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China threat to India's offshore supremacy waning: Forrester
By
siliconindia news bureau
Bangalore: As language, attrition and intellectual property (IP) protection continue to haunt the multinationals, the myth associated with China as key challenger to India for offshore supremacy is diminishing gradually.
A recent Forrester report ÂChinaÂs Diminishing Offshore Role stated that while ChinaÂs percentage of global delivery model (GDM) resources for the top services firms such as Accenture has dropped, there has been far greater investment into India and the Philipines.
Based on interviews with a mix of 10 MNCs, Indian, Chinese and Japanese services firms as well as government officials the report states that Âwhile Chinese services firms are supporting a vibrant local IT market, China has not achieved the offshore growth that people expected.Â
ÂTo be viable, China had to be 20 percent cheaper than India, and itÂs roughly as par in terms of rates currently, says report quoting an interviewee.
According to the report, Japanese clients constitute a major share for Chinese offshore service providers. On the other hand, the weak demands from the clients impacted the quality of services from providers firms, which are to a large extent limited to project application development work or SAP implementation. ÂOn an average, firms only have 20 to 30 accounts, of which 50 percent were still only doing project works, it added.
Chinese IT professionals are largely focused on modern language skills like J2EE and the skills base growth are also very limited.
The report suggested that the clients should focus in smaller projects in this realm to limit the exposure to the small supply of higher-end and more experienced technical skills.
On the other hand, the other global delivery model (GDM) locations like the Philipines and Brazil are growing at a mush faster pace. It also said that the Philipines grew at two and half times the rate of China, on the strength of its English-speaking skills and large investment led by Accenture.
The Forrester report says that countries such as Thailand, Malaysia, Egypt, and Morocco who are preparing as viable offshore markets, should learn from ChinaÂs slow pace. They also need to focus on advanced skills like project management and advanced architectural skills.
A recent Forrester report ÂChinaÂs Diminishing Offshore Role stated that while ChinaÂs percentage of global delivery model (GDM) resources for the top services firms such as Accenture has dropped, there has been far greater investment into India and the Philipines.
Based on interviews with a mix of 10 MNCs, Indian, Chinese and Japanese services firms as well as government officials the report states that Âwhile Chinese services firms are supporting a vibrant local IT market, China has not achieved the offshore growth that people expected.Â
ÂTo be viable, China had to be 20 percent cheaper than India, and itÂs roughly as par in terms of rates currently, says report quoting an interviewee.
According to the report, Japanese clients constitute a major share for Chinese offshore service providers. On the other hand, the weak demands from the clients impacted the quality of services from providers firms, which are to a large extent limited to project application development work or SAP implementation. ÂOn an average, firms only have 20 to 30 accounts, of which 50 percent were still only doing project works, it added.
Chinese IT professionals are largely focused on modern language skills like J2EE and the skills base growth are also very limited.
The report suggested that the clients should focus in smaller projects in this realm to limit the exposure to the small supply of higher-end and more experienced technical skills.
On the other hand, the other global delivery model (GDM) locations like the Philipines and Brazil are growing at a mush faster pace. It also said that the Philipines grew at two and half times the rate of China, on the strength of its English-speaking skills and large investment led by Accenture.
The Forrester report says that countries such as Thailand, Malaysia, Egypt, and Morocco who are preparing as viable offshore markets, should learn from ChinaÂs slow pace. They also need to focus on advanced skills like project management and advanced architectural skills.
