Sooner rather than later, China will emerge as a serious contender to India in the software outsourcing industry.
So thinks John Cestar, CEO of Chinese outsourcing firm Freeborders, which has just announced plans to quadruple the size of its Shenzhen facility to hold up to 2,000 workers.
He would say that, of course. But anyone who has been writing on the IT industry as long as I have, cant help but notice the sea-change in the software industry's perception of China. Once, it was only the hardware industry that worried about China.
Software vendors, if they mentioned the country at all, saw it purely as a potential market, but one that was immature and fraught with pitfalls.
But today many ISVs and also ITOs -- IT-using organisations -- are starting to take China seriously as an offshore software development centre.
Historically, India's Bangalore region was the place to go for cheap software development. But Bangalore risks become a victim of its own success: infrastructure is creaking, salaries are rising and the region's cost advantage is being eroded.
That has turned the spotlight on China, where firms such as Freeborders claim they can deliver savings of 30% to 40% over Indian rivals.
According to research firm Analysys, China's software outsourcing services market reached $323m in Q1 2006, up almost 44% over the year-earlier period.
Of course, western concerns about IPR and project management issues still weigh heavily. But the combination of mainland China's seemingly limitless supply of cheap skilled engineers and a growing Chinese diaspora clutching MBAs from US business schools and tuned into the latest IT trends seems unbeatable, in my opinion.
One nagging concern for potential customers is the quality of Chinese software. The churn-them-out-cheap image of much of China's manufacturing sector has done its software industry no favours and "Made in China" is rarely synonymous with quality to western eyes.
But China's nascent software development industry claims it is more than a match for better-known Indian rivals, not just on price but also on quality.
Freeborders, for example, stresses its CMMI Level 5 certification, saying it is one of the first Chinese software developers to achieve this universally-recognised symbol of quality. (The CMMI model, developed by the Software Engineering Institute in the US, measures the sophistication of software development processes - "5" is the best you can get -- and Indian outsourcers take pride in their CMMI certifications.)
Earlier this month, Freeborders won the "Outsourcing Excellence" award for developing an online sales platform, Fastextile, for Invista, the US fibre manufacturer best-known for Lycra. This is the first time an outsourcer from China has received the award and previous winners have typically been western heavyweights like Accenture and Hewlett Packard.
By combining onshore project management in Europe and the US with offshore development in Shenzhen, Freeborders was able to complete this project three weeks ahead of schedule. Western software developers take note.
More on Freeborders and its history here.
