China Makes Headway In Outsourcing

September 26, 2010

Outsourcing has turned out to be a controversial subject but it has taken a lot of significance in the wake of a recovery as firms are looking to cut costs. So far, India has dominated the outsourcing landscape with outsourcing giants like Infosys, Wipro and Tata Consultancy Services. However, things are changing post recession. There have been a number of competitors that are giving Indian outsourcing firms a run for the money.

China, Philippines, Latin America and even Eastern Europe have been some of the major players in outsourcing recently. But China is now headed to lead this group of nations as the world’s powerhouse in outsourcing. Some of China’s impetus for outsourcing stems from the government support that Chinese firms are receiving to undertake offshoring.
According to analyst Ovum, China’s outsourcing firms are in stiff competition with India. Recently, analysts had warned that there would be a possible overtaking of India’s outsourcing business by its Chinese counterparts. Outsourcing to China is likely to play a big part in offshoring. Some of the issues plaguing the Indian outsourcing industry include problems with infrastructure, and increasing wages. Not just that, the Indian outsourcing industry is also finding it difficult to retain employees. These are some significant causes affecting the decline of India’s shared services and outsourcing (SSO).
Compared to 2009, when outsourcing to India was at its peak, China was only in the top five rankings at the time. But that has changed. Now the outsourcing industry is looking at a two horse race to the finish line with India and China competing head to head. This trend is likely to continue in the near future as firms come out of the recession seeking to reel in profits during a recovery in the offing, reports ZDNet Asia.


4 Responses to “China Makes Headway In Outsourcing”

  1. Parag on September 26th, 2010 11:53 pm

    Typical Analyst BS :

    You said 3 problems :
    – Problems in Infrastructure
    – Increasing Wages
    – Difficult to retain

    What makes you feel that China will have none of these issues ? IT is knowledge work, people like to grow with it. I suppose that will be the same in every country. Initially they make break-in, but they will face the same problems as us.

  2. jakewriter on September 27th, 2010 5:37 pm

    This does not imply that China has no issues. But the Indian outsourcing market has been saturated for some time and price changes will have to come in. I think China can do the job cheaper and with governmental support, it can do a bit better than India.

    You have to admit that electricity and power are all privileges in India and there are frequent power outages. Second, as China is starting out with millions of young people, it is unlikely that wages will go up because there are about six billion Chinese. And last retention is also not a problem in China since there are more workers to go around than in India.

    I hope that makes sense.


  3. MicroSourcing on September 28th, 2010 1:29 am

    China has always been a big name in just about anything that’s offshore–everything is manufactured there, for starters. So there’s no reason why IT and other outsourced work can’t have the Made in China tag as well. Rising costs of living in India has translated to the demand for higher wages as well, and that’s why clients are looking elsewhere.

  4. Amy Rib on May 24th, 2011 10:24 pm

    Hey, Marvelous article! Very well written and right to the point. I am using some of this article in my own articles as a reference, I hope you don’t mind.

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