China Outsourcing
In today's economy, outsourcing is no longer an option but a
necessity. As companies are forced to focus on core competencies,
many are considering outsourcing various aspects of their in-house
operations. The driving force behind this decision is typically cost
reduction and organizational restructuring. Outsourcing can result
in significant benefits for both customers and vendors.
In recent years, China is rapidly emerging as one of the world's
leading suppliers of offshore software outsourcing services due to
its incredible development rate. Although India is at the moments
the world leader in software outsourcing industry, China aims to
outpace India and become the next dominant competitor in software
outsourcing. It is predicted that China will emerge as one of the
top three countries for overseas software outsourcing between 2007
and 2010. Companies are already beginning to plan their offshore
outsourcing strategies to take advantage of China's emerging
strength as an outsourcing center. This includes looking for ways to
take advantage of the country's current software strengths. Some
estimates state that China outsourcing could rival India as
the leading offshore IT services market as early as 2007.
China has all the major advantages required by companies and is thus
is seen as an outsourcing destination of the future. At the moments
though China outsourcing is not considered the best possible
option as because China still has a workforce that has relatively
low English speaking skills. Also compared with its main rival
India, the availability of skilled and computer literate labor in
China is less. China outsourcing is also lagging behind due
to the relatively less developed infrastructure and experience.
The main reason IT business is starting to be driven to China
outsourcing is the cost advantage. At present China has an
excess supply of well-trained engineers willing to work at wages
lower than their Indian counterparts. On average, an engineer with
some experience in China is paid a monthly salary of less than $500,
compared with more than $700 in India and up from $5,000 in the US
Silicon Valley.
Due to Indian IT firms moving to outsource in China, it will
take a while before Chinese IT firms can really hope to compete with
India on a global scale. With a head start of over 10 years, Indian
IT firms have reached scalability levels that will require some time
and resources from Chinese IT firms to reach. In terms of job
skills, it is the lower-end jobs that are being outsourced from
India to China. Now that Indian IT firms are setting up business in
China, it will be even more difficult for Chinese firms to compete.
China is not at the level yet, to be able to provide the same kinds
of turn-key solutions that India at the moment can.
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