Outsourcing IT to China

According to some reports, China is just a few years away from catching up with India as the destination of choice for companies looking to outsource IT of all or parts of their operations. People would say that there are too many barriers sit between it and success. The important question right now is what recent developments in China mean to your organization and its outsourcing strategies.

China’s presence in the service provider world is good news, since much of the drive to outsource IT is cost management, particularly in the area of labour. China’s cost advantage -- which can translate into as much as a 70% savings over US salaries -- sounds convincing.

But, of course, there’s more to consider than simply hourly labour cost. Quality of work, reliability, efficiency, flexibility, ease of communication and cultural issues are just as relevant in lying out an outsourced IT strategy, as are macro factors such as geopolitical risks. Accordingly, this multi-part report begins with an overview of the current outsource IT of landscape in China. We follow this with a quick discussion on the issues every decision maker and manager should think about before sending work to China.

Low Labor Costs

The most outstanding virtue of China as an outsource IT destination is the cost. In fact, China is often mentioned breathlessly as “cheaper than India.”
China’s labor cost advantage which translates to as much as 70% savings over US salaries simply overwhelming for most companies wanting to enter China. It is even appearing much cheaper than India now. This gap is even expected to widen as wage inflation drives costs up in India, Although India remains a powerhouse in high-end IT services.  The low labor cost gives China a slight advantage when choosing to outsource IT.

China's labor cost for the outsource of IT is 1/5th to 1/10th of that of many European countries. India's advantage has always been the large pool of inexpensive talent. But now salaries in India are jumping at 25 percent or more annually for its Outsource of IT. So India's cost advantage can't endure. Companies can gain 50%-60% cost saving from China considering the infrastructure, telecommunications and the outsource IT project management related costs

Global awareness

Most outsourced IT buyers are not well aware of the vast opportunities and competitive advantages they can get from the outsource of some of their IT/BPO services to the country. Realizing this, the government has committed to work closely with local vendors to ensure that China is well-promoted to the global business community as a viable outsourced IT option; and its plethora of competitive advantages can work favourably to actualize business goals for buyers looking to outsourcing IT.

China has a much more robust internal IT structure, networks and infrastructure than dose India. It has had a massive telecommunications expansion and more networking capacity than people think. All of these have been a direct result of the rapid and sustained national economic growth.

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