India v China in Outsourcing

Business Week writes that China is beginning a strong effort to take on India in the outsourcing game:

One analyst based in Hong Kong says the Indians are way too confident. In China, “costs are lower, productivity is higher, and language skills are better,” says this analyst, who prefers to remain anonymous.

While India has an advantage in its big English-speaking base, this analyst argues that English speakers are also plentiful in China. Moreover, the country has language skills that India lacks, says Tom Reilly, who runs the back-office center that Cap Gemini Ernst & Young is expanding in the southern city of Guangzhou: “There’s a nice, steady stream of graduates who are English-literate — and they’re also good at Asian languages like Japanese, Korean, and Thai,” says Reilly. “That’s an advantage over India.”

Then there’s the question of costs. “India’s getting too pricey,” says this analyst. “Everyone is complaining about how hard it is to get staff. China is not even close to that.” So can China overtake India as the premier place for white-collar outsourcing? “It not only can happen,” this analyst predicts. “It will happen.”

Dion Wiggins, the Hong Kong-based head of research for Gartner, estimates that China’s IT output will match India’s within a few years. Since so many multinationals investing in Chinese manufacturing want to do more of their white-collar work there, too, Wiggins thinks Indian companies must get into China as well — and quickly.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.