India vs. China The Outsourcing War

Transcription

1 Flexsin Technlgies (P) Limited India vs. China The Outsurcing War The glbal utsurcing market has evlved ver the years and has redefined the apprach f ding business. The utsurcing vendrs are prviding strategic slutins t meet the rganizatin s needs. The leading rganizatins are lking beynd data entry and custmer s service and are shifting their fcus t high-end analytics. IT is cnsidered t be the mst prminent areas f Outsurcing. The rganizatins are taking advantage f IT utsurcing t fcus n revenue-generating aspects. The ffshre utsurcing mdel can bring dwn cst by 50 percent. 1 The figure belw presents different areas f utsurcing. Areas f Outsurcing 16% 15% 11% 9% 27% 22% IT Human Resurce Sales and Marketing Finance Administrative Others Figure 1: Areas f Outsurcing India is the leading glbal utsurcing hub clsely fllwed by China. Inspite f the ecnmic slwdwn, there has been a slw and steady recvery in the furth quarter f India is targeting t achieve USD 60 billin (apprximately) by The figure belw gives the estimated revenue f the BPO and the IT cmpanies in India.

2 Revenue (USD Billin) Prject Exprt Revenues f BPO and IT Cmpanies Fiscal Year Estimated Revenue (USD Billin) Figure 2: Prject Exprt Revenues f BPO and IT Cmpanies Accrding t Nasscm, a revenue grwth f 13 t 15 percent is estimated frm the IT and BPO sectr in the next fiscal year t March 31, Estimated BPO market share f Indian Vendrs 10% 90% India (%) Rest f the Wrld (%) Figure 3: Estimated BPO market share f Indian vendrs by the end f 2010 As shwn in Figure 3, by 2010-end, the glbal market share f India s BPOs is estimated t becme 10 percent. 1

3 Hwever, China has begun ffering better rates with reduced peratinal csts as cmpared t India. In 2008, China generated USD 3.8 billin revenue frm infrmatin technlgy and business prcess utsurcing. Despite the financial crisis, China reached USD 2.59 billin in the first quarter f 2009, marking a grwth f 25.9 percent frm the same perid last year. Althugh China has nt yet reached India s revenue rate f USD 12.7 billin/year frm Infrmatin technlgy services, China s IT and BPO industry is expected t grw 30 percent annually by Accrding t NASSCOM, BPO industry f India is expected t generate annual revenues f USD 30 billin by 2012, as cmpared t its present annual revenue f arund USD 11 billin. India is cnsidered t be the best ffshre IT utsurcing destinatin because f the fllwing reasns 1 : Prcess and Quality: Accrding t NASSCOM, India wuld sn have the highest number f ISO-9000 sftware cmpanies in the wrld. These cmpanies ensure n-time delivery and quality utput. Gvernment Supprt: The Indian Gvernment has frmulated plicies and laws t ensure grwth f the ITES-BPO sectr in India. Skilled and Talented Resurce: India has highly talented and qualified resurce in IT. As far as English cmpetence is cncerned, India has an edge ver China. Mre white cllared IT and service utsurcing jbs are being mved t India while China is capturing the lw and medium-tech industries. 1 Educatin System: The educatin standard is at par with glbal standards.

4 Market Share in 2009 Others 79% India 13% China 8% India China Others Figure 4: India and China Glbal Offshre Market Share in 2009 China is gradually emerging as a tugh cmpetitr in ffshre IT services because f its lw cst talent pl. India needs t cme up with new business mdels t sustain its leading psitin. The gvernment needs t remve regulatry hurdles and imprve infrastructure and talent hldups t ensure India s leading psitin in the IT-enabled services. 1 The gvernment f China is taking measures t imprve the IT sectr and t vercme the language barrier.

5 Given belw are the latest Prs and Cns f IT utsurcing in India and China: Prs/Cns India China Prs Cns Large labr pl Transparency in peratins Cuntry-wide camaraderie Currency exchange rate Perceptin f sme American Cmpanies Weak Infrastructure Lack f privacy and security laws Lw-cst destinatin Easy entry t Chinese market. Strng infrastructure spending Intellectual prperty cncerns Language Barrier Inner-cuntry cmpetitin Table 1: Latest prs and cns f IT utsurcing in India and China Sme f the key Facts: Nrth America is the mst successful sales lcatin fr Indian BPO prviders generating USD 2.2 billin revenue. India s IT market is estimated t grw t USD Billin by 2011, at a 5-year CAGR f 23.2 percent 1 Outsurcing t Indian IT cmpanies can generate cst savings between 40 and 50 percent fr freign cmpanies