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Ireland, Vietnam, and Slovakia Emerging as Development Hot Spots:
Submerging corporate real estate markets
8 May 2008
| Move over Bangalore . Step aside Shanghai . The Indian and Chinese cities' status as the hottest spots for information technology and manufacturing development may be ending, according to a new report released 6 May at the San Diego CoreNet Global Summit. Rising costs, labor shortages and high turnover now plague Asian cities like Bangalore , Beijing and Shanghai , as well as other former international darlings like Bucharest , Budapest , and St. Petersburg . The foremost site selection experts in corporate real estate, which delivered a presentation on emerging markets at the Global Summit, conclude that investors' dollars are better spent elsewhere. Corporate real estate executives are looking for solid infrastructure, a bilingual labor pool, colleges and universities creating an emerging talent pool, and the presence of a few foreign companies to lure new development. They should now consider smaller metro areas for new plants, call centers and IT hubs. Dennis Donovan, Principal of Wadley-Donovan-Gutshaw Consulting said, "The capitals of outsourcing and the flat earth have given way to new spots which are ripe for development. For the money you're smart to invest in Belfast and Ho Chi Minh City , or Chengdu , China and Kosice , Slovakia ." A prominent Asia expert, Dennis J. Meseroll, Director of Tractus Asia Limited, a location consulting firm, concludes that, "as investment floods the Mumbais and Guangzhous of the world, wages go up for managers and front line workers, attrition rates spike and a talent shortage develops." Donovan and Meseroll advise corporate real estate executives hunting for new locations to: - Do your homework- Conduct primary research, and not rely on secondary research to see which cities offer low costs, a quality labor pool and emergent infrastructure. - Do an HR analysis- Companies looking to invest and expand abroad should understand expected wages and worker performance in the short term, as well as retention challenges they may face in the future. - Consider splitting up- Companies may find dividing operations to be the most optimal approach. For example, it may be more cost-effective to locate sales and marketing, technical support and research and development in a fully developed, higher wage city, and manufacturing in a lower wage emerging market. Methodology To determine which cities are most investment-saturated and which are emerging hot spots CoreNet Global considered important factors for the services and manufacturing industries. For the labor-intensive information technology (IT), knowledge process outsourcing (KPO) and business process outsourcing (BPO) industries, the panel considered the number of new jobs created as the primary indicator of market saturation. Since manufacturing is less labor-intensive, and the cost of manufacturing investments can range widely according to the type of manufacturing in question, the panel considered the number of new projects as the primary indicator of market saturation. However, since they also wanted to take total committed investment into account as an indicator in each case (as the total value of investment pouring into one locale results in rising costs), we used weighted formulae as follows: • For IT/KPO/BPO: .80(Number of jobs created rank) + .20(Total investment rank) = Score for level of saturation, where the lower the score is, the higher the city's final ranking (in terms of market saturation) is. • For Manufacturing: .80(Number of new projects rank) + .20(Total investment rank) = Score for level of saturation, where the lower the score is, the higher the city's final ranking (in terms of market saturation) is. • The data we used in these formulae was obtained from OCOmonitor, the leading source of intelligence and advisory services on foreign direct investment.
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ISSN 1994-9464
Key title: RFP magazine
Abbreviated key title: RFP mag.
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