The world has rapidly changed within the past couple of years. While associating the term “offshoring” automatically with India a few years ago, it is no more as clear any more. There are more and more countries competing with India for orders and projects.
However, India is still on the top of the list of offshoring nations. Long-term investment in education and IT sector pays back now. The names of Infosys, Tata or Wipro which stay for experienced and high-professional companies are world-known.
India’s outsourcing industry has risen to become the foundation of the country’s modern economy through aggressive targeting of export earnings, which reached an estimated $47.3 billion in the year ended March, up 15.8 percent against a year earlier. The National Association of Software Services Companies (Nasscom), India’s IT industry body, calculates that annual sales in the domestic outsourcing sector have grown to $24.3 billion from $13.2 billion just three years ago.
Nasscom also forecasts that the Indian outsourcing industry can potentially earn revenue of $225 billion by 2020 in a conservative variant or even $375 billion in an optimistic scenario.
However, due to high demand for well-qualified professionals, they are hard to get now. Also the fluctuation of personnel is a problem in Indian companies. And: the competition from at least 25 to 30 low-cost countries could reduce India's market share even by 10 percent, according to Nasscom.
The challenges are also recognized by companies outsourcing their operations and that makes sense for them to look for alternatives and to try to establish multi-co-operations: with India, China and other site(s).
China is a very interesting destination for offshore outsourcing. These factors which are of importance for foreign investors (agglomeration economies, infrastructure, institutional changes) have been much improved for the last couple of years. A working hour of a Chinese professional is even 30 to 40 percent cheaper than their Indian colleague, although the price should not be the only criterion to decide whether to outsource or not.
According to the statistics provided by the second China International Service Outsourcing Cooperation Conference, in the first five months of 2009 the number of newly-established outsourcing companies in China stood at 1,057, bringing 246,000 new jobs and generating a profit of $3.52 billion, which is a 13.2 percent increase year-on-year. The contract amount stood at $2.3 billion, with international outsourcing services taking 82.4 percent, a yearly increase of 45 percent. China has also huge economic growth rates: The GDP growth amounted to 6.1 percent in the 1st quarter 2009 and achieved 7.9 percent in the second quarter. And these figures were possible to reach in the difficult time of financial crisis.
China is not only interesting as an offshoring destination for American and European companies but also for Asian firms from Japan, Korea, Hong Kong or Singapore.