Outsourcing
Articles >> 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.
