Analysis China Targets India as Outsourcing Race H

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Back in 2004 Forbes ran a poll asking its readers if China or India would be the premier outsourcing location in the global business world by 2010. In itself it appeared a facile question,[link widoczny dla zalogowanych], given the growth of India's outsourcing giants and the fragmented nature of the Chinese outsourcing market.
Now, as that 2010 date looms,[link widoczny dla zalogowanych], China appears to be launching a late bid for parity,[link widoczny dla zalogowanych], with the kind of rapid consolidation that many analysts believed to be essential if the country was to pose a genuine threat to its great rival.
Last month, one of China's leading outsourcing service providers, iSoftStone,[link widoczny dla zalogowanych], announced ambitious expansion plans. "We have 7,000 employees now, but we plan to have at least double that number a year from now," Liu Tianwen, the company's chief executive told the Financial Times.
iSoftStones strategy is reliant on a series of acquisition, but although they're leading China's consolidation charge, others are waiting in the wings, and ready to challenge. "Our top 10 players are all pretty much to same size," said Mr Liu. "There has to be consolidation."
In 2005 A McKinsey report, claimed that despite the manifest advantages offered by China - citing the country's well-educated workforce and continued economic growth - the country still had some way to go to pose a genuine threat to the likes of Indian giant Infosys and Wipro.
"The industry's fragmentation and quality problems and the country's weak intellectual-property laws are among the key issues that will keep global success at bay," the report said.
Earlier this year, however, a similar report by the same company argued the global financial crisis offered China a perfect opportunity to play catch-up, with the country's booming graduate talent pool - many of whom are increasingly fluent in England - providing an ideal base for BPO growth.
It's also an area that the Beijing authorities are keen to latch onto. "There's significant emphasis from the government on building the infrastructure and support for large-scale outsourcing centres," says Brad Feuling, Shanghai-based CEO of supply chain consultancy Kong and Allan.
"China's clear strength is its untapped young labour pool - you have more graduates that are becoming increasingly fluent in English and have a difficult job market to enter. I can see that the draw of BPO will lure many of these graduates in a similar way to what we saw happening in India 5-10 years ago."
While India certainly holds most of the aces at the current time, it's worth noting that the speed at which the Chinese economy has recovered has put it in an ideal position to expand its outsourcing offerings.
Clearly, though, China still has some way to go. "They (Chinese companies) are not keeping pace with big players in India," said Enrico Benni, a McKinsey partner.
It's a view shared by many but a report by market research company IDC, published in 2007, predicted that improved Chinese infrastructure and wholesale improvements in technical skills and internet connectivity, would soon see the Chinese cities of Dalian, Shanghai and Beijing rivalling the traditional outsourcing hubs of Bangalore, New Delhi and Mumbai by 2011.
The figures appear to back up that assertion. China's BPO industry grew at a similar rate to India's over the past five years - with the 35% figure recorded by China between 2004 and the first half of 2009,[link widoczny dla zalogowanych], comparing favourably with the Indian rate of 37% between 2002 and 2008.
While others will argue that India's desirability as an outsourcing location shows no signs of fading, there's little doubt that China's star is still rising - and the gap is closing.

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