China to soon overtake India in offshoring?
15327
Analyst group IDC predicts that in four years, Chinese cities will be most popular locations for offshore global delivery.
139157
Rising oil prices are expected to hit China's growth rate this year.
577169
XIAMEN, China  - Dell Inc.  expects production in China for the domestic market to keep growing at about 30 percent in the short term, meaning the world's No.2 PC maker might add another factory there in three to four years, its top manufacturing executive in the country said.
588778
(InfoWorld) - The outsourcing and offshoring of software development work has become such an ingrained part of the technology industry in the U.S. that stories about it no longer rouse the public's interest as they did even a few years ago. That means the only way to gauge the growth of the phenomenon is by watching the bottom line of outsourcing giants like India's Wipro, which recently reported a 41 percent jump in revenue in its latest fiscal year, and the heated debate in Washington over the number of H-1B high-tech visas that the federal government grants. But the runaway growth of offshoring has created its own problems in countries like India, where a substandard infrastructure and stiff competition for talented workers has changed the economics of setting up shop outside the U.S. The decision to hire a staff in India "wasn't even a second thought" when Munjal Shah, CEO of RiyaÂ , was laying the groundwork for his visual search startup back in 2004. (Riya is part of InfoWorldâs Month of Enterprise Startups feature.) "At 30 percent wage rates [the ratio of an Indian salary to a U.S. salary], it still was worth the communication overhead, the travel, and the late-night conference calls," Shah recalls. Those were the good old days. Today, wages in India have risen so much that maintaining development operations in Silicon Valley and India no longer made sense, forcing Riya to make what seems like an unusual decision: In April, the company nixed its Bangalore operations and consolidated operations back in the company's Silicon Valley headquarters. In the end, the cost advantages of lower Indian wages did not outweigh the efficiency losses that came from maintaining some 35 employees in two offices, 12 hours apart, Shah said.Â  Indian software development shops have been the workhorse for countless high-tech firms and U.S. enterprises for more than a decade. But steady demand for development talent is erasing some of the cost advantages that offshore development outfits have enjoyed, according to a report by Gartner. In fact, the wage rates for Indian software engineers will reach between 40 to 50 percent of Silicon Valley wages by 2008 with the gap continuing to narrow after that.Â  Wage increases for Indian engineers averaged 15 percent from 2005 to 2006, compared with a 3 percent average increase for U.S. engineers, according to a recent Gartner report. That's not to say that things will be even-steven any time soon, though. "Even if Indian salaries continue to grow at 15 percent annually, it would take 16 years for Indian software engineers to catch their U.S. counterparts," the report says. But wages among startup employees have been growing much faster than that, especially among top engineers in Bangalore, Shah said. A native of India, Shah paid a premium to hire experienced graduates of the prestigious Indian Institute of Technology. Unlike IBM or Infosys, a startup doesn't have the resources to train the brand-new graduates who would work for smaller salaries. "Startups aren't places where you train people from the ground up," Shah said. "They're places where either you know what you're doing or you don't. We paid to hire the best." To that end, Shah said, wage increases among his engineers in Bangalore tended toward twice the national average. "Salary increases have been 30 percent for more than a year now," Shah said; the engineers who lost a job when Riya decided to close the Bangalore office all have received multiple job offers with significant wage increases, he said. Differences in the high-tech cultures of the U.S. and India also play a part. Indian workers are less likely than their Californian counterparts to be wooed by the prospect of working for stock options instead of cash.Â  "In Silicon Valley, you see your friends from Google driving around in new Ferraris, and you think, 'Huh, occasionally this actually works,'" said Shah. "But there's no comparable value for options [in India]."Â  And without the lure of options that might someday make a software engineer wealthy, money isn't just one reason for a Bangalore engineer to join a company â it's the only reason.Â Â  "If you can't build a core loyalty with options, then you're in for a tough time," said Keerti Melkote, cofounder of wireless LAN hardware company Aruba, which went public in March. Aruba tried outsourcing to India shortly after the birth of the company in 2002 but found that it slowed down operations too much for it to be worthwhile.