Management Strategies

05:25 PM
Nancy Feig
Nancy Feig
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Is China Going to Replace India as the Next Offshore IT Hub?

China threatens to be India's principal offshore competitor, according to Deloitte & Touche's "Global Financial Services Offshoring Report 2007."

China may be getting ready to give India a run for its rupee. "China threatens to be India's principal offshoring competitor," according to Deloitte & Touche's (London) "Global Financial Services Offshoring Report 2007." "Some 200 million Chinese people are currently learning English, providing a growing pool of skilled labor that may compete with India over the next 10 years," the report says.

Indeed, many experts say the biggest obstacle to China becoming an outsourcing force is the language barrier. The skills, education and sheer number of educated workers to make China a major rival to India already are there. India just happens to have a built-in base of more than 1 billion English-speaking workers. Still, that is not holding back companies from looking into offshore opportunities in China.

"I was surprised to see how much China has hit the radar screen," says Peter Lowes, a partner with Deloitte & Touche and leader of the firm's outsourcing advisory practice, referring to the findings from this year's study. "China is still a long way off, but the level of interest from last year in terms of early adoption has had a huge uptick."

But not everyone sees China as a booming outsourcing option. A May report from Forrester's (Cambridge, Mass.) John C. McCarthy, "China's Diminishing Offshore Role," details how the hype that began two years ago around China as an offshore superpower has yet to become reality.

McCarthy points to the fact that investments in other countries, such as the Philippines and Brazil, are outpacing investments in China. According to the report, the Philippines outsourcing market grew at two and a half times the rate of China's, and Brazil's market increased at three times the rate of China's.

One way for China to set itself apart is to become the hub for offshore services and activities that other countries are not already known for, such as testing, data management and product development, McCarthy asserts in his report.


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