China Law Blog

A very interesting report - the world of IT outsourcing is about to get bigger, and more competitive.

On the technology side maybe, but China has a way to go as far as English language proficiency. India has an advantage in this area and this is key to the service aspect of IT. Perhaps IT services in China will outsource the customer support portion to India.

Also, the article mentions governance and security issues in India; how is China any better? Sure, China is more stable big picture-wise but there are plenty of ways for local and national PRC gov't to intrude, especially if the IT services are for an entity with whom the PRC disagrees or if the information maintained is sensitive in nature.

China's computing & information services exports rose from US$4.3bn in 2007 to US$6.3bn in 2008 according to SAFE. Consulting services exports rose from US$11.6bn to US$18.1bn. I think that's pretty small beer by comparison to India, but the interesting thing is that China already has a net surplus in trade in these two fields...and of course those exports are rising pretty quick.

KPMG recommends Jinan as a "strategic sourcing location", but not Qingdao ??

I work for a huge US MNC and deal with at least 3 of the companies showcased in this report. The reality is quite ugly; they are total sweatshops and could care less about their employees. They usually recruit college graduates and make them sign ridiculous contracts. It makes me sick to have to make business with these kinds of companies.

I think outsourcing *IN* China is the next big thing. I don't see outsourcing *TO* China to be a major industry.

The big business opportunity is for China companies to outsource their non-core functions to other Chinese companies. In that situation, a lot of the disadvantages of US->China outsourcing suddenly become advantages.

I don't see any business driver for outsourcing *to* China. The only reason I can see in moving your BPO from India are to have a backup site, and also to take advantage of cheap labor. The trouble with the second rationale is that government policy is going to move against China being a source of cheap labor, IT or otherwise.

Re/ India back office.
I don't understand why people think India IT is so great. Has anyone ever tried to order a Dell and been routed through its call centre somewhere in India. I had the most HORRIFIC experience dealing with Indian call centre reps. Not only was their English incomprehensible, they got my orders wrong, and kept calling me back asking me to return their calls. I ended up spending HOURS talking to them on the phone, and $300 over my usual cell phone bill… there goes my saving from getting a Dell. I also have a good friend who works one of the world largest software companies and was sent to India to set up a call centre and train the local engineers. He was surprised by the incompetence of local Indian engineers and the amount of time it took for them to get up to speed. It was completely different from the top talents we used to see in the valley.
Saying the Chinese have a disadvantage in terms of language is probably unfounded either. To give you an example… would you say that Hong Kong is a fairly bilingual city, right? I can tell you that those who graduate from a good high school in China, speak and write better than any Hong Kong high school grad.. Again this is from personal observation.