Offshore Outsourcing: 24 Ways to Compare India vs. China

Major differences remain in the two mega-markets for offshore IT services, from language and management skills to industry focus and supplier bases. Here's a look at how the two stack up, using 24 key measures.

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Process Maturity

India's outsourcers have put years of investment and training into software development and other process maturity programs. In China, process and functional skills necessary for requirements analysis, business process design, and use-case development are scarce, say analysts.

English Proficiency

Hindi may be the India's official language, but English is the unofficial language of business on the subcontinent with 232 million English speakers (226,449 of whom list English as their first language). China has just 10 million regular English users, though as many as 300 million may be learning the language.

IT Outsourcing "Brand"

"India, Inc." is known as the leading offshore outsourcing destination thanks to concerted efforts of providers, trade association, and government. China lacks a clear identity or common message with competing government initiatives, regions, cities and technology parks.

Transparency

More than 85 percent of outsourcing customers cited "Chinese inscrutability" as a concern, according to Gartner, making relationship-building difficult. Leading outsourcers in India tend to promote transparency with customers, inasmuch as true openness is ever a part of an outsourcing deal.

PR Problems

This one's a tie. India's recent corporate scandals hit close to its ITO home, but did little to dissuade current outsourcing customers. China's product recalls made bigger headlines but have less relevance to ITO.

Signing on the Dotted Line

India has a strong tradition of private contracting and enforcement, similar to leading global providers, while China only recently moved away from trading agreement forms to more mature contracting capabilities.

Intellectual Property

China recently enacted IP laws, but security remains a top concern for outsourcing customers. India's IP laws are comparable to those in western nations, but enforcement remains challenging.

Cultural Affinity

A former British colony, Indian retains a strong cultural affinity with Western nations. U.S. and European customers cite cross-cultural differences as a big barrier to success when outsourcing to China, according to Gartner. Chinese workers can have difficulty adapting to collaborative or entrepreneurial environments.

Infrastructure

China has made major investments in a sleek and modern transportation system, power supply, telecommunications, and high-speed broadband. India's infrastructure is weak and has not kept pace with economic growth.

Government Incentives

India's government was slower to join its own ITO party but has created a business-favorable legal and regulatory environment. China's central government has gone into overdrive with a fiscal policy that encourages IT services development.

Currency Risk

A strong India rupee stills erodes the margins of Indian providers (or gets passed on in higher customer costs). China's currency is also strong, but does not float despite increasing pressure from trading partners to appreciate the yuans value.

Legal System

For Western customers, India's legal system is familiar-a British-based common law system with an independent judiciary. China's civil law system derived from Soviet and continental legal principles; critics warn that it is opaque, complex, and inconsistently enforced.

Sources: Gartner; Mayer Brown; International Monetary Fund; Duke University's Offshoring Research Network; CIA World Factbook; Neo Advisory; U.S.-China Business Council; 2009 A.T. Kearney Global Services Location Index; "Learners and users of English in China," English Today, Cambridge University Press; Census of India 2001; KPMG

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Copyright © 2010 IDG Communications, Inc.

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