Based on our experience, the answer is a definite no. Our office in Indonesia and Hong Kong are still grabbing outsourcing opportunities from the financial and professional services sector.

I recently attended a KPMG conference on outsourcing trend in Hong Kong, and the advisory firm confirmed that the recession is opening new opportunities and focus on outsourcing, with companies seeking newer destinations to lower costs and get added benefits.

According to KPMG, the economic downturn’s impact on outsourcing varies by market. But it has emerged that demand for outsourcing from Asia Pacific is on the rise, creating large opportunity for local suppliers to develop their capabilities.

The focus of companies looking to outsource has also changed as economic outlook still looks gloomy. The World Bank expects the world economy to contract by 1.7% and global trade by 6.1% in 2009. While companies previously were willing to invest in outsourcing relationship more than longer term benefits, the recession has put the priorities on cost optimisation and sustainable innovation. In short, outsourcing has risen above just a mere cost cutting tool, to become more strategic to the overall business strategy.

In terms of outsourcing destinations, the KPMG report said in aggregate, the majority of companies in Asia outsource to India at 55%, with China as the second most popular destination at 36%, Singapore at 20%, Hong Kong 16%, and the Philippines 7%.

Interest in Indonesia as an outsourcing destination is growing, mainly because the negative factors that used to hamper the country’s competitiveness and productivity no longer exist. The KPMG conference highlighted some of the key factors that make a location attractive to outsourcing, which included:

• Demographics – a large pool of well educated people available at a highly competitive cost
• Infrastructure – stable environment in which to operate, power, internet connectivity, access to the work place.
• Political Stability – giving confidence to potential clients that the operation is not going to be shut down due to political unrest.

There are other factors like rule of law, protection of intellectual property right, and track record. But the three factors stated in bullet points were significant barriers for us to attract clients in Indonesia had we entered these markets several years back. Things have changed. Less of the well educated population are no longer attracted to go overseas as more opportunities open locally, the infrastructure has improved significantly, and the political stability is much more evident.

We are positioned in a perfect situation to be a key outsourcer of business processing, and we already have a core of well-experienced team in our specialised field of financial services. As China attracts more outsourcing to this side of Asia, all the region’s countries will benefit. Having offices in Indonesia, Hong Kong, the Philippines positions us well to capture part of the market migrating south.

- Matthew Deayton, General Manager for Business Development, Precision Group -