Thursday, October 2, 2014

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China Overtakes India as Preferred Outsourcing Destination

Jul. 15 – China has overtaken India as the destination of choice for outsourcing and shared services according to a survey conducted by CFO Innovation for KPMG China.

The online survey asked 286 finance directors, financial controllers, CEOs, chief financial officers and senior executives their preferred location for outsourcing and shared services.

A surprising 42 percent of respondents cited China as the destination of choice for shared services followed by Singapore, India, Hong Kong and the Philippines. For outsourcing services, China also topped the list at 41 percent followed by India, Singapore, Hong Kong, Malaysia and the Philippines.

Language capabilities and low labor costs were cited as two of the major considerations for choosing a location. Infrastructure and world-class skills and expertise were also mentioned as deciding factors.

According to the report, while China’s outsourcing industry has not reached the level of maturity seen in India there is huge potential because of so many Chinese cities wanting to attract investment.

China’s onshore and offshore outsourcing market already reached US$20 billion in 2009 based on figures released by the Ministry of Commerce. KPMG forecasts that the industry may amount to US$43.9 billion by 2014.

Most of the respondents were based in China or Hong Kong, with 26 percent located on the mainland and 27 percent located in Hong Kong. Of the remaining respondents, Singapore accounted for 25 percent while Malaysia represented 11 percent and the Philippines and Indonesia accounted for 2 percent each. Only 1 percent of respondents were located in India.

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16 Responses to China Overtakes India as Preferred Outsourcing Destination

  1. Chris Devonshire-Ellis says:

    I find this deserving of a good pinch of salt if as was stated “most of the respondents were based in HongKong or China” it will skew the results towards a China destintion. To get a real picture of the global outsourcing industry you need a far more global panel of respondents. From what we see in investment patterns India still by far rules the English language international outsourcing industry – Chris

  2. Carlos says:

    I totally agree with you Chris :-)

    It seems to be a biased survey.

    Imho, the top 5 would be India, the Philippines, China,
    Malaysia and Hungary. In terms of revenue in US$.

  3. Rahul says:

    Irrespective of whether it is become true now, China will overtake India sooner or later.

  4. Bharath says:

    Rahul, you mean in terms of slow down in economy right? I agree with you there.

  5. I totally agree with Chris – found an interesting, bold article dismissing the same KPMG report http://inchincloser.com/2010/07/15/why-kpmg-is-wrong-chinas-outsourcing-industry-isnt-bigger-than-indias/. Choosing the right survey sample is vital in getting a holistic idea of the sector.

  6. Rohit says:

    I agree with Bharath. According to NBS, annual gross domestic product growth of China moderated to 10.3% from 11.9 % in the first quarter. It is also expected that the slowdown in china’s economy is likely to extend over the rest of the year. :)

  7. Chris Devonshire-Ellis says:

    India’s growth rate I expect to be about 10% for the next decade; we’re already seeing signs of this. China meanwhile almost inevitably has to slow down, and we’re seeing signs of this too. China simply cannot sustain 10% annual growth in an ever widening economy, and I already suspect that for much of the past few years China’s GDP growth rates have largely been manipulated by the development of unwarranted and unnecessary construction. I see so many empty buildings in China whereever I go. In India, I see much needed infrastructure development, and that represents real development growth. I’d actually put China’s real growth at about 4-5% against India’s 9-10%.

  8. Dev says:

    @ Chris,

    “India’s growth rate I expect to be about 10% for the next decade; we’re already seeing signs of this. ”

    - Thank you for the optimism. I will believe it when I see it, a decade from now. Premature celebrations are just that, premature. 10%+ growth rate is great, but our inflation is running at 10%+ as well. So we are back to square one. Moreover, the latest UNDA’s MPI poverty report has 645 million Indians living in ACUTE poverty, that is more than 55% of our population. We have a long way to go before celebrating.

  9. The_Observer says:

    While the Indians have English as their main second language, the Chinese take second languages such as Russian, Japanese, Korean as well as English. This measn that while India does outsourcing for the English speaking countries, China can serve the East Asian markets. China also has a large need for services herself for her growing number of manufacturing companies. That is why the Indians are setting out outsourcing centres in China to serve the latter two markets. In addition, the Chinese because of their higher educational are now been outsourced to do higher research as well as write embedded code for chips and instruments.

  10. Fairly True says:

    To put China in the same league as India is a conspiracy installed by the West media. China should stop mentioning India and basically ignore it.

  11. Carlos says:

    Fairly True,
    We would welcome dictatorial China “ignoring” India.
    That would be a welcome relief indeed. Unfortunately, the reality is that for decades now, China has been scheming against India using Porkistan as its major client-State pawn. I say major because China has others like Burma, North Korea, etc. Sri Lanka is fast turning into one as well.
    China should indeed ignore India. We, in India, could concentrate on enjoying life rather than building nuclear bombs to deter tyrants like China.

  12. Chris Devonshire-Ellis says:

    @Dev; your comments are exactly the same as what I was told about China 15 years ago – you may be right, but to wait ten years to find out would mean missing the opportunity;
    @Observer; true, but not entirely accurate. Outsourcing of Russian is done in Eastern Europe, while the Japanese & Koreans both have historic problems with China. Can you count on China impartiality and security in outsourcing? What to give China all that data? Probably not. That industry will move offshore just you see.
    Thanks guys – Chris

  13. The_Observer says:

    @Chris
    China has a big requirement for BPO services herself and that market will be served by both domestic and international providers.
    As regards higher research outsourcing, GM just broke ground for a site in China. See:

    http://www.thegreencarwebsite.co.uk/blog/index.php/2010/07/21/gm-to-launch-advanced-technical-facility-in-china/

    Quote from that article:
    that will “…develop advanced vehicle designs and technology solutions for the company on both a DOMESTIC and GLOBAL basis. Though it will boast 62 test labs and nine research labs, there are four key areas…”

    GM will be providing interesting, stimulating work for Chinese engineering graduates. China already leads in the manufacture and exports of green technologies such as solar panels and wind power. This GM research facility, together with other domestic and foreign facilities, will allow further technologies to be develop that will be required for sustainable living going into the future.

  14. The_Observer says:

    @Chris
    And while India is setting up outsourcing centers in China to serve that market and others, India is calling on the latter to help with food processing and storage. See:

    http://www.atimes.com/atimes/South_Asia/LG21Df01.html

    I think you would agree that feeding your people is more important than putting a few of them on the phones pretending to be American or European techies.

  15. Carlos says:

    “I think you would agree that feeding your people is more important than putting a few of them on the phones pretending to be American or European techies”

    1) Feeding ones people and encouraging the call centre business are not mutually exclusive. In simpler words, one can and should do both. They bear absolutely no relationship to each other.
    2) Its the Americans, Europeans, Australians, etc, etc who would prefer it if the Indian techies spoke in a way that they could identify with or at least understand. Nothing wrong in that, imho.

  16. Chris Devonshire-Ellis says:

    We already have an outsource business in China actually, and are looking for the same faciity in India. Dezan Shira & Associates payroll services division (for Chinese accounts and payments) is located in Dalian. We are looking at setting up a similar service in India for Indian and English language payroll. That naturally follows what I’ve said, China outsourcing for Chinese language, Indian for English. However its the latter market that is the larger. – Chris

Comments are closed.



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