in the long run, means that more functions can and will be considered for localization in countries outside of which end-customers reside."

"The headlines about persistent economic volatility may be here for some time, and for the global services industry, the short term will remain rocky as worries about sovereign debt, currencies and joblessness continue to roil the global economy," said Paul A. Laudicina, A.T. Kearney Chairman and Managing Officer. "But the long-term prospects appear little changed from our first Global Services Location Index. An increasingly interconnected world and increasing demand mean that the global services industry remains on the rise."