International Trade in Services.pdf - DSpace at Khazar University

Exporting Information Technology Services: In the Footsteps of India 227
Box 7.2: The Value of Securing an Anchor Investor
Developing countries that, without national champions, seek to catch the attention
of foreign multinationals in fiercely competitive markets for hardware, software, and
related services often target a leading, high-profile anchor investor. The establishment
of a leading multinational helps signal to other prospective investors that the
country offers a business-conducive environment in which companies can prosper. A
market leader transfers technology and management expertise. It can also provide
the impetus for the creation of a local cluster of suppliers. Intel’s decision to invest in
Costa Rica in 1996 had an overwhelmingly positive impact on the country’s economy,
industry, and business culture (MIGA 2006). Costa Rica’s investment in higher
education helped attract Intel in the first place, and the company’s establishment had
a positive impact on higher education in turn. The anchor investment helped shape
the country’s investment promotion strategy and led to more investment in adjacent
services. Other examples of middle-income countries attracting leading companies
include the establishment by DHL of an IT service center in the Czech Republic in
2004 and IBM initiatives in Egypt, including investments in a nanotechnology
research center and global service delivery center in 2005.
with engineering colleges and universities. These parks provide modern office
facilities with a guaranteed supply of electricity and high-capacity broadband
connectivity. By nurturing clusters, IT service companies can enjoy economies of
scale in procuring input services and overcoming infrastructure bottlenecks.
China, Egypt, India, and the Philippines are some developing countries that have
successfully established such parks.
Some consulting companies assess and compare countries based on perceived
attractiveness as offshore service locations. A. T. Kearney’s global services location
index is published twice a year and has developed into a widely studied benchmarking
tool for the IT service sector and the IT-enabled service sector (figure 7.2
and table 7.2). It provides a useful starting point and offers a number of lessons
for foreign investors who seek a new base for service delivery and local policy
makers who seek to address supply barriers. 4 It is based on three pillars: financial
attractiveness (cost and expense structures), people skills and availability (quality
and quantity of human resources), and business environment (miscellaneous
variables affecting the stability and time of supply).
The index provides a rather comprehensive coverage of issues, and the fact that
foreign investors make use of it reinforces its importance and generates some traction
in the efforts of governments at regulatory reform. It illustrates how different
locations have different strengths that cater to the different needs of foreign clients.
For some types of services, language skills are paramount in attracting business,
while other companies are highly price sensitive. Many multinationals look for locations
where they can rapidly scale up their operations by hiring hundreds or thousands
of IT professionals without generating labor market disruptions. Developed