China's IT services outsourcing industry is poised to boom and enjoys distinct advantages over that of India due to huge domestic market and its close interaction with local clients in service and manufacturing industry, experts have been quoted by the Chinese media as saying.
"China's large and fast-growing domestic IT services market is a great strength for its outsourcing industry," corporate vice-president and managing director of Electronic Data Systems, China and South Korea, David Wirt, has said.
Unlike their Indian counterparts, outsourcing companies in China work closely with local clients from industries such as banking, securities and manufacturing. These experiences allow them to develop their own domain expertise and enhance innovative capacity.
"This is impossible for Indian outsourcing companies due to their small local market," Wirt said. "They have to buy expertise and knowledge due to the small domestic market," Wirt was quoted as saying by China Daily.
China has been promoting its outsourcing sector to rival that of market leader, India. Chinese provinces have vying with each other in offering foreign companies favourable polices and tax breaks to set up call centres and offices.
China's software outsourcing companies raked in $1.4 billion in revenue in 2006, up more than 40 per cent compared to previous year.
The sales volume of China's software industry grew 23 per cent year-on-year to 480 billion yuan in 2006, the ministry of information industry said.
The ministry also predicted China's market for software and information services would reach one trillion yuan by 2010.
Meanwhile, according to the forecast made by EDS, outsourcing services could generate $56 billion in revenue and create 4 million jobs by 2015, becoming a new engine for China's economic growth.
Outsourcing service providers in China could earn as much as $18 billion by 2010 and more than triple it to $56 billion by 2015, the White Paper said.
"China is now facing a historic opportunity to become a leading player in outsourcing, if it can successfully overcome the challenges and capitalise on the opportunities in the coming years," vice-president of sales and business development of EDS Asia, Derek Sharp said.
The White Paper, titled 'Building a world-class IT services outsourcing industry in China,' said China has distinctive advantages such as abundant supply of raw talent, world-class infrastructure and low costs.
"Globally, outsourcing demand greatly outstrips the existing supply," said Richard Zhang, director of McKinsey & Company in Shanghai, said.
The potential outsourcing market is estimated to be as much as $465 billion in 2006 and $600 billion in 2010.
However, only 9 per cent of the total demand has been met, Zhang said.
EDS also reached a strategic cooperation agreement to develop the IT outsourcing industry in China.
EDS, which has about 20,000 staff members in India now, has been trying to scale up its operation in China. This April, the US-based company decided to establish a global delivery centre in Wuhan, capital of Central China's Hubei Province.
The company is looking to increase the centre's headcount to 5,000 in a few years.
