China poses a threat to Indian IT/BPO growth: Everest Report

December 9, 2011: According to a study conducted by Everest group, it is estimated that the Chinese revenue from the export of IT and BPO services across the globe will increase at a Compound Annual Growth Rate of 20 to 25 per cent from the revenue earned during 2010.

China has been experiencing a huge growth in the revenue earned from the exporting of services to markets across the globe. In the year 2007 the revenue from export of services was USD 1.2 billion and it has increased dramatically to USD 3.5 billion in 2010. These observations and projections were made in the survey conducted by Everest Group.   

The study points out that 65 per cent of the export revenue of China are contributed by the Information Technology services. This huge contribution is as a result of the presence of many leading global Information Technology service providers. The Business Process Outsourcing (BPO) sector contributes the rest which amounts to 35 per cent.  

According to Amneet Singh, V P, Global Sourcing, the regional language edge enjoyed by China and the massive cost reduction offered by the Chinese service providers has been instrumental in capturing a major portion of the Asian outsourcing market. 

He added that the Asian market accounts to 60 per cent of the revenue gained by China through Services exporting. Companies in the west outsource functions of their business in Asian countries such as Japan, Korea, etc. to China. More over few western companies have their captive units in China.

China cannot be considered as a major competitor to India and Philippines in the US and European markets. The main reasons behind this are the unclear cost structure and the lack of English speaking professionals. Still the United States and Europe contribute to 40 per cent of the revenue from export of services from China. As far as the North American and European markets are concerned, China is a means to divert risk associated with outsourcing.

There are risks associated with the outsourcing of services to China, the important one being the weak data privacy regulations. How ever the Chinese government is taking necessary steps to ensure data privacy by introducing strong data protection regulations. The report also contains evaluation of China’s services landscape across captives and 3rd party service providers for Information Technology and Business Process Outsourcing. The study covers seven important cities in China in terms of talent pool, cost and risk.

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