Thursday, September 18, 2014

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2point6billion.com discusses business and investment news rising from the geopolitical relations of China and India, and the interactions these two countries have with the rest of emerging Asia.




China outsourcing: All hype?

cer.JPGA critical yet edgy piece (very comparitive!) on whether China has the umph and brains to out-do India in outsourcing…  Highly doubt it! 

This piece was shared by friends of and contributors to 2point6billion, the China Economic Review Editors.  Thanks guys!

The global outsourcing story has been a hot topic for years now. India remains its lead actor, with local firms like Infosys and Wipro hogging the limelight.

An emerging thread, however, has been China’s role in the so-called BPO (business process outsourcing) scene. This is a particularly juicy thread because it connects two of the biggest business stories in recent years, the ‘India outsourcing’ story and the ‘rising China’ story.

The general consensus seems to be that China is becoming an increasingly powerful player in global BPO, as befits its climb up the value chain from cheap manufacturer to sophisticated service provider. An Indian paper, DNA India, has this recent headline: “India being Bangalored by China”. Offshoring Times, a trade publication, has items headlined “Will India’s dominance wane?” and “China an emerging BPO hub.” A quick Google reveals plenty of similar articles.

A new report by Forrester Research seems to buck conventional wisdom. Here’s the summary from the website:

When Forrester first looked at China’s offshore and global delivery model (GDM) role nearly two years ago, the country was widely viewed as the key challenger to India for offshore supremacy. However, our latest research shows that to date the market has not taken off as expected. While there continues to be demand from Japan and multinationals with operations in China, the offshore business from the US and Europe has been slow to materialize. In fact, China’s percentage of GDM resources for the top services firms like Accenture has dropped, while India and the Philippines have seen far greater investment.

The report also sparked an insightful discussion at a Computerworld blog. Some of the reasons cited for China’s poor BPO performance were “high attrition rates, a lack of English-speaking workers, and inadequate intellectual property laws.” Commenter David Scott Lewis, a former analyst and now an executive at a China-based outsourcer, begged to differ: “Hey, analysts are not right about everything. But in both cases, they should stick to topics that they know. China is a topic that they don’t know, don’t understand. Their knowledge is way too superficial, idealistic, biased.” According to Lewis, all the factors Forrester mentioned were not significant.

The outsourcing business is ostensibly based on the bottom-line — how much money can be saved, how much more efficient can a process be — but perception seems to play a much bigger part in decision-making, at least on a global level. China’s ascendancy to the global outsourcing throne will not just be because of the hard data, it will also be because of image-making, hype and perception.

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One Response to China outsourcing: All hype?

  1. Mohan Babu says:

    You begin the argument stating “on whether China has the umph and brains to out-do India in outsourcing… Highly doubt it!”

    Well, the jury is still out on this; right?

Comments are closed.



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