Global offshoring of IT services, manufacturing and other business functions will continue to grow over the next three years, with countries in Eastern Europe taking on India and China as leading destinations, according to a recent report.

India currently ranks as the most attractive offshoring destination, with China on its heels, but the Czech Republic was not far behind in third place, according to a study by the Economist Intelligence Unit (EUI). The ranking took into account factors such as labour costs and skills, regulation, and political and economic security. Offshoring is essentially outsourcing work done in a country other than that where a company’s primary operations are located.

India will continue to dominate the offshoring market with its low labour costs, developed legal system and English-speaking graduates, the EIU said. China will benefit from its abundant supply of low-cost labour, but a lack of English skills will keep it behind India.

Eastern European countries are poised to take more offshoring business, however, due to their attractive regulatory environments as well as close proximity and cultural ties to Europe, the EIU predicted. The Czech Republic is making a strong push, as is Poland, which came fifth in the ranking behind Singapore.

The EIU report surveyed 500 senior executives, of which 57 per cent said outsourcing and offshoring were critical in reshaping the global market, up from 51 per cent last year. The report predicted that companies would begin to offshore a wider range of functions over the next few years, including logistics, payroll, finance and accounting services.