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The phrase ’global village’ was coined way back in 1962 – more than half a century ago – to symbolize how technology or the magic of modern communication has brought together the entire world. We have only advanced from there – making the best use of technology, businesses have been able to find the best-fit resources from different geographical locations.
The two years of the pandemic have taught us important lessons in empathy, resilience, and antifragility. As a result of these developments – or the lack thereof – globalization has now come to be viewed as a sure-shot way of de-risking business, accelerating innovation and digitalization, and creating a moat against external disruptions and uncertainties on the horizon. Adding geopolitical dynamics to the mix, it became crystal clear for companies across verticals, that Globalization is not just a good-to-have, but a must-have.
These megatrends have shot up the importance of, and reliance on global talent hotspots or Centers of Excellence (COEs) by companies worldwide. Emerging locations such as Vietnam and Costa Rica have begun to garner attention from global companies – owing to vibrant ecosystems across technology start-ups, Service Providers, and universities, as well as the ease of doing business in these locations at affordable costs.
This year’s edition of Zinnov’s COE Hotspots Report identified multiple talent hotspots across the world, where scalable software product engineering teams could be housed. But first, we need to ask – what are the dimensions that need to be considered to crown a location as a potential hub for COEs? In this report, we have taken into consideration factors such as Ease of Doing Business, costs incurred, talent availability, and software engineering ecosystem maturity.
Here’s a quick overview of the results of our analyses.
For the purpose of this study, we have assumed the size of a software engineering team to be 100 – divided into software engineering, and product management and design teams. When we looked at the scalability of these teams as a function of ‘number to hire,’ in comparison to the United States (as a baseline), we found that India, Canada, China, Poland, and Mexico occupy the top 5 spots.
The talent pool in certain countries that we evaluated, is increasing significantly due to the migration of skilled labor to these locations, in the recent past. For example, Canada alone saw a 35% increase due to the rapid migration from the US – thanks to its lenient immigration laws. Canada values multiculturism and has been welcoming towards immigrants – and immigration has significantly shaped the country’s history and brought it to its present form.
When it comes to salary costs, the ongoing geopolitical tensions in Eastern Europe have impacted the job market in these regions. This could be tied to the fact that geopolitical tensions often lead to the exploration of alternate business markets.
In the wake of ‘The Great Resignation,’ attrition was put on the spotlight across the globe. Key trends have emerged that will define how the rest of 2022 will pan out for companies around the world. Our analysis revealed that attrition rates spiked in most countries during the pandemic. The average monthly attrition in Philippines in the first half of 2021 was almost 33% higher than the second half, which is when the country went through the second wave of the pandemic. Contrarily, in Vietnam, several companies had to wrap up their businesses owing to the difficulties posed by the situation. Consequently, the market demand dipped – which in turn lowered the attrition rates.
Our evaluation also highlighted wide ranging trends with respect to the cost of talent worldwide. Across industries, the move towards digitization has led to a convergence of required skillsets, which in turn has heightened the need for these skillsets – leading to a higher demand in the market. With software engineering teams specifically, most countries saw an increase in the cost of a software engineer by 20% on an average. The only role that saw a decrease in salary is that of a Technical Writer, which went down by 10% in 2021, as compared to 2020.
Software engineering ecosystem maturity and ease of doing business are major determinants in establishing a location as a global COE hotspot. They also help companies in evaluating the feasibility of setting up scalable teams, with relative ease. Currently, the APAC region has the highest number of headquarters of Fortune 500 enterprises, followed by North America. These Fortune 500 companies have over 9,500 centers across the world, and Zinnov’s analysis shows that global MNCs will set up at least 500 more such centers in hotspots such as India, over the next few years. In this regard, North America has the highest number of centers, followed by APAC and Western Europe. Within these regions, countries like India, China, Mexico, Canada, Brazil, and Poland have attracted more Fortune 500 companies than other COE hotspots (apart from the United States). These countries have emerged as top destinations for building COEs across verticals such as Automotive and Transportation, Banking, Financial Services, and Insurance (BFSI), Consumer Electronics, FMCG, Software and Internet, and more.
Most of these countries also have vibrant tech start-up ecosystems, which are producing unicorns at rates faster than ever before. As of 2021, there were 440 tech unicorns in North America, 258 in the APAC region, 102 in Europe, 27 in Middle East and Africa, and 21 in LATAM.
Interestingly, the year 2021 witnessed a sudden spike in the number of unicorns in Fintech, followed by a spike in Internet Software. The lesser time an ecosystem takes to mature, the better for the companies that plan to invest there – because of the ready availability of resources (like talent and Service Providers) and quicker Returns on Investment (ROI). The above image compares the number of tech start-ups to the number of unicorns in a country, thus illustrating the maturity of the ecosystem.
Taking all these factors into consideration, we have ranked the top 15 countries that are the best choices for businesses worldwide to expand into, for their Engineering and R&D centers. Each country has its own set of perks that makes it uniquely perfect for different requirements of tech companies across verticals. Zinnov’s COE Hotspots report takes deep dives into each of these locations, presenting the best choice for companies looking to grow and expand their footprint, while de-risking their business and accelerating innovation.
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