Would you offshore your IT to China?

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I blogged earlier in the week about how Indian IT services association Nasscom expects software and services export growth for this year as a result of European and US customers holding back spending. It still expects double digit growth, but only just.

It seems the Chinese IT services sectoris also feeling the pinch. According to this website two of China's biggest IT service providers are merging amid fierce competition and harsh market conditions.

HiSoft Technology International and VanceInfo Technologies, both US listed, are merging to form one new company, Pactera Technology International.

I have met VanceInfo as well as another China based service provider known as Bleum. These companies are managed from the US but have access to a massive computer science worker resource. China has 350,000 computer science graduates every year and they cost less than their equivalents in India.

Professor ILan Oshri at Loughborough School of Business said unlike most Indian IT vendors that have been growing organically by gradually adding scale and areas of specialities, Chinese vendors grow through acquisitions and grow fast.

"This growth strategy is going to challenge Chinese vendors but also may offer them opportunities to eventually compete with Indian vendors. The key challenge for a company such as Pactera following this merger is to ensure synergies between their various businesses currently in-house such as IT, BPO and some KPO. Much of that depends on the re-organisation of the new venture that on the one hand needs greater diversity in the boardroom but at the same time greater alignment between the different businesses, so Pectera can position itself as an outsourcing powerhouse at the global level. The fast growth that Pectera has achieved in recent years is surely signalling to the outsourcing industry that the Chinese vendor landscape is changing, moving one step closer to become a serious contender to some Indian vendors."

Please fill in the poll at the bottom of this post, but before that read the below posts I have done about China offshoring,

Is China ready for frontline offshore services?

Is China a serious alternative to India for software development?

Indian CEO warns of business threat from China

Can China catch India without a Y2K?

China needs a Y2K to overtake India

Michael McCourt of the China-Britain Business Council in Shanghai describes the opportunities for UK IT companies in China

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About this Entry

This page contains a single entry by Karl Flinders published on November 14, 2012 11:26 AM.

Xerox announces 2,500 job cuts with services arm taking biggest hit was the previous entry in this blog.

Inside outsourcing interview: HCL discusses targeting potential customers unhappy with current suppliers and having a DNA like IBM. is the next entry in this blog.

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