China vs. India For Outsourcing and Offshoring
In some quarters, India has almost become synonymous with outsourcing. For instance, a recent article in Forbes magazine interviews Raman Roy, who says how
“In the days leading up to India's '90s outsourcing boom, one of its pioneers remembers starting presentations to prospective American clients by telling them, "You probably think I travel to the office on a bullock cart." ….At a time when India is firmly established on the global map, that line seems outdated, slightly offensive even."
With articles like these appearing in the mainstream media, it essentially means that “Offshoring to India” is not a title that can draw readers’ eyeballs anymore; so what’s the next hot title that analysts, bloggers and business media are fixated over? It is “China vs. India”!
The debate in the blogsphere is also fueled by a recent Forrester Research report [China's Diminishing Offshore Role] that downplays Chinese offshoring and GDM (Global Delivery Model) executed from China. For instance Computerworld blogs quoting “Dalian not so hot, says Forrester.” Apu, in his CIO forum blogs about the report “India vs. China: Forrester right on facts, wrong on conclusions?”
Even the business media is eagerly doing a compare and contrast of the two BRIC leaders. On a similar thread, Wall Street Journal editors stir a debate in their blog on “Doing Business in China and India” by asking What sort of approach would you recommend for doing business in China and India? If companies are considering expanding to those countries, should they go there with a short-term or long-term outlook? And how much of a company's resources do you think it should devote to China-India expansions?"
On Infosysblogs, Aditya asks “How Important is China to Your Business?” which prompted quite a few interesting comments. On a similar thread, I had also blogged about executing projects and programs out of multiple geographies, leveraging Infosys’ GDM
The current debate over “India vs. China” makes me wonder if it is just a storm in a (Chinese) Teacup? Well, The authors of ChinaLawBlog responded to my query on the topic: “I agree with you that it is a bit much to paint this as an India v. China issue as though only one country will be left standing. But, hey, it's the headline that draws the readers. I should have put in the word "smackdown," like I did the last time I compared China versus Vietnam.”
Bottomline: The title of this (as well as other blogs and articles) should not be “Versus” but should probably read “And”
What does it mean? For this discussion, assume that Infosys is your sourcing partner: well, we have global teams in several locations in India and in China, and can deliver out of either, or both locations…but does it matter to you? This means that I will continue to advice my clients to leverage global skills, whenever, wherever they can, and not worry about whether China or India will lead in offshoring. In an increasingly flattening world, the debate over location should be moot; right?
To many western clients, the debate over location is already less significant: to them, China is as offshore as India is. What matters more to them is: can my sourcing partner execute my programs under budget, on time and deliver efficiently?
Comments
China or India?
or for that matter, Brazil (Satyam fame) these days.... or may be Slavik nations and/or phillipines (market research says that they have better western accents than indians!)
Work will follow the cheap cost path till the time "cost" includes everything. By everything, I mean cost of risk management as well.
Some of these nations may have high cost of risk management. Besides, wage inflation and currency risk may always prevail. Intellectual property risk is often mentioned as one of the costs preventing clients to use offshore Chinese resources.
I am confident that entrepreneurs will find out ways to workaround these hurdles. However, destination determination will always follow low TCOs (total costs of ownerships).
Posted by: Manik Patil | June 7, 2007 11:54 AM
China presents unique potential as well as risk. Over the past couple of years Indian companies have developed unique skill sets and best practices in terms of leadership, management and the ability to tackle complex projects leveraging the global delivery model and thus delivering value to the customer .These skills are complementary to the weaknesses of Chinese developers especially in the above mentioned areas. I have briefly interacted with some Chinese developers and my first impression was good. I thought their ability to present alternative solutions; team work and being proactive with the customer were certainly things you would generally not see in a developer from India. Hence there is a win-win situation for the both India and China
Another aspect of a China specific strategy could be to leverage the local and language specific expertise of Chinese professionals. This should allow Indian firms to reach the domestic market as well as other ones in the region, especially Japan and South Korea.
Posted by: Chetan Bhor | June 7, 2007 10:18 PM
There is a cultural issue due to which Indian managers managing Chinese developers is difficult to implement.
The Chinese developers, at large, will be more productive with Chinese managers - which has driven up cost of Chinese managers. Overall, the cost of a team of developers alongwith the manager is catching up to that in India.
Thus, this is not a win-win situation. Eventually, work will follow low TCO destination.
I agree with the East Asian markets (not domestic) point - Chinese on the Eastern side grow up with 3 languages - English, Mandarin, and/or Japanese. This makes them suitable for our business.
Alongwith Japan, South Korea, there is also, Chinese market itself. Certain players who we serve in the developed nations may need support in Chinese market from the same vendor. Thus, extended China Services may become a must and hence, services' suppliers will have to create such services. Therefore, China services are an imperative for a service provider from here on.
Posted by: Manik Patil | July 6, 2007 11:17 PM