Â  "You need a critical mass for offshoring to work -- a whole project as opposed to part of one project -- and for a startup, offshoring might not make sense. Especially now, the loaded cost of all the late-night conference calls is high enough that it might not make sense." Melkote said that with its growth in the last few years, Aruba can now afford to support a fairly autonomous Indian operations center in Bangalore. But startups don't have that option. "We found that if you gave a guy less than a 30 percent salary increase every year, then he'd walk," Shah said. "By the middle of this year, we would have been paying [the Indian engineers] 75 percent of a U.S. salary, and at that point, it doesn't make sense because of all the other overheads that take away from productivity." What kinds of overheads you ask? "On average the power probably goes out three or four times a day," said Fran Karamouzis, a research vice president at Gartner who specializes in outsourcing issue. âYou get surges for 15 or 20 minutes, and if you don't have adequate power supplies, then that's a big issue." Thatâs a big issue for startups, whose employees often work odd hours from home, Shah said.Â  Of course, infrastructure problems are nothing new and are considered par for the course in India, but with competition from China, Russia, Eastern Europe, and even Vietnam and Africa, unreliable infrastructure is starting to cost India business, such as Intel's recent decision to locate a $2.5 billion chip plant in China. The nature of work at a startup makes them even less tolerant of those kinds of risks than companies like Intel. "If you're a startup and you're doing a lot of iterative design and you constantly need a higher level of agility, you might find it more burdensome than the cost differential is worth," Karamouzis said. On the other hand, "If you can give the Indian team things that are clearly delineated that they can own and drive on their own, then it works out pretty well," said Pejman Roshan, cofounder and senior director of marketing at Agito Networks, a wireless technology startup in Sunnyvale, Calif. that outsources software coding to a services firm in Bangalore. Roshan acknowledged, though, that the wage gap is shrinking. "I'd heard there was a five-to-one [ratio of Silicon Valley wages to Bangalore wages], and we were salivating at that notion," Roshan said. "We're seeing a three-to-one benefit, and we're still happy with that." Riya's Shah is confident that moving the company's operations back to the U.S. was the right move and expects to see more companies doing the same in the months ahead.Â  "We might be a little bit ahead of the curve in our decision -- maybe six to 12 months -- but I don't think wages are going to stop rising," said Shah, who detailed his decision in his CEO blog, Recognizing Deven. "I don't think weâre isolated." Still, despite wage increases, new startups aren't likely to rule out Indian operations any time soon, Gartnerâs Karamouzis said. In fact, they may have to consider such operations in order to get venture capital. "More often than not, what I hear is that venture companies are almost demanding that [startups] leverage India or Russia both to optimize the cost structure and to maximize a 24-hour cycle to get things done faster," Karamouzis said.
439282
Indian outsourcers already have a large share of outsourced application development and maintenance and are dominant in business process outsourcing. The country is now targeting a larger share of the market for remote infrastructure management services (IMS), and is planning to more than double revenue from these services to $15 billion by 2013.IMS involves managing an enterprise&#8217;s core IT systems, including hardware, software, connectivity and people. The IMS industry is moving towards a remote delivery model where services are increasing delivered from low-cost locations by service providers and wholly-owned services subsidiaries of user companies, according to a report released Thursday by India&#8217;s National Association of Software and Service Companies (Nasscom).Customers in the US and Europe are increasingly willing to outsource IMS to offshore locations, because the data does not move out of the home countries, and is only managed remotely, said Siddharth Pai, a partner at sourcing consultancy firm,Technology Partners International (TPI) in Houston, Texas.In India, IMS business is going both to Indian outsourcers, and the Indian operations of large IT services companies, Pai said. Because of the large staff component involved in IMS, there are cost benefits in outsourcing IMS to low-cost, offshore locations like India, he added.Research done by management consultancy firm McKinsey for Nasscom, suggests that the IMS business could generate between 325,000 to 375,000 jobs in India by 2013, as 70 to 75 percent of the roles in IMS can be moved offshore.Low-cost locations, including India, have so far captured a mere $6 to 7 billion&#160;of the IMS opportunity.Indian outsourcers have so far learned to price their services on the basis of staff time utilized. They now have to learn more sophisticated pricing that takes into account other parameters like amount of computing power being managed, if they are not to risk losing money in the business, Pai said.
