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IT outsourcing to China increases despite drawbacks

Stephanie Overby | Dec. 7, 2011
Offshore IT outsourcing in China remains a viable option for IT leaders seeking to cut labor costs for the next 13 years.

The Everest report offers an updated snapshot of China's strengths in the IT service market:

Labor Pool

5.8 million annual graduates in 2010 in China, fueled by government investment in education.

Operating Cost Arbitrage

Tier-one cities (e.g., Beijing and Shanghai) 60 to 70 percent cheaper than U.S., 50 to 60 percent cheaper than Tokyo or Singapore.

Tier-two cities are another 5 to 10 percent cheaper than tier-one cities.

Asian Language Support

Geographic proximity, as well as cultural and linguistic similarities with Japan and Korea.

Large pool with Asian language skills (870,000 Japanese learners in China; two million Koreans living in China).

Access to other Asian languages such as Thai and Bahasa Indonesia.

Domestic Market Opportunity

Global companies expanding their businesses in China require local service delivery.

Increased outsourcing by domestic enterprises.

Operating Environment

Infrastructure investments in power, transportation and high-speed broadband network in outsourcing cities.

Government support

Significant investments in education and incentives to develop the services industry.

National level initiatives bolstered by provincial and city government incentives.

 

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