What You Should Know About Outsourcing to China

A veteran watcher of India's outsourcing market, researcher Joseph Rottman says that China is worth evaluating for offshore work but he warns labor costs are rising.

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The chapter devoted to Dalian in your book will be titled “Can China Compete with India in the ITO/BPO Market?” What’s your answer?

Rottman: China will not replace India. And it will be years before they seriously compete with India for the larger market. It’s a small, immature, and fractured market. Even with China’s impressive growth, it’s not quite ready to capture significant market share.

I can’t imagine Neusoft and Infosys competing for the same business and Neusoft winning. [Neusoft lacks the depth and size to compete against companies like Infosys for large projects.] But if Alpine needs Japanese-speaking developers or Dell needs to service the Chinese market worth $1.3 billion in potential revenues, they’re not going to go to India.

So what’s the message for CIOs?

Rottman: Keep an eye on China. India surprised the market and U.S. companies had to catch up. Every firm should have a China plan. Every firm wants to sell things there, and outsourcing to China is a good way into the market.

If I were a CIO, though, I’d put BPO there before ITO. With BPO, there are processes that can be replicated. Tasks are well-structured and you can use the BPO center to benefit your Asian customers. That’s what Oracle is doing. China’s a pretty good spot to put Asian-facing customer service representatives.

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Copyright © 2007 IDG Communications, Inc.

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