219141
China is to face greater competition from foreign banks as a WTO deadline to open its markets looms.
194560
India is projected to outpace China and become the world's most populous country by 2050, growing by 50 percent in the next 46 years to reach more than 1.6 billion people, a US research institute said.
273311
China's software and IT services sector is on track to catch and exceed the U.K.'s output in.
697005
China may provide some answers. Globalization can't hurt.
709112
OCTOBER 15, 2004  - In quarterly reports released this week, three big India-based offshore outsourcing companies detailed sharp increases in employee head count, clear evidence of growing demand for offshore services.
451817
(InfoWorld) - Chinese cities are expected to unseat Bangalore, Mumbai, and Delhi in India, and Manila of the Philippines, as favored offshore delivery centers by 2011, according to IDC. The market researcher has introduced a new Global Delivery Index (GDI), which compares 35 cities in the Asia-Pacific as potential offshore delivery centers, based on criteria such as cost of labor, cost of rent, language skills, government policies, infrastructure, and staff turnover rates. Bangalore currently tops the list, followed by Manila, Delhi, and Mumbai. The Chinese cities that figure in the 2007 list include Dalian, Shanghai, and Beijing, at numbers five, six, and seven. Indian cities have inherent challenges such asÂ cost of staff and pressure on infrastructure, said Conrad Chang, a research manager at IDCâs Asia Pacific operations, in a telephone interview on Thursday. While India has focused on the U.S. and European markets, China has large opportunities in the Japanese and Korean markets, Chang added. Chinese cities will overtake Indian cities by 2011 because of massive investments made in infrastructure, English language, Internet connections, and technical skills, which are favorable towards offshoring, IDC said Tuesday. Forrester Research,Â however, takes a less optimistic view about China as an offshore destination. Nearly two years ago, the country was widely viewed as a key challenger to India as an offshore services delivery location, however Forresterâs research shows that the market has not taken off as expected, the research firm said in a recent report. China primarily attracts business from Korean and Japanese companies, but most of them have preferred to set up their own operations in China rather than outsource, because there are not many large service providers in China, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners InternationalÂ (TPI) in Houston, on Thursday. Many U.S. and European companies, that set up offshore services operations in India, may also have an operation in China, Pai said. â But the Indian operation will typically be the larger,â he added. China has still not overcome customersâ concerns about English language skills, intellectual property (IP) protection, and attrition in the country, Forrester said. In contrast, India has a sophisticated and time-tested legal environment built around Western common law, Pai said. Even if China invests heavily in education, the population cannot get in four to five years as fluent in English as Indians, he said. â Indians have been speaking English for over a hundred years,â he added. Indiaâs demographics also favor its continuation as a key offshore services location. On account of Chinaâs one-child-per-family policy, the countryâs population is aging. The country has about half as many people under 30 than India, Pai said. The IT industry primarily employs younger staff, he added. The IDC GDI rates the potential of cities as offshore destinations, said Chang. The actual business decision by companies to offshore to these cities will depend on a host of other factors, he added. The GDI is a moving index, reviewed every six months. âThis is not about India versus China,â Chang said. IDC expects both countriesâ offshore business to grow, he added.
256583
China is closing fast on Japan and is likely to overtake it this year as the world&#39;s No. 3 trading nation behind the United States and Germany, new figures show.
457499
that is, in other countries such as China and India. According to an IDC study, China&#39;s IT growth is expected to be 15% annually and India&#39;s about 20%.
560575
SHANGHAI -- Indian outsourcing company Infosys Technologies Ltd. moved into its Shanghai office in February. Now, the company is running out of space and is scouting locations for a second outsourcing facility in China, a company executive said Wednesday.
599860
India wants more foreign investment to match the growth of its giant neighbor. But the democratic nation has to consider something China doesn't: voters
221480
Vietnam is making a big push to turn itself into an outsourcing powerhouse.
242086
If you think that China and India are the rising stars of the developing world, you may be missing a big part of the story.