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| Jun 09, 2005 4:17 am |
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How will Indian IT sector tackle this? |
| RHA
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China allure grows as India wages rise.
About 40 percent of the companies surveyed plan to shift some technology work to
China in the next three to five years.
NEW YORK: Interest in China as an outsourcing destination shot up over the last
year as wages in India kept climbing, according to a survey released on
Tuesday.
About 40 percent of the companies surveyed plan to shift some technology work to
China in the next three to five years, compared with merely 8 percent last year,
according to Chicago-based management consulting firm DiamondCluster
International's 2005 Global IT Outsourcing Study.
China's largest draw is its labor cost, which can range from 20 percent to 50
percent below India's, said Tom Weakland, who leads the outsourcing advisory
services practice at DiamondCluster.
"China is starting to look like India did 10 years ago," Weakland said. "The early adopters in China have shown some success. The risks are not overwhelmingly more than in some other countries."
Despite lingering intellectual property problems, China has become a strong exporter of software development services. Major services providers such as Accenture Ltd., BearingPoint and India's Infosys are using China to provide a hedge against India.
Countries that appear to have fallen out of favor include Israel and Russia, due to concerns over their stability, according to the study.
The study also found that the number of buyers terminating an outsourcing deal before it expires has doubled to 51 percent, due to either poor vendor performance or a client's strategy change following a merger or the decision to bring work back in-house.
Satisfaction with offshore providers dropped below that of domestic ones for the first time, as the number of buyers happy with their offshore providers fell to 62 percent from 79 percent.
DiamondCluster's third annual study was the first in which any buyers reported that they are planning to reduce their outsourcing spending.
Companies remain concerned about an employee backlash, but worries about anti-outsourcing legislation and political pressure have waned.
"Buyers are not overly worried about the impact of competitor criticism or union pressures on their outsourcing endeavors," Weakland said.
© Reuters
This report is available at
http://www.ciol.com/content/news/2005/105060701.asp?nl=5_212344_Jun7
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Dear members,
I have been predicting correction in Indian IT sector by 2009 as I am aware from my prior experience that the workforce in China is more controllable and disciplined due to the national structure they are in. Businesses ultimately do what they need to be doing to excel and will be least bothered about the society.
These reports and the laid back attitude of the industry to find pragmatic solutions seem to be spelling great threat for the industry which otherwise can retain its edge by taking several measures of which some are being taken by NASSCOM to get enough employable talents to meet the demand that exists while on the other side we have other problems such as rising pay scales that drastically increase costs.
Your comments as stakeholders, please.
Cheers,
Rajesh
Private Reply to RHA (new win) |
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