The love affair between LCCS (Low-Cost-Country-Sourcing) and China has taken a few hits in recent years: bad press on humanitarian issues, unfavorable VAT rebate reductions, a weakened US$, and increasing government interference. It’s made more than one company turn a speculative eye towards central and eastern Europe (CEE).

And why not? There are a number of factors that make the more stable countries (such as Poland, the Czech Republic, Slovenia and Hungary) in CEE attractive:

• Highly skilled workforce with multiple western language skills
• Good to strong infrastructure
• Access to raw materials at better prices
• Ease of business in terms of cultural differences
• Decreased lead times
• Government incentive programs
• EU membership
• Labor costs (which while still not as low as China or India, usually come in at less than half those of the US or most of Western Europe)

So should we expect to see a migration west (or east depending on your starting point)? Well… those labor costs in CEE are increasing at a concerning pace, causing doubts as to the long term total cost advantage. Additionally, a recent issue of the Economist highlighted (glowingly, really) the infrastructure improvements China has made: a highway system to rival the United States, a new airport in Beijing, new bridges, improved railways, port transit upgrades and deeper shipping lanes.

Needless to say, China has big plans. More importantly, they are executing on those plans at a staggering pace. Having been in the military, I can attest to the fact that an authoritarian environment does make for efficient completion of projects. Case in point: China is currently 13 years ahead of schedule on their highway system development plan. These infrastructure improvements make a convincing case for continued investment in China.

Given all of that, where in the world should you go? We haven’t even discussed India, Mexico or the early stage hopefuls such as Thailand and Vietnam (though truly it may be quite a few years before they are ready to compete with China on infrastructure, quality standards and skills). As always, the answer is… it depends.

It’s a frustrating, yet accurate answer. It depends. It depends on: what you’re looking for, where you’re shipping to, what your objectives are, whether you’re setting up an International Purchasing Office (IPO), looking for new products, building a plant, or just trying to get out of the office on an elaborate boondoggle… in which case I highly recommend Hong Kong - a beautiful city.

It also depends on whether or not you’ve done your homework. These markets are changing so quickly that you really can’t just assume that the best answer is to head to China, CEE, India… or wherever the hot spot of the moment is.

Carol Pilarski is a Consulting Manager in Ariba’s Spend Management Services group. Her current focus is on supporting customers’ LCCS (Low-Cost-Country-Sourcing) initiatives.