Just came across an interesting debate in Information Week’s Optimize Magazine on whether China is ready to become a major force in IT outsourcing. The magazine asks the question and received “opposing” answers from the two professors questioned.
Peter Williamson, a professor of Asian business and international management at INSEAD in Singapore answers,”no,” because a fragmented industry and a dearth of English speakers are holding China back for now.” Go here for that article.
Oded Shenkar, the Ford Motor Company chair in global business management at the Fisher College of Business, Ohio State University, answers, “yes, because government prodding and market pressures are propelling China onto the IT outsourcing stage.” Go here for that article.
A close reading of the two articles however, reveals more agreement than disagreement. Shenkar, who answers, “yes,” concludes his article with the following:
Finally, China has more science and engineering students in the United States than any other country, and increasing repatriation rates translate into a flow of a highly capable and globally experienced workforce back to the mainland. The bottom line: You can ignore China at your peril. In five to 10 years, the factory to the world may well become its outsourcing mecca.
Williamson, who cast the negative vote, concludes his article with the following:
For these reasons, China isn’t ready to be a major outsourcing player today. Nevertheless, it would be wrong to write that nation off as a viable competitor in IT-enabled services long term. China is rapidly strengthening its base of software development, and clusters of excellence are emerging: Dalian, in northeastern China, for example, is home to 18 of the world’s top IT companies, including Accenture, General Electric, and IBM. This, in turn, is attracting outsourcing and service activities.
China has another big advantage fueling this growth over India: a large home market for IT. And there are many other potential customers in neighboring, higher-cost Japan and Korea. Given the capacity for rapid learning in Chinese companies and the pool of more than 3 million university graduates entering the market each year, many trained in IT, China is unlikely to confine itself to competing for regional business.
As in the manufacturing sector, after a base is established, China tends to be aggressive in looking for new global markets. While it’s years behind India in these services today, China may be a serious alternative for evaluation in the future.
Seems Williamson and Shenker agree more than they disagree and both agree China is likely to eventually become an IT outsourcing powerhouse.
For more on China IT outsourcing, check out the following:
1. My post of about a month ago, entitled, “China Outsourcing — Consolidation Waiting (And Waiting) To Happen“
3. “China IT Outsourcing,” which concludes China is five to ten years behind Indian IT and “foreign companies in China are spending a small fortune subsidizing China’s education system.”