China has the attitude and the processes in place to exploit the outsourcing markets.
A vast labor pool and consequently cheap labor form the foundation of China’s outsourcing
goals. An entry-level programmer in China draws 30% to 50% less than one in Chicago.
Add to this other favorable trends like the liberalization of government regulations,
the presence of a growing middle class, large-scale investments in technical education
and a vibrant economy, and China’s prospects look very promising.
So what’s holding the country back? China needs to build up capabilities in terms
of the efficiency of its work force, articulation skills in English (a major dampener
in China’s flight) and do away with a lot of the red tape surrounding its stringent
government regulations. But these limitations are being recognized – the Chinese
government is slowly working towards rectifying them, striving to bring in investors
and widen its revenue from the IT sector, in the process promoting a transformation
that it has dubbed the 'changing face of China.
China is leveraging itself as a cheaper alternative and also appealing to clients
eager to explore the huge local market. China’s proximity to fertile markets such
as Japan and South Korea, where there is an advantage of both geography and language,
is also a factor running in its favor.
China is also gradually moving beyond merely being a traditional hub of manufacturing
to wider pastures. According to a report by the United Nations Conference on Trade
and Development, China scores over India when it comes to innovation. China’s investment
in R&D investment is 1.5% of its gross domestic product, twice that of India. Companies
such as Motorola, P&G, IBM and many others have identified this facet and are expanding
R&D operations in China. And ironically enough, many Indian firms are also setting
up operations in China, recognizing the prospects that the country holds in outsourcing.
Indian investment in China is nearly $ 50 million, with around 18 Indian companies
operating in China. And expansion of operations and work force are on the cards
for these companies.