Indian outsourcers flock to China

If Indian outsourcing companies once saw China as a threat, they now view the economic giant in their backyard as an opportunity.

India’s second largest outsourcer, Infosys Technologies Ltd., announced last year that it will expand its staff in China to about 6,000 by 2010. Tata Consultancy Services Ltd., it's biggest, has been expanding its development centers in China, and is setting up an IT outsourcing venture with Microsoft Corp. and three Chinese partners.

By having a presence there, Indian outsourcers can service the Chinese operations of their large multinational customers, said Kiran Karnik, president of India’s National Association of Software and Service Companies (NASSCOM). They can also address China's domestic market for IT services, and those of others in the region such as Korea and Japan.

As costs increase in India and it gets more difficult to recruit staff in large numbers, Indian companies are also looking at China as a possible resource pool to service clients worldwide. Satyam Computer Services Ltd., which is also expanding in China, is likely to use Chinese staff to address the global market, said Ram Mynampati, president of the company’s commercial and health-care businesses.

India will retain its pre-eminent position as the prime offshore location, however, predicted Siddharth Pai, a partner at sourcing consultancy firm Technology Partners International Inc., in Houston, Texas.

Though China aspires to be an offshore powerhouse, its main drawback is likely to be the poor English skills of its engineers, Karnik said. The country also does not have large IT services companies of its own, and the Chinese have less experience than Indians in managing IT projects with large numbers of people, he said.

China’s "single child" policy means that India also has a significantly younger population, with almost two-thirds of Indians under age 30, Pai said. "This means that the sheer numbers of young graduates being produced by the system (in India) is much larger than in China," he added.

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