Outsourcing 11 Jan 2013

India and China becoming less attractive for outsourcing – Pros and Cons

Global outsourcing has been booming for a number of years, as companies became creative about how they could minimize their costs. Currently India is number one in the outsourcing industry, followed closely by China. These two countries are similar in population, labor costs, and geographic terms. However, India and China are actually becoming less attractive for outsourcing. Let’s look at the pros and cons they have to offer.

The Pros of Outsourcing to China:

  • Relatively low rates
  • Attrition rates are low
  • Large talent pool to draw from in many areas
  • Workforce has excellent work ethics
  • Well organized
  • Highly disciplined
  • Flexibility

The Cons of Outsourcing to China:

  • English skills are poor
  • Poor grasp pertaining to western communications style
  • Wide cultural gap
  • Poor theoretical knowledge in important areas
  • Technical skills are weak in comparison to Silicon Valley resources
  • Limited resources in a number of key areas

The Pros of Outsourcing to India

  • Most developed, sophisticated, and experienced outsourcing workforce
  • ESL is supported significantly
  • Large pool of IT talen6
  • Large pool of management talent
  • Oversupply of skilled labor

The Cons of Outsourcing to India

  • Infrastructure can be a problem – for example, during monsoon season there can be down time
  • Operating environment can be difficult especially if you must travel to your outsourcing destination
  • Indian companies and workers don’t say no, so keep this in mind when you are asking for something. Even if they say, they can provide/produce it may not be so.
  • There is no deal on the rates charged
  • There is a high degree of turnover which can create a great deal of instability
  • Strong qualifications do not correspond with skill level.
  • It is difficult to find the right provider, as there are numerous fly by night, low quality vendors operating out of India.
  • Time differences

Outsourcing – India Compared to China

India’s revenue rate is around US $27 billion annually. China cannot yet be compared to India in relation to outsourcing revenues. Nevertheless, market experts believe China will grow by 30 percent annually in the next three years.

To date India has been an outstanding global outsourcing leader with one of the highest numbers of ISO9000 software companies. Many of these outsourcing hubs are very experienced and able to deliver quality services. In contrast, China is a relatively new player in outsourcing. While startup outsourcing companies are popping up everywhere, they are lacking experience.

The Indian government support is given as ITO and BPO, and is an important source of economic growth in India. The Chinese government is very proactive and has spent huge amounts to stay caught up with being one of the world’s top outsourcing locations.

However, both India and China are becoming less attractive for outsourcing as their labor costs and material costs continue to climb, leading to an increase in the cost of goods from outsourcing. In addition, with government incentives to keep production and services in America the lure of outsourcing overseas continues to diminish.

– BackOffice Pro

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