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In Outsourcing will China really be a contender to India?

May 13, 2009

With the global export slowdown hitting its manufacturing sector hard, China’s government is turning its attention to boosting its service sector and is laying the groundwork to grab a bigger slice of the US$1 trillion plus global outsourcing market – putting India on notice. Sure, India has an enormous pool of talent to draw upon and a big head start advantage but China also has an enormous and well educated population, a largely untapped domestic market for outsourcing, numerous small or medium sized cities offering competitive cost advantages, and excellent transportation and telecommunications infrastructure. Moreover, the government now plans to offer more perks to outsourcers in 20 pilot cities in the form of tax breaks, subsidies and IP protection.

Nevertheless, China is still far behind India in the race to take the outsourcing lead. For starters, there is a general lack of English language business skills among Chinese graduates, especially among graduates of IT or technical courses, and Mandarin remains the language of business. Moreover, there is a shortage of experienced project managers and middle managers (especially those who have English language, project management and business skills) as the education system still focuses on teaching theory with little practical knowledge about solving real world problems. Furthermore, the “service culture” that has developed in India among its established outsourcing players is still a largely alien concept to the Chinese. And finally, a Chinese version of Infosys or Wipro has yet to emerge as the domestic Chinese outsourcing industry remains highly fragmented with thousands of mostly small players – many of whom are doing relatively low-end type of work for domestic or foreign clients (many of whom are Japanese).

outsourcingMarket In Outsourcing will China really be a contender to India?

Given the above situation, should India really be all that worried about China’s potential as an outsourcing alternative and a serious competitor? When Pramod Bhasin, the CEO of Genpact, was asked by India’s Business Today back in November what worries him the most, he bluntly commented that in India he is running a taxi service and a power plant and it took two years to get a traffic light on the street outside his office. On the other hand, in Dalian China where they also have operations, if they want a new bus route for the benefit of their employees, the government will see to it that it quickly gets done.

In other words, just having a deep talent pool and a big head start is not enough anymore for India to stay competitive, India must improve their physical infrastructure. And just like the fable about the tortoise and the hare, if China (or another country) slowly starts to fully develop its talent pool and has or puts the necessary physical infrastructure in place, work that would have gone to India will go elsewhere – ultimately leaving India the looser in the race.

Related posts:

  1. China, India and the Google wars
  2. Outsource yourself to China as a fake white executive
  3. Outsource Work shifts to Tier-II and III cities in India
  4. Is China losing its outsourcing shine?
  5. Manufacturing Outsourcing Growing in India


Written by JohnU · Filed Under Outsource Blogs 

Comments

4 Responses to “In Outsourcing will China really be a contender to India?”

  1. Seo Executive on May 14th, 2009 12:20 am

    I work as a developer – not games – and almost every time we outsource something it’s a disaster. When I say disaster I don’t mean the code is a bit poor, I mean throw away the results because even if we were to fix it in-house, it’d be much easier to start from scratch. And that in the time our developer handling the outsourcing spent arguing with them, he could probably have made a damn good start on just that.

    In fact, the only successes have been outsourcing to ‘best-of-their-kind’ Western companies with specific direct knowledge of the system we work with.

    (And no this isn’t a slam on Indian developers either; several failures were in India, others were from smaller Western operations.)

    So anyhow, I’m sure it’s possible to outsource code successfully but I’m also sure it’s a lot more difficult than most managers think. In other words the results of this report seem pretty likely to me…

    (I think other things like artwork may be a lot easier to outsource because it’s much clearer to define: you can see whether they’ve done the job properly just by looking at it.)

  2. Christian Sagala on May 14th, 2009 3:48 am

    In my own opinion, China still need to learn a lot of English and I believe that the majority of Chinese living in China do not know how to speak in English. However, I believe in the discipline and knowledge of the Chinese people and they may be one of the leading outsourcing resource in more years to come.

  3. Nidhi on May 14th, 2009 2:00 pm

    protest in India for Obama’s statement

    Buffalo has buffaloes,Bangalore has brains,Protest in India

  4. China will win in ITO on May 28th, 2009 7:03 pm

    India should work hard to keep the ITO market, I do not know about BPO, but in IPO China can easily beat India in next 5-10 or so years.

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