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Offshore outsourcing: 24 ways to compare India vs. China

Stephanie Overby | Nov. 29, 2010
ajor differences remain in the two mega-markets for offshore IT services, from language and management skills to industry focus and supplier bases. Here's a look at how the two stack up, using 24 key measures.

FRAMINGHAM, 29 NOVEMBER 2010 - For nearly a decade, China has been touted as the biggest threat India's supremacy in offshore outsourcing, and its central government has been funneling money into developing the country's growing IT outsourcing (ITO) industry.

But beyond the obvious similarities (they're both big—really, really big—and cheap in comparison to their Western counterparts), there remain major differences in the two mega-markets for offshore IT services, from language and management skills to industry focus to supplier and customer bases. We checked in to find out how the two countries compare today.

China is the world's most populous nation with 1.3 billion residents to India's 1.17 billion, but experts expect India to surpass China in coming decades.

Labor Force
China boasts 813.5 million workers and 4.3 percent unemployment compared to India's 467 million and 10.7 percent unemployment.

GDP (Purchasing Power)
It's no wonder everyone wants in: China's GDP is the third largest in the world at $8.748 trillion. India's GDP ranks fifth at $3.57 trillion.

ITO Market Size
India remains the leader raking in an estimated $70 billion annual IT services revenues (both domestic and offshore outsourcing), while China has about $20 billion overall.

Customer Rationale
Customers look to India and China for low cost, a large available talent pool, and expertise, according to Duke University's Offshoring Research Network. But IT buyers rank language requirements and co-location with business process facilities as top reasons for offshoring to India; they list access to the local market and co-location with manufacturing facilities as important reasons for outsourcing to China.

Average ITO Salary (2008, in USD)
China's labor costs are cheaper, according to data from offshore outsourcing consultancy Neo Advisory. An entry-level ITO worker earns $7,000 a year versus $8,400 in India while a Chinese team lead with two to five years of experience earns $14,700 compared to $17,000 in India. At the manager level, wage disparity increases with Indian manager earning $30,800 a year, 36 percent more than their Chinese counterparts making $22,600.

Wage Inflation
India continues to experience strong upward pressure on salaries, while China's wage inflation has been low thus far.

Scope of IT Services
India continues to climb the value ladder offering IT, business process, and knowledge process outsourcing. Consulting services are also on the rise. China's focus remains software and product development.

Management Maturity
India possesses strong project management skills and continues to invest in initiatives to strengthen middle management capabilities. China has a shortage of middle- and senior managers with experience managing client expectations, Western business acumen, leading large teams, and communicating with customers.


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