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China struggling to compete in the IT outsourcing arena

Stephanie Overby | Sept. 16, 2013
The Chinese government has made no secret of the fact that it wants to compete with India on the global outsourcing stage. However, progress has been slow due to bad timing.

When asked about the top new services they planned to offer, 24 percent indicated software development with 12 percent answering IT infrastructure support and product design. The majority of providers also said they expected new work to more likely come from China and Asia than Europe or the U.S.

"One of the most telling themes was that, in the future, they want to focus more on the domestic industry than international clients. They realize they're not at the level of professionalism that makes them competitive for international business," Lewin says. "They're not ready to leapfrog India." That's a downshift from the more aspirational attitudes Lewin says he had seen in recent years.

Since 2006, the Chinese government has altered its approach to bolstering its services industry, identifying more than 20 cities that might be able to develop a good model that could be used throughout the country. "The approach is very Chinese," Lewin says.

But Lewin has some other suggestions for the government, such as creating incentives for ISO standards compliance. That would send a clear message about the importance of process to the business. "China doesn't have a process orientation the way India or Germany or Japan does," Lewin says. "In China, if they find a shortcut they will take it, and they will not document it. I hear it all the time."

The U.S. mid-market could also be a growth opportunity for Chinese companies, but trying to sell internationally is prohibitively expensive for small players. The Chinese government "could create representative offices in the U.S. and reduce the marketing costs for them," says Lewin.


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