China threat to India's offshore supremacy waning: Forrester

By SiliconIndia   |   Thursday, 31 May 2007, 07:00 Hrs   |    1 Comments
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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 ‘China’s Diminishing Offshore Role’ stated that while China’s 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 “while Chinese services firms are supporting a vibrant local IT market, China has not achieved the offshore growth that people expected.”

“To be viable, China had to be 20 percent cheaper than India, and it’s 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. “On 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 China’s slow pace. They also need to focus on advanced skills like project management and advanced architectural skills.

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