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?
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?
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?
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.