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China not a match for India in IT outsourcing
By siliconindia
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Wednesday, 04 July 2007, 19:30 IST
Mumbai: With China promoting its information technology (IT) outsourcing sector, the only question is will it threaten India's stand in the sector. Analysts say that there is four times more demand in India than in China. "China has the potential, but India has the edge," claims NASSCOM Vice-President Ameet Nivsarkar. "Clients of Indian outsourcing vendors just expect more out of the services provided, leading the Indian vendors to set up base in places such as China", he added.
In 2006, the Chinese IT services market reached $7.7 billion, a growth of 17.8 per cent compared with that of the previous year. On the other hand, software and services exports from India for 2006-07 grew by 33 per cent to mop up $31.4 billion and the domestic segment grew by 23 per cent to garner $8.2 billion, according to Nasscom's figures.
A recent Forrester report noted that with language, attrition and intellectual property (IP) issues plaguing multinationals, China lags behind. As of December 2006, China's headcount with regard to outsourcing was less than one-tenth of that of Indian firms.
The other global delivery model (GDM) locations such as the Philippines and Brazil are growing at a faster pace. The former grew two-and-a-half times the rate of China, reported Business Standard.
The Chinese IT consulting market benefits from various IT consulting projects of the telecommunication industry. The Beijing 2008 Olympics has helped the system integration market to garner a high-speed growth. Sheetal Bahl, Research Director, Everest Group says, "China is unlikely to substitute for India or other mature offshore destinations in the short or the medium term- it will work best as a supplement that matures over the years."
Meanwhile, Indian IT service providers such as Satyam, Wipro, TCS and Genpact are setting up base in China and tapping the market. "With the presence of Indian vendors in the Chinese market, the Chinese firms might face difficulty on the global front. The Chinese outsourcing firms are more focused on the domestic market compared with Indian companies," said Anish Zaveri, associate director, KPMG Advisory.