Offshore Outsourcing

China has the attitude and the processes in place to exploit the outsourcing markets. A vast labor pool and consequently cheap labor form the foundation of China’s outsourcing goals. An entry-level programmer in China draws 30% to 50% less than one in Chicago. Add to this other favorable trends like the liberalization of government regulations, the presence of a growing middle class, large-scale investments in technical education and a vibrant economy, and China’s prospects look very promising.

So what’s holding the country back? China needs to build up capabilities in terms of the efficiency of its work force, articulation skills in English (a major dampener in China’s flight) and do away with a lot of the red tape surrounding its stringent government regulations. But these limitations are being recognized – the Chinese government is slowly working towards rectifying them, striving to bring in investors and widen its revenue from the IT sector, in the process promoting a transformation that it has dubbed the 'changing face of China.

China is leveraging itself as a cheaper alternative and also appealing to clients eager to explore the huge local market. China’s proximity to fertile markets such as Japan and South Korea, where there is an advantage of both geography and language, is also a factor running in its favor.

China is also gradually moving beyond merely being a traditional hub of manufacturing to wider pastures. According to a report by the United Nations Conference on Trade and Development, China scores over India when it comes to innovation. China’s investment in R&D investment is 1.5% of its gross domestic product, twice that of India. Companies such as Motorola, P&G, IBM and many others have identified this facet and are expanding R&D operations in China. And ironically enough, many Indian firms are also setting up operations in China, recognizing the prospects that the country holds in outsourcing. Indian investment in China is nearly $ 50 million, with around 18 Indian companies operating in China. And expansion of operations and work force are on the cards for these companies.

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