Date: 05-07-12 07:58
What's India got going for her?
IT outsourcing. Call centers and software development for global firms.
Well, it seems that China is expected to outpace India in India's only strong point.
Here are two articles on the Chinese outsourcing industry.
http://www.zdnetasia.com/enough-room-in-outsourcing-for-both-china-india-62304696.htm A May 3, 2012 ZDNet Asia news article titled "Enough room in outsourcing for both China, India".
By Jamie Yap
SINGAPORE--China is expected to outpace India in the IT outsourcing space, thanks to growth locally and abroad, but rather than eat away at each other, there will be enough business for both countries, says the chief executive of HiSoft.
Loh Tiak Koon, CEO of Beijing-based IT outsourcing giant HiSoft, said within the booming global outsourcing market, the Chinese market will continue to grow a lot faster than its counterparts. Citing research from IDC, China saw 25 percent year-on-year growth in 2011, whereas India grew in the mid-tens, he told ZDNet Asia in an interview Thursday.
Loh, a Singaporean based in Beijing, was at a media event here where HiSoft's Singapore office received the international headquarters (IHQ) status from the Economic Development Board (EDB), making it the headquarters for HiSoft's Asia South--excluding mainland China and Japan--business.
According to Loh, the Chinese IT outsourcing industry has grown well vis-à-vis the Indian players and will continue to be "extremely strong" in the next three to five years. He attributed his outlook to four main reasons.
First of all, there is the huge and rapidly growing domestic market in China, coupled with still low IT penetration, that local outsourcing companies can tap.
Second, there has been a tremendous push by multinational corporations (MNCs) to enter the Chinese market, which they increasingly realize that their systems must be localized in order to succeed.
Third, the size of the IT labor force including IT graduates in China is equal to that of India. But while the Indian labor force has been fully exhausted because Indian outsourcers have been fully deployed over the last 10 years, the Chinese labor force has not been tapped as much, meaning means room for tremendous growth in the "infant years", Loh explained.
The last reason is that Chinese outsourcing companies also have business opportunities in Japan which has an aging population, he noted. "In terms of proximity like geographical distance and cultural affinity, the best country to serve Japan's outsourcing [needs] is really China," he said.
China's growth not significant threat for India
On whether the upheavals in the Indian IT outsourcing landscape, such as the visa fee hikes and anti-outsourcing sentiment in the U.S., may mean India's lead could be taken over, Loh replied that even if non-Indian outsourcers wanted to bring their staff into the U.S., they would face the same issues since the government's aim is to not give out too many local jobs.
China, however, does have one advantage, he said. CIOs are getting a more global perspective. While these large MNCs have "practically outsourced 90 to 99 percent to Indian companies already", they logically want to diversify their reach, especially if the Chinese market will expected to take up more share of their total revenue and since "India cannot supply all the resources that the United States or the world needs".
Loh emphasized that despite the intense competition, the global IT outsourcing industry is itself growing and can therefore accommodate both India and China. While China has the fastest growth rate, Indian IT outsourcing companies themselves are not stagnant or experiencing flat growth, he pointed out, and both countries will be "extremely successful" over the next few years.
"The Indian [outsourcing companies] are going up the value chain, so are the Chinese. The Indians are going up the value chain to take on the IBMs and Accentures of the world, because they're much larger than China. The Chinese are going up value chain too, doing a lot of the work that used to be done by Indian companies," Loh said.
The CEO noted that the IT outsourcing pie was also getting bigger. "It's not like the pie is the same [size] and everyone has to kill the other."
Loh also noted that the U.S. still has an IT skill shortage among locals, which is why companies there still need to outsource jobs overseas.
"15, 20 years ago, anyone with a computer science degree [in the U.S.] ended up in an IT shop of an organization. Today, graduates want to join Facebook or Zynga. The U.S., in spite of what the government says, must outsource because they don't have the labor force to support their needs," he pointed out.
HiSoft to expand portfolio
HiSoft was the fastest growing U.S.-listed China-based outsourcing company in 2010 and 2011, according to Loh, who said the company has to move up the value chain "or be irrelevant". Besides India, there is also competition from also countries such as Vietnam and Indonesia where the wage levels are lower than China's, he pointed out.
Beyond its core strengths in research and development and application development and testing for its clients, HiSoft has already branched further into SAP software, banking solutions and management consultancy, he revealed.
The focus this year, Loh said, would be strengthening its cloud management services, business analytics and business intelligence (BI), and mobile management services.
