Can China beat India at BPO game

Whatever goes up, comes down. The cassandras of the world are confident that India's booming IT and ITeS sectors are heading for a bust! And they are hoping that the balance of BPO power will tilt towards China this time. And this notwithstanding the 30% growth, translating into $16 billion revenues till April this year.

The much-touted English speaking capability of the Indian, which had been so far giving it an edge in the BPO stakes is under attack by the Chinese. In fact, India is not even the largest country of English speakers after the US . It is the Philippines!.

India's detractors argue that While English is still an elitist language taught in certain schools, China is making it a national priority for people to learn English! The results, they say will certainly be a tilt towards China in the near future. And who knows? China may emerge as the country with the largest number of English speaking persons then!

US Congressman, Jim McDermott, currently visiting India is certain that India is losing jobs to China . "Companies would naturally move over to destinations where they can get their job done for less. "India is losing jobs to China," he said.

Ironically, though India has been the butt of most anti-outsourcing anger, it is not even the largest outsourcing destination for the US. Ireland is.

It is true that offshore wages in India are going up thanks to higher salaries and fresh hiring brought about by the booming state of the Indian BPO industry. Over the years, India's greatest attraction for outsourcing companies, its cost advantage, is bound to come down. Slowly wages in India will go up and that in the West will come down. But even then there is bound to be enough difference between the two extremes for the outsourcing balance to rem ain with India.

Michael Beckman writing in Australia's The Age points out that India's competion is coming up in the form of countries like China, Sri Lanka, Egypt, Romania and South Africa. These countries exhibited their capabilities at last month's OutsourceWorld Conference in London.

Why stop there? There are countries like Malaysia, the Philippines, Russia, and even Mauritius, all whetting their apetite for a piece of the action.

China In The Forefront

Chinese IT companies for long have been providing outsourcing work to MNCs. Now, they are trying to emulate the Indian success and trying their hands in outsourcing. The Chinese city of Dalian is trying to emulate Bangalore's success and the mayor of Dalian visited the Indian software hub for picking up tricks of success.

Already there are some Chinese outsourcing giants. The Beijing-based IT United Corporation is one such company. Its clients include Airbus, British Airways, Cisco Systems, Siemens, and Kraft Foods.

The company has around 100 mostly Chinese staff. It now offers its web and IT-based solutions and call centre management services not just to companies based in China or with operations there but to companies worldwide.

IT research company Gartner estimates that China has 6,000-plus software companies against India's 3,000-plus. Add to this China's domestic software sales of $4.3 billion aginst $2.06 billion for India.

It is not that Indian companies are not aware of the Chinese threat. IT giants like Tata Consultancy Services and Infosys have picked outsourcing to China as a future trend and are hiring Chinese staff and opening branches in China.

Agreed, there are some black and white criteria for showing China's superiority. Like, both have billion plus populations but China has always the favourite FDI destination with $800 billion poring in that country against $20 billion in India in the last 20 years.

Gross domestic product per capita in China is $5000 against India's $2,900.

All that may be true, but equally true is the emergence of India as a more favoured destination MNCs in recent times. Also, last year in the third quarter, India's GDP growth had been the highest in the world, beating even China's.

By all accounts India and China are the superpowers of the future with Goldman Sachs predicting that even if the Indian economy continues to grow over the next 20 years at just the same pace as it has over the past ten years (about five and a half per cent each year), it will become the third largest economy in the world, after US and China. If it can match China's growth rate (more than seven per cent a year) its economy will, within 50 years, exceed China's and be the world's second largest economy!