China facing challenges to catch India in outsourcing

By Freddie Pierce
On paper, China looks like as ideal of an outsourcing location as global leader India. With costs rising in India and other developing countries, youd...

On paper, China looks like as ideal of an outsourcing location as global leader India. With costs rising in India and other developing countries, you’d think China would be primed to take advantage, thanks to its seemingly endless labor pool.

While China’s outsourcing has seen some growth, there are many problems ahead if the country hopes to catch India in the global outsourcing market. China’s software and outsourcing sector grew 43 percent year-on-year in 2010 to reach $19.8 million, which accounted for 5.4 percent of the world’s total software and outsourcing market.

Thanks to such low labor costs and the support of the government, China’s software and outsourcing sector has grown roughly 40 percent each year for the past 10 years, but that could be coming to an end.

“It seems the golden age for the software and outsourcing industry is over,” Liu Jiren, chairman and CEO of Neusoft, China’s leading IT service provider, told

Operating costs have gone up at least 10 percent in each of the past two years, which is expected to slow outsourcing growth in China.


The Top 5 Tax Efficient Outsourcing Locations

HP, Cisco and Motorola reinforce Egyptian outsourcing

Can India survive a disaster?

Check out June’s issue of Supply Chain Digital!

Also hurting China’s attempts to narrow the gap with India in the global outsourcing arena is the fact that China is attempting to grow its outsourcing capabilities in over 20 cities nationwide. India, on the other hand, focuses its software development and outsourcing strength on just four major cities.

Michael Ye, vice president of Dalian Software Park, suggested an outsourcing system similar to India’s, with a software and outsourcing hub in each of the country’s five main regions.

China has tried to do everything bigger, playing on the country’s unparalleled population, and the outsourcing business is no different. But until China’s leaders realize that bigger isn’t always better in outsourcing, expect India to remain out in front in outsourcing for years to come.


Featured Articles

Women in supply fare better in large firms - Gartner report

Annual Gartner report on women in supply chain workforce shows there are more women in C-level positions, nut that females in VP supply roles has fallen

What can be done to avert food catastrophe foreseen by UN?

UN's Antonio Guterres warns Ukraine war is causing global food supply crisis, but problem is compounded by rail logistics and poor food supply chains

UST's Colehower shares supply risk insights in webinar today

Procurement guru David Loseby and Jonathan Colehower of UST share insight on using technology, both to mitigate supply chain risk and to gain visibility

Why today 3PL providers are 'perfect supply partners'


SMBs 'are investing heavily in safeguarding supply chains'


Accenture Euro ops chief offers Ukraine supply chain advice

Supply Chain Risk Management