by Stephanie Overby

Offshore Outsourcing: 24 Ways to Compare India vs. China

Nov 29, 2010

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.

For nearly a decade, China has been touted as the biggest threat India’s supremacy in offshore outsourcing, and its central government has been funneling money into developing the country’s growing IT outsourcing (ITO) industry.

But beyond the obvious similarities (they’re both big—really, really big—and cheap in comparison to their Western counterparts), there remain major differences in the two mega-markets for offshore IT services, from language and management skills to industry focus to supplier and customer bases. We checked in to find out how the two countries compare today.


China is the world’s most populous nation with 1.3 billion residents to India’s 1.17 billion, but experts expect India to surpass China in coming decades.

Labor Force

China boasts 813.5 million workers and 4.3 percent unemployment compared to India’s 467 million and 10.7 percent unemployment.

GDP (Purchasing Power)

It’s no wonder everyone wants in: China’s GDP is the third largest in the world at $8.748 trillion. India’s GDP ranks fifth at $3.57 trillion.

ITO Market Size

India remains the leader raking in an estimated $70 billion annual IT services revenues (both domestic and offshore outsourcing), while China has about $20 billion overall.

Customer Rationale

Customers look to India and China for low cost, a large available talent pool, and expertise, according to Duke University’s Offshoring Research Network. But IT buyers rank language requirements and co-location with business process facilities as top reasons for offshoring to India; they list access to the local market and co-location with manufacturing facilities as important reasons for outsourcing to China.

Average ITO Salary (2008, in USD)

China’s labor costs are cheaper, according to data from offshore outsourcing consultancy Neo Advisory. An entry-level ITO worker earns $7,000 a year versus $8,400 in India while a Chinese team lead with two to five years of experience earns $14,700 compared to $17,000 in India. At the manager level, wage disparity increases with Indian manager earning $30,800 a year, 36 percent more than their Chinese counterparts making $22,600.

Wage Inflation

India continues to experience strong upward pressure on salaries, while China’s wage inflation has been low thus far.

Scope of IT Services

India continues to climb the value ladder offering IT, business process, and knowledge process outsourcing. Consulting services are also on the rise. China’s focus remains software and product development.

Management Maturity

India possesses strong project management skills and continues to invest in initiatives to strengthen middle management capabilities. China has a shortage of middle- and senior managers with experience managing client expectations, Western business acumen, leading large teams, and communicating with customers.

Service Delivery Model

In India, traditional third-party outsourcing deals predominate as captive centers continue to be sold or folded. In China, captive centers account for more than half of all IT service delivery.

Supplier Base

India has a robust and competitive provider environment led by a legion of Indian-owned, publicly held suppliers and large local operations of global providers, along with niche players. China’s market is fragmented and dominated by small to mid-size suppliers, including Chinese owned providers, Western-managed companies, and local operations of global suppliers.

IT Outsourcing Customer Base

India’s most valuable customers are U.S. and European buyers of IT services. In China, domestic companies make up the majority of the customer base, followed by those from nearby Asian countries such as Japan.

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.


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.


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