Offshore outsourcing: Can China steal India's thunder?

By Stephanie Overby, CIO |  IT Management, China, India

But China faces challenges foreign to India. And its problems aren't easily or quickly solved by throwing money at them--serious security and intellectual property concerns, management immaturity, cultural conflicts with Western enterprise customers, and most importantly, lack of customer confidence. "The biggest hurdles are rooted in perception versus fact, and that's very hard to overcome," says Karamouzis. "You can't just convince someone with a PowerPoint slide." In addition, China lacks the strong process and quality maturity necessary for the large-scale delivery of IT services, says Atul Vashistha, CEO of outsourcing consultancy Neo Advisory.

India had much of what Master calls "the soft infrastructure" in place--English capabilities, a cultural and business affinity with its Western customers, rule of law--and struggled with the physical infrastructure required for a robust IT services industry. China faces the opposite conundrum. In addition to China's world-class technology parks, it boasts modern airports, new roads, even high-speed magnetic levitation trains. But the country has just 10 million English speakers versus India's 232 million. "Things happen in China when the government sets its sights on doing something," says Master, pointing to the development of its manufacturing sector which now rules the global market. "Stunning things." But the kind of advances necessary to overtake India in the outsourcing export market will take time.

China's Unique Value Proposition

There are areas where China has surpassed India, most notably in embedded systems engineering. Major hardware and software vendors are eyeing China--and Asia as a whole--as a future source of revenue and must localize their products. "It's China's number one area of exported outsourcing, but it doesn't get much press or fanfare because the customer is not an enterprise buyer like the CIO," says Karamouzis. "It's someone in product development or R&D."

In fact, it's that massive domestic market--boasting the highest growth rates in the world and 20% of the global population--that has drawn most IT service providers--and even some customers, to make early bets on Chinese outsourcing. The local economy makes China "independently attractive to virtually any company with any kind of international growth aspirations," says Master. "Accessing ITO capabilities can be part of an overall program of introduction to China."

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