Euro zone is still struggling. European economies are not seeing much respite and there are numerous issues that are yet to be resolved.  But interestingly Europe and other regions like Middle East and Africa, and Latin America are being highly sought after as promising outsourcing locations, even when they are in the midst of an economic turmoil. Its good to be aware of the challenges.

The Economy so Far
Although numerous remedial measures are being taken as a way of instilling new life into the struggling Euro Zone, things haven't improved much as yet. The United States has seen some improvement and organizations have to some extent been able to maintain productivity levels. But the picture remains darker in Europe. The year started on a positive note. This comes mainly on the back of the European Central Bank (ECB) giving out more than $450 billion to the European banks. Now that is a whopping amount but is that big enough to bring the Euro Zone out of its financial crisis. This remains a question. Liquidity crunch is still very much there. A part of the money that European banks have received from the ECB also goes back to the ECB  in the form of reserves. Spending by banks is tightened and that puts a pressure on the liquidity and cash availability in the European markets. Private sector losses and threat of a downgrade in credit ratings adds to the woes of the European economy.  

It is fairly evident that the EMEA is still in trouble. The uncertainty has also spread to other regions like Latin America and Middle East and Africa. Interestingly, these are regions that are increasingly gaining prominence as favored outsourcing destinations. Though the preference for offshore low cost destinations like India and Philippines still remain, there is a visible trend of moving towards newer, unexplored locations. Regions like EMEA and Latin America are being explored more as enterprises and service providers see huge untapped potential there.   

Outsourcing Demand Picking Up
As nearshoring demand is picking up in the Western Europe and the United States, the outsourcing markets in certain Eastern European locations are getting more prominence. Similarly certain locations in the Middle East & Africa, like Iran and Egypt are also seeing more demand for nearshored services. Enterprises are preferring to keep work closer to home and these locations offer certain unique capabilities that are difficult to find elsewhere. Also the factors like cultural affinity and other similarities with the Western Europe and US offers these locations an edge. Offshore service providers are also expanding their bases to these locations in an attempt to serve customers being closer to home.

Challenges to Look At
While its no longer a mystery that the lure for competitive advantages is driving outsourcing interest to these regions, under the current economic scenario it is also essential to look at things from a long term view. Will European locations be able to sustain their competitiveness in a tough economic situation? Will inflation not have an impact on labor costs in some of these regions? And do the benefits of operating in these regions, when put together, really outweigh the new, emerging challenges. These are questions that remain unanswered, but can prove to be vital in the long run.