The erosion of markets, increase in competitiveness and price wars, are factors
that play a role in this new outsourcing trend. During the last few years, the acceleration
of commercial exchanges with Asia has caused a huge increase in competition on all
national and international markets.
As a result, outsourcing in China has advantages that companies willing to optimize
and manage their development can not ignore anymore.
|
|
Support from Chinese Government
|
|
The Chinese Government support is proving critical to promote the offshore software
business in China. In addition to investing heavily in developing a skilled workforce,
the Government is providing tax breaks and incentives to software outsourcing companies
setting up operations in China or improving their capability.
|
|
Modern Infrastructure
|
Accessibility is on a par with New York or London with Shanghai boasting a state
of the art international airport with direct daily flights to most major cities
in the world. Importantly access to downtown takes only 7 minutes on the world's
fastest train - The Maglev. There is accommodation and restaurants to suit all tastes
and budgets, and free and reliable broadband and wireless access is widely available.
Telecommunication accessibility is also expanding. Internets, cell phone network
coverage is increasing.
|
|
Geographic Diversification
|
|
As outsourcing becomes a strategic operating policy for an increasing number of
companies so organizations are looking to outsource to two or more destinations.
A second outsourcing destination has many benefits; it diversifies the geopolitical
risk, companies can increase their negotiating power amongst service providers and
it prevents a company becoming beholden to a single vendor.
|
|
Domestic Economy
|
|
The huge domestic consumption market helps Chinese outsourcing companies to provide
more channel partnership opportunities for client-partners.
|
|
Attractive & Stable Labor Cost
|
|
Labor cost in China is 20-30% less costly than Indian offshore vendors today. Inflation
rates are favorable low compared to India's 15-20%. A survey by Hewitt Associates
in 2006 shows that wages increase in India is 73.5% more than China.
|
|
Labor Quality and Scalability
|
In India, just 61% of adults are literate, well behind other developing countries,
and far from China's 91% adult literacy rate.
The size and skill of China's talent pool has barely been tapped. The Chinese Government
is mobilizing this resource and having identified software as one of the six favored
industries in 2000 is proactively supporting the software outsourcing industry.
National schools for software training have been set up and the number of graduates
from Chinese universities with degrees in IT, computer sciences, and software engineering
is growing year on year.
|
|
Minimal Labor Attrition
|
|
The annual attrition rate in India is projected to be around 35-50%. This number
is much lower in China - the large labor supply minimizes "job-switchers" and poaching.
|