Much to the umbrage of those languishing at the foot of the rankings, the launch of Brown and Wilson’s ‘2009 Black Book of Outsourcing’ has put offshoring and the risks involved, perceived or otherwise, firmly back on the news agenda.

This year’s report, ominously titled ‘The Year of Outsourcing Dangerously’, takes the 50 best recognised offshoring locations and ranks them in the Safest and Riskiest 25. Taking into account ten factors that could conceivably affect offshoring operations, and therefore end-user’s businesses, the report aims to give those involved in outsourcing an idea of the threat each country poses to business continuity.

Some of the big winners in the report include Singapore coming in at number one in the ‘Safest’ category followed closely by Dublin, though of course coming complete with its higher European price ticket. The current bellwether of Africa, Egypt comes in at number ten but the rest of the continent is dismissed by Brown and Wilson in one sentence “The entire continent of Africa still poses serious dangers to business continuity and is recommended to be avoided.”

But what stall can today’s potential outsourcers really set in these rankings as cost pressures of the recession intensify?

Dinish Goel of TPI, commented, “That would really depend on what parameters and criteria have been used in arriving at the ranking. Further, generic rankings, while relevant, do not necessarily apply in the same rank order to a specific client situation.”

The report itself is extensive having surveyed 3010 end-user executives during the later half of the year, 448 of these were then included within the analysis and 125 offshore locations were selected to feature in the report based on employee counts. So while vendors and industry watchers may be surprised at some of the countries’ positions, the results reflect the views of a sizeable chunk of the end user marketplace.

Kit Burden, a Partner at the DLA Piper law firm, recommended a common sense approach in light of the report, “Some destinations are generally recognised as being relatively "safe" for example the nearshore options such as Czech Republic, Poland, Ireland and further afield options such as India and the Philippines, and insofar as the rankings reflect this, they are worthwhile to support the basic sourcing decision.”

But most advisors sourcingfocus.com spoke with were quick to add that the Black Book and other similar surveys can only take a potential outsourcer so far and need to be considered alongside other factors.

“Most users of outsourcing tend to be more sophisticated nowadays in their offshoring decisions and consider many more factors when making their decisions,” said David Skinner, from the Global Sourcing arm of Morrison and Foerster. “Most advisors nowadays will give extensive insight and analysis on offshoring locations beyond what a report can divulge.”

Another reoccurring theme was that of perception over reality – whether civil unrest and terrorist attacks were actually causing problems for outsourcers. In one case sourcingfocus.com spoke with a Kenyan call centre that continued to operate without hitch during last year’s civil unrest around Nairobi; meanwhile global media outlets conveyed an entire country in turmoil. Likewise Mumbai languishes at number 42, surely suffering from last year’s terrorist attacks. sourcingfocus.com heard no reports of Mumbai’s attacks affecting outsourcing operations.

“There is a lot of scaremongering but the reality is that there are very few instances of impacts upon offshoring or outsourcing,” commented Kit Burden.

Nevertheless those that spoke to sourcingfocus.com were keen to convey the importance of spreading risk.

“It’s important that end-users look at the supplier, not just the location. Most of the big suppliers will have delivery locations worldwide now and will be able to handle any problems,” said David Skinner. Also adding, “A good thing about assessing risk in offshore locations is that it gets end-users asking the right questions of suppliers. It makes companies do things correctly.”

Prudence it seems will be a key theme in offshoring throughout 2009. But while the report predicts a shift in preference towards nearshoring, stating that offshore vendors without sufficient nearshore representation would face problems securing contracts, this was not echoed by experts.

“The cost pressures are simply too acute,” says Kit Burden. “So long as the destinations in view "pass muster" at a basic level, they will not be seen as being so risky as to justify foregoing the cost advantages otherwise on offer.”

Chris Tiernan, Managing Partner of Grosvenor Consultancy Services LLP, explained the choice ultimately does come down to cost but it’s not as simple as a direct comparison, “The issue is the balance of what might happen if risks materialise against the cost of taking steps to address them.” He also said that the costs involved should be assessed and worked out in the outsourcing contract. “Interestingly a deal with these contractual stipulations was signed just two weeks after the Mumbai incident, the client having been there while they were still clearing up after the incident,” he added.

This common sense approach was supported widely but Andy Gallagher, head of sourcing at Compass Management Consulting, recommended further due-diligence and contingency planning. “Contingency planning is an issue which many clients choose to brush away in the drive to minimise costs. The Satyam case in India was a dramatic reminder of the need for some contingency capability on the client side of outsourcing deals in order to minimise risk and keep systems running.”

David Skinner of Morrison and Foerster summed things up succinctly “Of course there are risks but these are often exaggerated by the media. Although, those dependent on just one location for their offshoring should have cause to be worried. The report should prompt all those who aren’t doing things correctly to assess their arrangements and put the necessary measures in place to protect themselves.”