Friday, September 15, 2006

Elephant , Tiger and Outsourcing

With so many newspapers and news magazines these days focusing on the emergence of the Asian Tiger (China) and Elephant (India) as major economic power-houses of the 21st century, I frequently get thought provoking questions from my readers about leading businesses that are forming the engines of such growth. One question that was making me scratch my head was from a certain Mr. Dinesh. It went like this...

"If India and China are competing so intensely for a share of the outsourcing pie, will not one of the countries eventually win out?"

At first glance, the question appears a trivial one. However as you try to look for a definite answer, the "What ifs...", "How abouts..." and "Why sos...." start popping up.

My line of thought led me to the fact that India and China have their own distinctive advantages while offering cheap outsourcing services. India has a huge English speaking population that offers the incentive for North American and European countries to outsource to India. China on the other hand offers much cheaper labour. That brought the next logical thing of whether China and India are actually competing for the same slice of the pie at all? I doubted it.

Why then are Indian companies like Infosys, Satyam and Wipro rushing to establish call centers in China? What is available there that is not already available in India? Did the Chinese manage to force feed English overnight to a substantial section of their Mandarin speaking population? Does not make sense, right?

The answer to this part was beautifully presented in a piece titled "Global Sourcing is not Olympics" by Stephen Lane of Infosys Technologies. He says:

"Companies have elected to outsource IT functions and business processes and/or established captive centers there (China) primarily for the following reasons.

  • Support operations in China that require local knowledge as well as IT or business process skills;
  • Serve Asia/Pacific markets that are culturally, linguistically, and economically linked to China;
  • And, Avoid over-dependence on other low-cost sourcing locations such as India or the Philippines. "
That answers the question succinctly. Indian companies are rushing to set up their BPO operations in China to support mainly their Japanese and South East Asian clients.

The missing piece of the jigsaw puzzle was finally in place. Clearly countries do not need to engage in a "win-lose" kind of, zero sum games that give birth to a clear winner while the other is left biting the dust. The outsourcing pie is too huge and its slices are too varied for every portion of it to be appealing to everyone. While the Indian companies need not be worried that the curry laden part of the pie is being eyed by China, the same holds true for China too. China just has to dig its teeth into the slice stuffed with schezwan noodles. Just enjoy the pie as long as it lasts !!!

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