tajmahal.jpgIndia's dominance of the IT offshoring market was always going to be finite. China knows it and so apparently do the Indians.

Indian outsourcer Satyam plans to boost its China head-count to 3,000 and open a fourth development centre, reports India's Business Standard. Four second-tier cities have been shortlisted for the new centre, which will house up to 1,000 developers.

Fellow Indian Wipro Technologies plans to set up its third China development centre. It already has 100 software developers in centres in Beijing and Shanghai working for North Korean and Japanese clients. The third centre, to go live soon, will recruit 400 people to cater for western companies based in China.

Not to be left out, TCS has 500 people in China and plans to ramp up to 5,000 in the next five years.

These announcements have to put into context. The amount of offshore software development done in China is only around 15% of that done in India. So, there is no wholesale shift to China, at least not yet. Rather, the Indian firms are looking to “de-risk” their traditional outsourcing model.

India may have been the only choice five years ago, but the Bangalore region, where India's offshore industry is centred, risks becoming victim of its own success. Power cuts are common and pay rates are not as low as they once were.

To counter this, Indian firms are setting up centres in other countries. I recently visited a new Satyam centre in Hungary, which Satyam sees as “beachhead” to Europe. Humdrum programming work is still done in India, where pay rates are lower, but for tasks requiring contact with European clients, Satyam's Hungarian workers are used.

China is seen performing a similar function for clients in Japan, South Korea, Taiwan and, increasingly, China itself.

however, it is only a matter of time before China develops a home-grown outsourcing industry and starts to challenge Indian firms, first in China and later on the world stage.

More info at CIO China Weblog, which specialises in China's fledgling IT outsourcing industry.

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