China might usurp outsourcing operations from Indian cities like Bangalore and Mumbai by 2001, according to Forbes. While the Indian outsourcing industry struggles with infrastructure problems and rising wages, China is making massive investments in infrastructure, English-language training, Internet connection and technical skills, making it attractive to companies looking for an alternatives, according to IDC market research company. “Chinese cities are on the rise and nipping at India’s heels,” IDC said. “IDC forecasts that Chinese cities will overtake Indian cities by 2011 due to massive investments made, which are favorable towards offshoring.” Currently, Bangalore leads IDC’s list of the Top 10 cities best suited to be offshore services centers, followed by Manila, New Delhi and Mumbai. The Chinese cities of Dalian, Shanghai and Beijing are next on the list. The list is based on cost of labor, rent turnover rates and language skills, as well as political risk and future plans for infrastructure improvements. While many believe that China is giving India increased competition, other analysts are not sure that China will surpass India anytime soon. Thousands of college graduates are equipped for the workforces of tech companies in both China and India every year. However, India produces almost double the number of English-speaking graduates annually. Increasingly rates of attrition and wages are increasing in India as companies fight for talent. In the fiscal year through March, wages grew at an average of 12% to 15%, and are expected to rise another 20% in the present fiscal year. Also, companies in India are weighed down with problems like erratic power supply and congested roads and airports, which make traveling difficult. China is growing stronger when it comes to infrastructure and the relative ease in setting up operations in the country. Even Indian companies are setting up shops in China, at the request of Western clients and the potential to win outsourcing work from local companies. However, a report from Forrester Research concluded that China’s offshoring market had not taken off as expected and had a way to go before emerging as an option besides India. “The consensus among interviewees was that China still has not overcome clients’ concerns about limited English skills, attrition, and weak intellectual property protection,” said John McCarthy, author of the report, “China’s Diminishing Offshore Role.” Forrester quoted an executive who “went so far as to say that China had to be 20% cheaper than India to be viable, and it’s roughly at par in terms of rates currently.” The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.
Insight and analysis into the management, marketing, operations and technology of the asset management industry.
Have an account? Sign In