China Set to Take India's IT and Outsourcing Services Crown

The playing field for global delivery is seeing increased competition coming from the tiger (India) and dragon (China) cities as both countries are keen to create a long-term sustainable competitive advantage. However, IDC predicts that by 2014, Chinese cities will emerge as the most ideal global delivery locations.

 

IDC’s latest Global Delivery Index showed that the government of China continues to build heavily on its foundation of the 1000-100-10 initiative rolled out in 2006, with 22 cities now identified as software and outsourcing locations.

 

As the battle for supply of global delivery heats up, the investments made by the government in China to promote “Triple Play” --a convergence of fixed line, cable and broadband services and cloud technologies, particularly in Shanghai and Beijing-- will tip the global delivery scales in favor of the Chinese cities by 2014, IDC said.

 

Meanwhile, India, with an abundance of engineering graduates and experienced professionals, will continue to dominate in the talent forte. The local governments in India are investing heavily in technology schools to churn out graduates with the right skill sets to meet market needs.

 

“Infrastructure investments, particularly in terms of key technologies, will drive foreign direct investment, which in turn will bring with it foreign talent. If this talent is capitalized upon and can be used to train locals, there will be experienced talent available in China within the next five to seven years, placing the dragon in a dominant position on the global delivery map,” says Suchitra Narayan, Research Manager, Services, IDC Asia-Pacific.

 

“India cannot rest on its laurels and rely on its existing differentiators of ‘low cost’ and ‘availability of talent’. It is currently in a position to capitalize on the best practices and years of experience to build out/automate future technologies and solutions that may stand it in good stead for the future. Strategic growth and investments are key for future dominance,” Suchitra adds.

 

Top BPO Destination

 

With China’s bullish approach into its outsourcing market initiatives, it can also overtake India as the top BPO destination of choice in the world, but there’s no room to be complacent.

 

In a new report, the independent technology analyst claims that even though the industry itself continues to grow, India’s share of the market is in decline and China is already providing substantial competition as the world’s outsourcing powerhouse in terms of footprint, awareness and capability.

“Both countries are often touted as the low cost delivery location of choice, with many non-domestic vendors investing millions of dollars to set up operations in multiple locations in both countries,” says Jens Butler, Principal Analyst. “Add to this China and India’s growing influence as global centers of political and economic power, and it appears to be a two horse race to the finish.”

 

However, according to Ovum, each market must be considered as a delivery location on an individual contractual demand basis rather than as a broad brushstroke, as each has socio-, political- and economic-competitive and comparative advantages.

 

Stability and governmental influence will play a key future role, with China’s five year plans and the associated federal infrastructure investment and India’s province-led support for its home-grown free-market organizations. And the focus on such investment and direction will need to continue, as there are a host of up-and-coming alternatives to these current “magnets” of the services delivery world (such as the Philippines, South Africa and Latin America). “These locations may not compete from a pure scale perspective, but they may well continue to extract market share from both, just as China as continues to take share from India,” concludes Butler, based in Sydney.

 

 

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