Will cyber-attack diplomacy deter corporates from offshoring IT to China?

This week there have been a few articles about cyber war and the hacking of US military information.

Unsurprisingly China is at centre stage.

What will this mean for the IT services sector in China? The Asian giant wants to emulate India’s rise as an IT services destination. India has almost become the default choice for IT services from US and UK corporates, but can China match it?

China certainly has the skills base, with 350,000 computer science graduates every year. It also offers lower cost labour and the government is encouraging the development of English language skills at education organisations.

But will US and UK companies sign contracts with China based service providers while cyber-attack diplomacy, which seems to have replaced the traditional gun boat diplomacy, continues? If the US is accusing Chinese hackers of accessing military secrets what will that mean to highly regulated US businesses. I would be surprised if it encourages them to use Chinese service providers.

Having said that many global service providers already have operations in China and China based companies such as Bleum are actually US owned and run from the US.

I recently polled readers on whether or not they would consider offshoring IT jobs to China. The result was very balanced – of the 104 people who responded, 46.15% said they would not offshore to China, 41.3% said they would, and 12.5% said they had never considered it.
Click this link and fill in the questionnaire about offshoring IT to China.

Mark Lewis, head of outsourcing at law firm Berwin Leighton Paisner, says China may not compare to India now, but this will not hold it back.

He believes that in a year’s time China will have “overturned India as the number one offshore IT services destination”.

Douglas Hayward, outsourcing analyst at IDC, says he is not seeing much from China in terms of providing IT services to Western companies, and many of the firms providing IT services from China are doing it through intermediaries. “We have not yet got a company like India’s TCS to champion China,” he added, “but at some point the IT services companies that supply within China will turn their attentions externally, which will be very interesting.”