Outsourcing's trials and tribulations

Gap with India

Unlike the upcoming cold winter for the outsourcing industry in Beijing, things are still warm down south in Shenzhen, Guangdong province.

Larry Chen has enjoyed the opposite experience to Yang. After leaving his former post at IBM, Chen joined the Tata Group, an Indian communications and IT giant this June to become an "insecure" IT engineer in one of the company's outsourcing centers based in Shenzhen.

Currently working on a project for a world-class investment bank in Hong Kong, Chen travels to the Special Administrative Region, which is just a few kilometers away, on a regular basis and deals with issues occurring within the client's system and operating processes.

"There is no such thing as 'head-counting' here in Tata. We're all working as a team with our client on a project basis," he said, adding most of his job is completed in the Shenzhen office unless he is wanted in Hong Kong.

Chen's basic salary is 14,000 yuan a month. It is nowhere near what his co-workers in the team on the client's side earn but, taking into account overtime rates and other bonuses, Chen's income is very competitive for someone with five years of experience.

"Plus we don't have to work night shifts at all," said Chen, adding the majority of his company's clients are Hong Kong-based financial institutions.

"The fundamental difference between Indian and Chinese companies is Chinese companies are still 'people-based', whereas Indian companies have become 'package-based'," said Ramgopal Natarajan, head of the delivery, consulting and systems integration services of Infosys China.

"When you buy IT outsourcing from an Indian company, you don't just buy people alone. You buy methodologies, tools and technology that support the efficient delivery of this IT service and the knowledge gained over a period of time, the best practices we have tailored for an individual company."

Although China had already become the second largest offshore-outsourcing vendor globally in terms of contracted volume in the first half of this year, Qian Fangli said she wasn't optimistic the country could catch up with India in the short term.

More than 90 percent of the outsourcing companies in China are small enterprises and only 22 of them executed more than $100 million offshore contracts in 2011. In comparison, India had 86 companies of such a scale early in 2009, among which nine reported more than $1 billion in annual output.

"Indian companies are more recognized globally, not only on the technical side but also for their quality certifications," said Ren Hongbin, a senior researcher with the Chinese Academy of International Trade and Economic Cooperation.

There are more than 100 Indian companies that have reached level four or above in what is known as the Capability Maturity Model, a universal evaluation standard for software makers. Fewer than 20 Chinese companies have garnered such an accolade.

According to Ren, US companies won't even consider awarding a contract to an outsourcing company below CMM3. Level five is the highest.

Chinese companies started receiving global work only in recent years and have the disadvantage of language barriers so their business is still at the lower end of the industrial chain, Qian said.

However, she said, domestic companies may find opportunities with the reform of China's financial system.

Opportunities

The website of Chinasourcing.org.cn run by the Ministry of Commerce and the China Council for International Investment Promotion. The website shows the government's support for the country's outsourcing businesses, which saw a boom in both their revenues and the number of employees. The more people the companies employed, the more revenues they earned. However, their production costs increased at the same time. [Photo/China Daily]