Why China?

Long known as the world’s largest and leading manufacturing hub, recent multi-billion dollar infrastructure investments by both, the public and private sector, as well as other strategic  initiatives undertaken by the Chinese government have helped China’s IT industry  to strengthened its position as India’s closest and most fierce competitor. According to worldwide leading IT research organizations such as Gartner China’s emerging offshore IT market which experienced double-digit growth over the last five years is expected to continue to grow by at least 44 percent annually, surpassing revenues of US$ 2.5 billion by the end of 2008. Some of the key drivers for the exponential growth of China’s offshore IT outsourcing industry are briefly outlined below :

• Availability of vast, expanding pool of skilled workforce
• State-of-the-arts infrastructure
• Strong government support
• China’s huge domestic and close proximity to neighboring market
• Multi-vendor, multi-country approach
• Overheating market in India
• Low cost

Availability of vast, expanding pool of skilled workforce

As the country with the world’s largest population it does not come as a surprise that China possesses the world’s largest number university and college graduates. Its more than 2,000 universities produce out an average output of approximately five million graduates annually. Out of these, roughly 600,000 are coming from IT-, engineering- and science-related courses.

Modern, state-of-the arts infrastructure

To boost China’s competitiveness as a global IT destination, the Chinese government has been investing multi-billion dollars over the last decade in the development of a country-wide state-of-the-art infrastructure, including 29 Science and Technology Industrial Parks, that rank second to none in the Asia-Pacific region and that serves as the backbone of China’s fast-growing IT industry.

Solid Government Support

True to its unparalleled commitment to push the country’s IT industry to become a global superpower by the year 2010, the Chinese government sped up educational programs, both on a primary and secondary level, to meet the increased demand for highly qualified and technically skilled as well as English proficient IT professionals. Apart from the aforementioned, the government has forged partnerships with multinational corporations to train its IT workforce and to accelerate the creation of a sustainable, first-class high tech labor force. Tax incentives, the strict enforcing of laws protecting intellectual property rights and the subsidizing of the acquisition of quality certifications such as CMM SEI Levels are just a few measures undertaken by the government to achieve its ambitious goal. 

China’s huge domestic and neighboring market

China’s huge domestic market and close proximity to Japan and Korea make it an attractive location for companies who aim to set up or widen their global footprint. An ever-increasing number of multinationals have China foresee their current centers as footholds for serving China’s huge and expanding domestic outsourcing industry.

Multi-vendor, multi-country approach

One of the most recent trends in global outsourcing is the implementation and execution of a multi-vendor and multi-country outsourcing approach of primarily large, multinational corporations.

Overheating market in India

After almost two decades of exponential growth India’s IT industry has been facing challenges primarily caused through “brain drain” and exponential wage inflations.

Low Cost

China has some of the world’s most competitive cost structures, and this is one of the primary factors pulling companies towards the country. China’s labor cost advantage, for instance, which can translate into as much as 70% over U.S. salaries, provides pure labor arbitrage for companies all over the world. Compared to India, China is relatively cheaper now. Labor rates in China are currently 20 to 30 percent lower than those in India, and this cost difference is expected to widen as India experiences wage inflation of at least 10 to 12 percent annually.