Interesting paradoxical news on this front today.
Around a month back, Forrester research came out with a report titled “China’s Diminishing Offshore Role“.
“When Forrester first looked at China’s offshore and global delivery model (GDM) role nearly two years ago, the country was widely viewed as the key challenger to India for offshore supremacy. However, our latest research shows that to date the market has not taken off as expected. While there continues to be demand from Japan and multinationals with operations in China, the offshore business from the US and Europe has been slow to materialize.”
SiliconIndia reported: “As language, attrition and intellectual property (IP) protection continue to haunt the multinationals, the myth associated with China as key challenger to India for offshore supremacy is diminishing gradually.”
(Also see this blog post for an interesting take on the Forrester research.)
Citing the above report, the Business Standard today declared “China outsourcing sector no match for India”:
- In 2006, Chinese IT services market reached $7.7 billion, with a growth rate of 17.8 per cent
- In FY 2006-07, IT exports from India reached $31.4 billion, with a growth rate of 33 per cent
- Demand for IT outsourcing from India is around 4 times that of China
- China does not have any significant cost advantage, note analysts
- China’s headcount with regard to outsourcing was less than one-tenth that of Indian firms
- US & European markets, which have highest share (75%) of the world’s total market and the highest growth rate (60%), account for a smaller pie (40%) of China’s market. Japan and Korea are China’s largest customers.
Probably oblivious of these reports, IDC predicted the exact opposite:
IDC’s Global Delivery Index (GDI) Predicts China Overtaking India by 2011
IDC has developed a new Global Delivery Index (GDI), which compares 35 cities in the Asia/Pacific as potential offshore delivery centers, based on a comprehensive set of criteria such as cost of labor, cost of rent, language skills and turnover rate. In its inaugural findings, Indian cities are highly ranked, while Chinese cities are on the rise and closely nipping at India’s heels.
The IDC study also forecasts how these top 10 cities rankings might change in 2011. The GDI reports take into consideration future plans of cities such as future infrastructure plans and efforts taken to lay a firm foundation for attracting investments. IDC forecasts that Chinese cities will overtake Indian cities by 2011 due to massive investments made ( e.g. infrastructure, English language, Internet connections, technical skills, etc) which are favorable towards offshoring.
And this is now all over the news after CNET picked it up.
The IDC methodology is still behind curtains. For e.g. we do not know:
- Which criteria were used to select the 35 cities
- Whether Tier II and III cities in India were considered
- Whether current export revenue figures were considered (not mentioned in press release)
So, till we get a better understanding of the IDC approach, there’s no point in comparing or contrasting these two contradictory research reports. I personally believe the Chinese competition is good for India. It will keep our industry and our government on their toes!