The Rational Outsourcing Blog just did an interesting post comparing the future of business process outsourcing (BPO) for China versus India. The post is entitled, The secret weapon of the Chinese BPO industry, and the writer starts out by talking about his diminishing confidence in India’s ability to dominate China in outsourcing far into the future. He thinks China may surpass India in outsourcing within a few years, and not just because of China’s “lower employee churn rates, lower effective salaries, and better infrastructure.” He sees China outsourcers as having the “secret weapon” of having had to mostly serve its domestic market, which, “out of necessity,” forced them to be “incredibly cost conscious.” Because Indian outsourcers mostly serve wealthy Western companies with whom they “have enjoyed a large labor cost differential” they have been able to get away with being much less labor efficient than the Chinese business process outsourcers:
I must admit that many Indian BPOs often have an attitude that labor is cheap so we can always throw a lot of bodies at any problem. This has in many cases led to inefficient use of labor. If Chinese BPOs have truly figured out a way to be profitable in the absence of a labor cost advantage and are now shifting their attention to the US market then Indian BPOs may have cause for concern. An industry that is used to running lean and mean in their own country would have a huge advantage once they gain the additional advantage of the labor cost differential between China and the US. Look out India!
I do not know enough about this industry to comment on this, but I have to believe both that India is fully capable of getting more efficient and that China is fully capable of getting less efficient as its wages rise and as it begins servicing more foreign companies. At one time, I was sure India, with its huge cadre of English speakers, had a language advantage over China, but those in the industry quickly set me straight on this. They told me China has the language advantage because it has so many people who speak Chinese, Korean, Japanese, and English.
Will there not be plenty of work out there to keep everyone busy in both countries for a very long time to come? Will not bigger companies intentionally outsource to both China and India so as to reduce their dependence on any one country? Forget about language for a moment, is China really ready to provide great service?