1 July 2008

IT Outsourcing – China, the Waking Giant.

Until now, India has been the undisputed world leader in IT Outsourcing (ITO).  Now the Indians are looking over their shoulders as China bids to overhaul their lead!

According to a Gartner Group research report, the global ITO market value will be worth over US $32.2 billion in 2009 and it’s growing all the time.

Ms Ting Zhang, CEO of leading UK-China specialist consultancy, China Business Solutions, said,   “China wants a bigger slice of this pie, and although they’ve a long way to go to compete with India’s superpower position, the Chinese are showing their strong potential to the world and they can do it.”

“Once the Chinese government is committed to achieving a goal, they really go for it? and that is what is happening here.”

Ting added: “Technology enterprises of all sizes have to outsource engineering work that involves high labour costs to low-cost countries.

Facing international recession pressures, for cost saving and to enhance competitive advantages purposes. It is a must-do.”

China Business Solutions’ IT consulting team has found that even though there’s still a technical skills gap between China and India, the gap is narrowing fast.

Ease of communication in English has proved a major competitive advantage to the Indians until recently, but now that the Chinese government is spending large sums on English education, the landscape is changing rapidly.

“Apart from language concerns,” Dr. Paul Irwin Crookes, senior associate of China Business Solutions, commented, “business culture has an influence that can work in China’s favour. The disciplined workforce with sought-after technical skills who have been brought up to work well as part of a team, offer a compelling attraction to UK enterprises.”

Typically, the Chinese government is methodically planning, allocating resources and putting in place commercial measures to ensure growth in ITO. The Chinese Ministry of Commerce (MOFCOM) has initiated the “ten-hundred-thousand” program. Through this program China aspires to promote 10 cities as key bases for undertaking offshore services outsourcing; attract 100 multinational enterprises to China as an offshore destination and assist the development of at least 1000 enterprises having the capability and international qualifications to undertake offshore outsourcing with the goal of doubling service exports by 2010.

Ting Zhang further added, “In recent years, large numbers of overseas Chinese IT bilingual specialists have returned to China to offer the knowledge and experience they’ve gained in top international technology firms. That’s a notable contribution to China ITO sector’s growth as well, and the process is continuing.”

Furthermore, with the China government’s capital support in Outward Direct Investment, Chinese outbound M&A activities in acquiring international technology brands also enable Chinese enterprises to gain technological and managerial capability and advantages.

At present, the Chinese advance in this sector is still in its infancy.  The potential is fantastic, and there are mouth-watering opportunities to be found for cost saving, competitive advantage and long term service delivery, but careful choices need to be made to avoid the pitfalls of an immature market and the intrinsic difficulties of doing business in China.

China Business Solutions is a leading China specialist firm based in Cambridge offering consulting, research and support services.

China Business Solutions, St Johns Innovation Centre, Cowley Road, Cambridge CB4 0WS  tel: +44 (0)1223-421968.