July 3, 2007 8:31 AM PDT

China to soon overtake India in offshoring?

Affordable rent, low-cost labor and population literacy are the main reasons why companies still prefer to set up their delivery centers in Indian cities such as Mumbai and Bangalore. But this offshoring trend is likely to change in the near future, according to an IDC study.

The analyst group forecast that Chinese cities will soon overtake their Indian counterparts as top destinations for offshore global delivery by 2011, based on the results acquired from its Global Delivery Index.

Global Delivery Index
These are the world's top 10 cities
for offshoring, based on IDC's Global
Delivery Index, which weighs
"deal-clinching factors" such as
agent skills and political risk.

The GDI compares 35 cities in the Asia-Pacific region as potential offshore delivery centers based on a set of criteria such as labor and rental costs, language skills and turnover rate. Cities covered by the index include Adelaide, Bangalore, Dalian, Hanoi, and Kuala Lumpur.

According to Conrad Chang, IDC's research manager for Asia-Pacific business process outsourcing research, what differentiates the leading cities from the rest is "the focus on deal-clinching factors" such as agent skills and political risk.

"There are different risk factors to consider when evaluating outsourcing, offshoring, onshoring and nearshoring," Chang explained in a statement Tuesday. "Some factors are obviously more critical than others."

Chang also noted that while Indian cities scored high on the criteria set by the GDI, the picture could well be different four years from now.

Although the top-ranked Chinese cities--Beijing, Shanghai and Dalian--trail their Indian counterparts in the GDI this year, they are expected to overtake the competition by 2011.

IDC attributed this to China's massive investments in areas favorable to offshoring, including infrastructure development, technical skills and Internet connectivity.

Farihan Bahrin of ZDNet Asia reported from Singapore.

See more CNET content tagged:
offshoring, Asia-Pacific, Bangalore, city, agent

6 comments

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IP protection
Where is IP protection considered in all this? I would be very careful not to send anything to China unless you don't have any IP concerns. That might work fine for some business applications, but certainly not all.
Posted by CompEng (201 comments )
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IP UP We all P..
Problem 1: Executives are misled by "facts"
Problem 2: Nobody checks the facts.
Problem 3: Not every country does things the same way.

Imagine a country where 40% is a passing grade, all tests are open-book or open-discussion, and your Junior and Senior years in High School qualify you for a college-level degree if you graduate in the top 10% of your class....And even if someone fails, you offer up enough cash, you can buy your education.

What could that country end up claiming? More students graduate on time, more people with degrees, and a very low failure rate.

So, the execs think "Smart, Ambitious, Learn and Adapt quickly.. perfect!".. But is it?

Mix that with a country where everyone is money-centric, so they will do anything for a little cash here, a few dollars there.. Want to get out of a ticket, pay the cop a few bucks. Stolen credit card numbers buying pirated software, and so on. Then move that into China where it's even worse, and you are setting yourself up for failure if you do not ensure some level of accountability. End result, if you wouldn't show it to your competition or the crack dealer down the street, don't let it in front of the eyes of people outside your own company, on your own soil.
Posted by FusedAndCondazed (26 comments )
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Don't forget Thailand
I am currently in Thailand on vacation. Thailand is working on teaching English and Computer Science in their schools in hopes of gaining offshore contracts with the USA and Europe. The only problem is that the literacy rate is not high enough because most Thai people drop out of school to go to work to support their families. Once the economy improves, more Thai people will stay in school and go on to college.
Posted by Orion Blastar (590 comments )
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China to soon overtake India in offshoring ...Um atleast not in the near future i guess ...
I can see that this post is written in 2007 and this is year 2008 .......I still feel india is having upper hand .. But , there are chances that china might take over ,......But not in the near future
Posted by gudipudi (4 comments )
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