China to outpace India in IT outsourcing?
But there's plenty of business to go around?
http://my.news.yahoo.com/chinas-outsourcing-industry-booms-040003710.html A May 6, 2012 China Daily/Asia News Network article titled "China's outsourcing industry booms" found at the Yahoo News Malaysia web site.
By Wei Tian
Beijing - China's outsourcing industry is likely to double in volume by 2016 on account of a fast growing domestic market, with innovation rather than low costs being the leading driving force, industry insiders said.
Although for many, an Indian call center is still the first image that comes to mind when mentioning outsourcing, "China has the opportunity to develop an outsourcing industry much more robust than India ever will", Mike Corbett, chairman of the International Association of Outsourcing Professionals, said in Beijing last week.
India is still the top global outsourcing service provider, but China is catching up rapidly because it combines the development of offshore business with the support of a rapidly growing domestic market, Corbett said.
Corbett predicted that China's outsourcing market will be among the world's top three in the next five years along with the United States and Europe, and customers from the technology, automobile, logistics and healthcare sectors will be the key drivers of development.
As a result, "I would be surprised if the industry (in China) does not at least double in the next four years", Corbett said.
"More multinational companies select China not only because of its low costs, but also to cash in on the fast-growing Chinese consumer market," said Angela Wang, chair of IAOP's Beijing chapter and senior vice-president of Neusoft Corp, the largest IT solution and service provider in China.
With a profound understanding of the local market, Chinese providers have more resources and advantages, Wang said.
"That is why multinational companies would like to establish partnerships with Chinese providers," she said.
"Such partnerships are not only about outsourcing, but winning the China market."
According to statistics from the Ministry of Commerce, the revenue of China's outsourcing industry in 2011 totaled $32.4 billion, of which $23.8 billion came from offshore business. The industry grew more than 60 percent year-on-year.
Outsourcing contracts carried out by Chinese companies currently account for 23 percent of the global total, coming second after India.
According to Wang, the general costs of outsourcing in China are still 20 to 30 percent lower than in India.
"But China's cost advantage compared with developed countries will disappear in a few years, because of a diminishing demographic bonus and the continued appreciation of the renminbi," Wang said.
Corbett considered a closing cost gap in wages between China and the West to be a good thing for the industry, "because the real competition will eventually come down to business models, talent and technologies, which would trigger an 'explosion' of innovation in the economy".
Meanwhile, "it will bring an end to complaints about 'outsourcing causing job losses due to cheap labor', "Wang added.
Nevertheless, offshore business will continue to grow rapidly, not at the lower end of the market, but from creating new opportunities in the higher end of the market through technical innovation.
Neusoft aims to expand the total revenue of its cross-border services over the next 10 years to 60 percent of its total income from the current level of about 30 percent, Wang said.
"An often asked question in the outsourcing industry a few years ago was 'When will China have super-big companies such as Infosys and Tata?' The question is no longer meaningful for Chinese providers," Wang said.
"A large group of employees keeping down the human cost is not the growth model for Chinese companies," she said.
According to Wang, China will be the driving force in the next round of development of the outsourcing industry through innovation and skills, and it will change the stereotypical image of the industry as a low-value added business.
"It's like in a hockey game," Corbett said. "The key to success is to have the ability to go where the puck is going to be, not where it is."
China's outsourcing industry is likely to double in volume by 2016 with innovation rather than low costs?
China has the opportunity to develop an outsourcing industry much more robust than India ever will?
India is still the top global outsourcing service provider, but China is catching up rapidly because it combines the development of offshore business with the support of a rapidly growing domestic market?
China's outsourcing market will be among the world's top three in the next five years along with the United States and Europe, and customers from the technology, automobile, logistics and healthcare sectors will be the key drivers of development?
More multinational companies select China not only because of its low costs, but also to cash in on the fast-growing Chinese consumer market?
Outsourcing contracts carried out by Chinese companies currently account for 23 percent of the global total, coming second only after India?
The general costs of outsourcing in China are still 20 to 30 percent lower than in India?
China will be the driving force in the next round of development of the outsourcing industry through innovation and skills, and it will change the stereotypical image of the industry as a low-value added business?
Is there really room enough for India and China in IT outsourcing?
I've posted articles where even the Philippines have taken call center jobs away from India.
It seems that the only thing India has going for her is IT outsourcing. Take that away and what does India have?
Is it time to chip away at India's soft underbelly? ;-)
Let a hundred outsourcing businesses bloom, let a hundred something, something contend. ;-)