India's IT outsourcing industry, already wounded by the scandal at Satyam, one of its leading players, now faces a growing challenge from China's younger but increasingly confident outsourcing sector.
So says the Financial Times, which has picked up on a trend that EngagingChina has been documenting for at least two years. Nevertheless, India's outsourcing giants have little to fear in the short term.
Unlike India, China's outsourcing industry remains highly fragmented and none of its indigenous outsourcers are household names in the west. China starts from a much smaller base and its largest players are also not growing as fast as India's outsourcing giants players which suggests that China is unlikely to overtake India any time soon.
Bleum, one of the better known Chinese outsourcers, last month announced it had been recognised by the International Association of Outsourcing Professionals as one of the 100 leading outsourcing providers globally. Nevertheless, it is a league table whose upper reaches are dominated by Indian giants like Satyam, Infosys, Wipro or Tata Consultancy Services.
Recognising that it needs to do more to promote this nascent industry, Beijing started offering incentives, including tax breaks and subsidies, to the outsourcing players in an effort to help them grab more market share.
Reflecting its geographic proximity, China's outsourcing industry has built good ties with large IT-using organisations (ITOs) in Japan but its efforts to sell into the western customers are likely to continue to be hampered by poor English skills and cultural gaps.
Ironically, Satyam has been one of the more active Indian outsourcing vendors in China, where it opened a “nearshoring” centre in Guangzhou to serve customers in Japan and HK.
More on the challenges facing India's outsourcing sector here.
More EngagingChina stories on China's ascent in outsourcing in these posts.