China's push to become an alternate BPO hub for MNCs tackling soaring wages and high attrition rate in India remains a distant dream as its offshore market is developing slower than expected, a study says.
Despite significant government support and huge level of visibility on the global arena, China's offshore market has not taken off as expected and still has a long way to become a potential alternative to India, the technology research firm said in the report.
Multinational firms, considering China as a 'quick-fix' solution to deal with rising costs and high attrition of employees in other offshore locations like India, would be sorely disappointed by the country's slowing offshore momentum, the report said.
When first looked at nearly two years ago, China's offshore and global delivery model was widely viewed as the key challenger to India for offshore supremacy. However, the latest research shows that to date, the market has not taken off as expected.
The report authors, who had predicted in 2002 that over three million BPO jobs in the US would go offshore, added that firms with large bases in India should consider other geographies when addressing the risk mitigation issue. Even countries like the Philippines, Mexico and Brazil could prove to be better alternatives than China for diversifying offshore exposure. The Philippines, Mexico and Brazil may provide better alternatives than China in terms of skills, language and convenience.
Noting that China's percentage of overall offshore resources has dropped and other countries were growing at a faster pace, with the country needing to refocus its offshore efforts. Instead of trying to compete in areas like application development and management, where India clearly dominates, China should encourage its local firms to focus on other areas like testing, data management and product development services. Chinese firms also need to implement strict intellectual property controls and undertake training programs.
For other countries vying for the lucrative offshoring pie, the authors suggest economic development agencies in Thailand, Malaysia, Egypt and Morocco need to do more than just re-labelling the pool of engineering graduates as being ready to export their services. Education programs ought to focus on advanced skills like project management and advanced architecture skills, while at the same time, respective governments should invest significant funds to market the country as an alternative to the offshore incumbent India.
Source(s): Rediff, Forrester