China taking giant strides in Outsourcing services!

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The growth stories witnessed in India and China over the past decade can easily standout as torchbearers and growth engines of the world economy. While China excelled as the global manufacturing hub, India proudly emerged a low-cost outsourcing giant.

But, a few startling facts suggests that China seems to be covering the grounds hard and fast – and, seems to be in no mood to accept the second position to India even in her dominant space of off-shoring services business.

According to a KPMG survey, China has overtaken India as the destination of choice for outsourcing and shared services. In fact, China is rapidly expanding and winning market share over India and other regional destinations, according to the online survey covering 280 senior company executives across Asia.

However, one has to bear in mind that respondents of this survey were mostly executives from China, Hong Kong & Singapore.

The survey further reports that a whooping 42% of respondents believed that China is the preferred destination for shared services followed by Singapore, India, HK and Philippines. Even for the outsourcing services, China topped the list at 41 percent followed by India.

Where is/are your shared services centres located?

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KPMG forecasts that China’s total outsourcing market will grow at $43.9 billion by 2014, more than double of $20 billion in 2009 for the same industry.

Unforgettably, a point to be noted over here is that the outsourcing-led growth in India was primarily triggered by lower cost of living which translated into lower salary costs. This situation was further helped by the boom in the number of engineering graduates from the computer field during the decade.

However, this advantage for India as a most preferred outsourcing destination has stayed diluted for now. The domestic economy is facing headwinds with high double-digit headline inflation (10.55% in June) and even higher consumer price inflation, directly affecting the affordability and lifestyle costs of employees. This gradually renders the concept of low-cost outsourcing unviable on account of high attrition.

Why was that Shared Services location selected?

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This leaves Indian graduates with the sole advantage of mastering the art of spoken English. Yes, I do believe that Indians still have an edge in terms of control over the universal language, unlike China – though even they’re learning this globalised language fast. Gradually, China is making heavy investments into English training to overcome the language barrier.

At the current juncture, outsourcing from China, at the most, can be more useful in serving clients groups situated in countries such as Japan, Taiwan and Vietnam. By this, I don’t mean to say that the Japanese use Chinese language or vice versa. Just that proximity helps as well as the historical reasons which allow understanding of internally diversified languages of each other. The Japanese language is written with a combination of three scripts including Chinese characters called kanji.

What services are undertaken by your Shared Services Centre/s?

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It needs to be pointed out over here that India can’t rest on the laurels of its language strength, especially, with BPO no longer remaining only call based/voice based. It’s going to be a bigger challenge with keeping only English language as the advantage point.

China also has a favorable time zone. The time in China is 13 hours ahead of New York, 12 hours ahead of Toronto, and 2 hours behind Melbourne. For example, in the US, late evening 05:00 PM 06:00 PM (standard time when they leave work), its already 06:00 to 7:00 AM in China enabling a much smoother handover as compared to India where it is still very early 03:30 AM – 04:30 AM. Not a big advantage but an advantage, nonetheless.

China still has a lot to catch up with, but they are slowly and steadily getting there, India needs to no longer only offer cost benefits but also give innovative services.

  1. Altaf Rahman says

    This is what happens when you think that you are perfect and perfection can not be improved.
    When Western Financial gurus coined a term BRIC economies, they had in mind minerals, production and services in mind as engines of growth. They thought Brazil, Russia will provide the most compititive resources to the world, India will provide the most compititive services and China the most compititive manufacturing. For some time the theory held good.
    Then India is happy with its role as Global leader in services went on to sleep as others who are not content with what they have keep improving.
    More than a decade back China decided to take on India in its field of compitence still India did not wake up. China recognized the edge of India in the field of advantage as the knowledge of the English language. Its a shame that we were happy when China recruited 25,000 Indians to teach English to Chinese. At that time we were happy for the simple fact that we are getting few dollars more from this employment. We see the results now. With our teachings Chinese learnt English and compiting with us now.
    We have to be rea;istic. Our pathetic politicians lack vision and occupied with Anti Pak views where as the real challenge to India will come tomorrow if not today from China.
    We are still not realising the stage we are in.
    See the below :
    1) We export iron ore to China and cry when we face compitition from China in steel export market.
    2) We allow Chinese cheap products into china with out concern for After sale service. We reached a stage where we assume that when chinese products break down, simply throw it and buy a new one. If its an indian product, we go to the companies asking for replacement.
    3) Chinese come to India and try to understand our requirements and with in a year come up with products matching our requirements, where as we dont even know China beyond Beijing and Shanghai. In Andhra I was surprised when Chinese are offering rice delivered to shops at cheaper rates than local farmers. In contrast we dont even know what Chinese eat.
    What you get from the above? Chinese are not loosing basics while we salivate at few dollars more.

    The remedies required are :
    1) First of all recognixe what China can do to us if we keep sleeping.
    2) Concentrate on China and start introducing Chinese culture to our students. Teach Chinese language to our students (who will be our strength while countering Chinese might)
    3) More and more people travel to China and see what they need and what we can supply to them, see how they do manufacturing, try to adopt where its advantageous.
    4) Try bargaining chips in international issues. For your understanding, we go to China for support in certain international matters, they use leverage of our problems with Pakistan. Same way we should stand up strong in international issues concerning China like Human rights violations, fair trade practices, etc and use the weakness of China that is Taiwan issue. Send feelres to them that if they dont cooperate, we favor Taiwan.

    If we dont keep strict vigil on matters that concern us, it will be too late and we only can cry.

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