Offshore IT Services Showdown: India Versus China
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How does offshore outsourcing's reigning champion, India, compare against China on software quality, staff costs, and more?
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India&#39;s IT services market is forecast to grow to $10.73 billion by 2011, at a five-year compound annual growth rate of 23.2 percent, as outsourcing emerges as a more favored option for companies in India, according to research firm Gartner.
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In a new wave of global outsourcing, personal chores are moving offshore, and this is leading to some daunting challenges, both economic and cultural.
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The best of Computerworld's coverage of IT outsourcing.
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For some companies, outsourcing IT is not just a cost-cutting strategy, itâs a way of life. Take General Motors, for example. GM has been contracting out its tech work since the company spun off its IT subsidiary, Electronic Data Systems, into a separate entity in June 1996.ADVERTISEMENTMAKE SOA REAL WITH IBM WEBSPHERE PODCASTStreamline processes and maximize efficiency within a proven service oriented architecture. Take back control of your business processes with IBM WebSphere.
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(InfoWorld) - Hewlett-Packard and itsÂ Watergate re-enactmentÂ now own the tech scandal headlines, but during the summer our attention focused on other alleged malfeasance, by the company with the normally shiny image: Apple Computer. A British newspaper claimed that one of Apple's contract manufacturers in China, Foxconn, owned by Taiwan's Hon Hai Precision Industry Co., wasÂ mistreating its workers, through low pay, long hours, and poor living conditions. What went unreported from this saga was that we so rarely see headlines that contain the words "Apple" and "China." Microsoft, Intel, GoogleÂ -- their ongoing conflicts with the Chinese government and the Chinese consumer are bread and butter for business and technology reporters in China. But Apple? In Beijing, the best evidence that Apple exists is an iPod billboard that faces one of the city's main arteries, and advertising during televised English soccer matches. There are quite a few iPods peeking out of people's pockets, but when it comes to which laptops are being tapped upon at Starbucks, it's HP, it's Dell, it's Sony, but except for foreigners, no Apple. The fact is, when it comes to China, Apple as a computer manufacturer and retailer is nowhere. The simple reason for this is that Apple is asking too much of Chinese consumers. The biggest factor is price. Service, quality, prestige, satisfaction -- these are extremely secondary concerns to the Chinese consumer. People bringing home $400-$600 per month are considered middle class in this country. They can afford to buy computers, and for them, price is the singular issue. An Apple machine in China costs between double and four times as much as a competing Wintel box. The computer whiz kid down the street can build you a generic box with a pirated copy of XP for about $400. An entry-level Lenovo computer probably costs about 20 to 25 percent more, followed by foreign name brands. Apple is at least double the no-name box. So, one month's salary to give your kid a computer and access to the Internet, or two months'? What would you choose? The second reason is availability of software. In China, if you're using Apple and you need software, you have to buy the legitimate product. For Apple, that means that their system is rejected, except by high-end graphic designers and die-hards. The cost of ownership of an Apple machine plus legit software to run on it is just too high for most people to consider. Third is service. Until recently, having your machine break down was the thing that every Apple user in China prayed to avoid. Repairs are much more accessible now, but still there are only one or two authorized service centers in Beijing, whereas fixing a Windows box is far simpler. Apple's China strategy for its computers seems entirely different than for the iPod. While its music player is accessible, affordable, and increasingly ubiquitous, for desktop hardware it seems to be following Vertu, the luxury phone maker, instead of Nokia. Unless Apple chooses to address this market on its own terms, there won't be any harvest for it here.
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The decision to outsource and offshore is more complicated than just counting costs.
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The rise of the Indian rupee against the U.S. dollar is affecting Indian outsourcers.
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Infosys Technologies profits from global outsourcing trends.
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IBM said Wednesday that it has sewn up outsourcing deals with two Danish companies valued at more than $1 billion over 10 years, reinforcing its strength in Europe.ADVERTISEMENTWhite Paper: Converged Services Spell ReliefDiscover why technical decision makers are turning to IP telephony and VPNs to increase worker productivity while keeping an eye on the bottom line.
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India&#39;s IT services market is forecast to grow to $10.73 billion by 2011, at a five-year compound annual growth rate of 23.2 percent, as outsourcing emerges as a more favored option for companies in India, according to research firm Gartner.As companies are finding it more difficult to hire and retain staff in their IT departments, they are looking at external service providers as an option, hoping to also cut down costs, and better manage growth in the process, Gartner said Tuesday.Indian user companies compete for staff with Indian outsourcing companies and Indian operations of multinational companies, which hire new staff by the thousands each quarter.Staff attrition is however not the key reason why companies are outsourcing, said Arun Gupta, chief technology officer, at Shopper&#39;s Stop, a top Indian retail chain. Driving outsourcing in India is a growing demand for new technologies and applications. Shopper&#39;s Stop has six IT projects in progress with another 12 projects planned for the next six to 12 months.Rather than creating and managing a large IT organization in house, the company is working with service partners to support its 45 IT staff, Gupta said. Some of the functions it outsources are network maintenance, desktop and server maintenance, monitoring enterprise resource planning (ERP) applications, and software development, he added.A number of large banks and telecommunications service providers are already outsourcing key IT operations, though the key winners so far have been multinational services companies. Many Indian outsourcing companies had neglected the Indian market in favor of exports, according to a survey last year by Gartner. But that may be changing as the&#160;weakening dollar puts pressure on rupee&#160;realization from exports.IBM,&#160;Tata Consultancy Services (TCS), and Wipro together accounted for 26.1 per cent of IT services vendor market share in India last year, according to Gartner. IBM was the top vendor, with 11.2 per cent market share. TCS and Wipro occupy the second and third positions with 10.9 and 4.1 percent market shares, respectively.However, the Indian IT services market is still fragmented, with the majority of the market being serviced by smaller local players that account for close to 40 per cent of the IT services market, according to Gartner.&quot;We have looked at smaller players for very small and specific jobs, but for larger jobs, running into a number of years, and which require a variety of skills, we look at large Indian companies or multinational services companies,&quot; Gupta said.The key segments of the Indian IT services market are hardware maintenance and support, software support, consulting, development and integration, IT management, and process management, Gartner said.
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An early end to International Business Machines Corp.&#39;s contract with JP Morgan Chase &amp; Co. reveals how mega information-technology outsourcing deals are falling out of favor, with both IT services companies and their customers.
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India reports success, while Venezuela fears fraud. What can the United States learn?
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When the Nasdaq stock market opens next Monday, Indian outsourcer Infosys TechnologiesÂ will become the first Indian company to be included in its prestigious list of top-100 companies.ADVERTISEMENTNEW IT SERVICES FROM IBM: EASIER TO BUY AND IMPLEMENTDiscover a simpler, more cost-effective way to get the solutions your company needs to grow more flexible and efficient.
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It may now be the turn of Indian companies to offshore outside India their IT services requirements.
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China Mobile and Focus Media: Domestic titans selling at knock-down prices.
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A panel of executives at the IBM Rational user conference talk about the challenges of using offshore outsourcing firms for development projects.