Reader's comments(1)
1: Innovation or Disintegration:
Like any other boom that is unplanned and lacks long term approach, bubbles burst and markets crash. There are a multiple reasons why India might be left following the race after winning the lap. In the past and current century US and Europe have remained as the leaders of innovation and creativity. Institutes like MIT and Stanford continue producing graduates who not only are technically sound but innovative. To have a sustainable growth technology needs to be followed by ideas and needs, instead the other way round. Companies and countries which follow ideas with technology often face this crisis. As US and European companies feed on their technical skills, while the flag of innovation remains beached on their lands resulting in great products and profits. Indian companies made great efforts to fulfill the technical demands of US and European companies and when the price margin didn't remain competitive they began to offshore to China. What India needs to realize is that companies are not nationalist in the current times; they are global and would not waste a second thinking for better places to offshore or outsource. To sustain growth, innovation and creativity are the vital elements for organizations which keep them attached to a particular region. India needs to focus on producing and hiring graduates with not only technical skills but also entrepreneurial skills who know how can they establish and develop companies like Google, Facebook, Microsoft, Amazon, e-Bay, Oracle, IBM and Cisco. Companies that feed on their own ideas, creativity and research. During this process instead of focusing on outsourcing and off shoring opportunities Indian companies should have focused more on partnerships and alliances that are mutually beneficial not just in terms of material but also in terms of knowledge sharing and true development of organizations. This can be best achieved by practicing the agile model fairly as it spotlights on collaborative teams. In agile mind set from the project manager to the junior developer are involved in communication with the client that results in business understanding and knowledge growth. Coming to the financial and economic factor Indian companies need to operate their cash flows in Euro's as USD is losing its value swiftly and Euro is the next global currency. This can even worsen the condition if Indian companies do not modify their pricing model. The pricing model needs to be based on the project scope and complexity rather than rigid pricing which is usually based on the popularity and reputation of the company itself, this again requires business analysis skills along with excellent expertise of requirements gathering, analysis and design phases while estimating the RFP's or requirements. The best solution for this is the agile framework, as pricing done through agile framework offers better ROI for both the vendor and the client. But agile framework essentially requires business analysts, project managers and technical employees to have both business and technical know how, as the agile model requires day to day based communication of the development team and the client. This brings us back to the need of technical human resource with economic and business knowledge. India is not the only country that has faced this crisis, we should not forget the Indian capitalists were the ones who wisely benefitted from the dot com crash resulting in a great growth to Indian economy and also they most efficiently utilized the 10 flatteners mentioned in the book âWorld is Flatâ by Thomas Friedman. But the new 11th flattener is Innovation and Creativity for sustainable growth. Its not too late as Indian companies are moving towards the Question Mark from the Cash Cow quarter after enjoying a money-spinning time period as the Star. I am sure Indian think tanks have a back up plan to safe-guard their strength.
Business Development Executive,
Ephlux
Like any other boom that is unplanned and lacks long term approach, bubbles burst and markets crash. There are a multiple reasons why India might be left following the race after winning the lap. In the past and current century US and Europe have remained as the leaders of innovation and creativity. Institutes like MIT and Stanford continue producing graduates who not only are technically sound but innovative. To have a sustainable growth technology needs to be followed by ideas and needs, instead the other way round. Companies and countries which follow ideas with technology often face this crisis. As US and European companies feed on their technical skills, while the flag of innovation remains beached on their lands resulting in great products and profits. Indian companies made great efforts to fulfill the technical demands of US and European companies and when the price margin didn't remain competitive they began to offshore to China. What India needs to realize is that companies are not nationalist in the current times; they are global and would not waste a second thinking for better places to offshore or outsource. To sustain growth, innovation and creativity are the vital elements for organizations which keep them attached to a particular region. India needs to focus on producing and hiring graduates with not only technical skills but also entrepreneurial skills who know how can they establish and develop companies like Google, Facebook, Microsoft, Amazon, e-Bay, Oracle, IBM and Cisco. Companies that feed on their own ideas, creativity and research. During this process instead of focusing on outsourcing and off shoring opportunities Indian companies should have focused more on partnerships and alliances that are mutually beneficial not just in terms of material but also in terms of knowledge sharing and true development of organizations. This can be best achieved by practicing the agile model fairly as it spotlights on collaborative teams. In agile mind set from the project manager to the junior developer are involved in communication with the client that results in business understanding and knowledge growth. Coming to the financial and economic factor Indian companies need to operate their cash flows in Euro's as USD is losing its value swiftly and Euro is the next global currency. This can even worsen the condition if Indian companies do not modify their pricing model. The pricing model needs to be based on the project scope and complexity rather than rigid pricing which is usually based on the popularity and reputation of the company itself, this again requires business analysis skills along with excellent expertise of requirements gathering, analysis and design phases while estimating the RFP's or requirements. The best solution for this is the agile framework, as pricing done through agile framework offers better ROI for both the vendor and the client. But agile framework essentially requires business analysts, project managers and technical employees to have both business and technical know how, as the agile model requires day to day based communication of the development team and the client. This brings us back to the need of technical human resource with economic and business knowledge. India is not the only country that has faced this crisis, we should not forget the Indian capitalists were the ones who wisely benefitted from the dot com crash resulting in a great growth to Indian economy and also they most efficiently utilized the 10 flatteners mentioned in the book âWorld is Flatâ by Thomas Friedman. But the new 11th flattener is Innovation and Creativity for sustainable growth. Its not too late as Indian companies are moving towards the Question Mark from the Cash Cow quarter after enjoying a money-spinning time period as the Star. I am sure Indian think tanks have a back up plan to safe-guard their strength.
Business Development Executive,
Ephlux
Posted by: Ali Zaidi - 12:00 AM Mar 05, ' 08
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