Source Code China – The New Global Hub of IT Outsourcing

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Source Code ChinaAug. 28 – China Briefing doesn’t usually run book reviews, but on this occasion something has come our way that we feel is well worth a read, especially for those interested in IT outsourcing. “Source Code China – The New Global Hub of IT Outsourcing,” a new book written by well known Beijing-based IT guru Cyrill Eltschinger, effectively deals with the question of outsourcing IT to China, rather than to India and the changing dynamics that led Eltschinger to believe China’s star is in the acendency in this global industry.

Calling China “your essential shore,” Eltsschinger comments on the pheonomenon:

One of the most convincing pieces of evidence that the global outsourcing market is shifting to China is the expansion of India’s top outsourcers into it in order to take advantage of lower costs and a sufficient supply of available talent. Since 2005, these companies have come to China in force… This returns to our original concept of the Essential Shore. Outsourcing to China offers not only advantages in terms of quality, cost, and availability of talent, but an IT services strategy here can be incorporated into a complete China strategy, given the existing or developing presence of most major corporations. India’s outsourcers had to come to China in order to support their multinational clients, who have a smaller or no presence in India. By choosing country over company when selecting an outsourcing market, China’s continuing attractiveness as a global business destination makes its use as an IT outsourcing services location all the more obvious.

The corrollation between the fact that many global companies are indeed based at present in China as a regional office function rather than India is a telling one. Even now, as Dezan Shira & Associates run our offices in Dubai, Mumbai and Chennai, the direct Beijing-Delhi and Shanghai-Mumbai flights are full of executives running their Asian Regional offices in the main from China. This may well change over time, but to be close to managing your IT infrastructure, Eltschinger also points out:

Given the fact that experienced engineers with a high level of English proficiency are in high demand, globally, it is indeed no surprise that in the view of more multinationals moving in to set up captive centers, salaries for certain skill sets have started to soar in some major outsourcing cities. While rates may experience a natural increase, the output or supply in the China market keeps climbing. As the supply keeps climbing, the amount of available talent that enters the workforce has a positive impact on the demand coming to China. It is important to note that until now, primarily only university graduates have been making up the numbers of tech graduates. It is to be expected that the ‘‘blue collar programmers’’ graduating will start adding to the supply of qualified tech talents in the near term. As the government has selected technology as one of the key pillars and engines of the economy, it is a safe industry to work with and count on. China does not do things halfway.

The India-China comparison is always an alluring one, and much has to evolve. Our very own 2point6billion.com site deals with these issues on a daily basis. But for IT at least, Eltschinger makes a convincing argument for China, and he’s done his regional research well.

It’s a good read, well written, albeit on a somewhat dry and technical subject, on a strategic matter subject of increasing importance, and it contains some great comparisons of the business climate between China and India which are worth having even if you’re not specifically in the IT industry. For sure, this should be on the shopping list of any IT manager based in Asia, and also for those businessmen involved in both markets. His website promoting the book with other excerpts, case studies and so on is located here: www.sourcecodechina.com

We predict this book will take off – and remember where you read about it first.

1 thought on “Source Code China – The New Global Hub of IT Outsourcing

    Chris Devonshire-Ellis says:

    Cyrill’s book is a good read, however not everyone agrees with his hypothesis. Over at the China-India blog 2point6billion, Nasscom, India’s national association of all things IT, take a different view, claiming that India is 3-5 years ahead before China even becomes a threat. The post is here: http://www.2point6billion.com/2007/08/29/india-beats-the-dragon-in-the-race-for-global-it-outsourcing-is-this-real/#more-299

    Have a look – and please give us your views – are Nasscom correct or does Cyrill Eltschingers perspective make more sense ?

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