China set to take over India in outsourcing market

Thursday, 23 September, 2010

China’s outsourcing market may well soon be as strong as current leader India’s and could eventually overtake it, according to Ovum, but neither country can rest on its laurels.

In a new report, the independent technology analyst claims that, even though the industry itself continues to grow, India’s share of the market is in decline and China is already providing substantial competition as the world’s outsourcing powerhouse in terms of footprint, awareness and capability.

“Both countries are often touted as the low-cost delivery location of choice, with many non-domestic vendors investing millions of dollars to set up operations in multiple locations in both countries,” said Jens Butler, Principal Analyst. “Add to this China and India’s growing influence as global centres of political and economic power, and it appears to be a two horse race to the finish”.

However, according to Ovum, each market must be considered as a delivery location on an individual contractual demand basis rather than as a broad brushstroke, as each has socio-, political- and economic-competitive and comparative advantages.

Stability and governmental influence will play a key future role, with China’s five year plans and the associated federal infrastructure investment and India’s province-led support for its home-grown free-market organisations. And the focus on such investment and direction will need to continue, as there are a host of up-and-coming alternatives to these current ‘magnets’ of the services delivery world (such as the Philippines, South Africa and Latin America). “These locations may not compete from a pure scale perspective, but they may well continue to extract market share from both, just as China continues to take share from India,” concludes Butler, based in Sydney.

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