By Dan Berthiaume
India and China are the number one and two outsourcing destinations in the world, respectively. Within the BPO community, there is the occasional argument about which nation makes a “better” location for service delivery. Closer examination of the relative strengths and weaknesses of each destination shows there is no single “better” place to locate your BPO services; it all depends on what exactly you’re trying to achieve.
India Attracts Larger Companies
A recent study, “Rethinking the Boundaries: India vs. China,” by Dr. Arie Y. Lewin, professor of strategy and international business at Duke University Fuqua School of Business Offshoring Research Network, indicates the mix of organizations offshoring to India has a bigger share of large companies (more than 10,000 employees) than the mix of firms offshoring to China.
Thirty-seven percent of companies offshoring to India are large, compared to 30% of companies offshoring to China. In contrast, 33% of companies offshoring to China are small (fewer than 500 employees), compared to 25% of companies offshoring to India. The share of midsized companies (500-10,000 employees) offshoring to both countries is essentially the same (38% for India and 37% for China).
IT Firms Find Footing in China, Financial Services Favor India
Looking at the distribution of companies offshoring to China and India, it becomes apparent that different types of firms favor one country as opposed to the other. For example, 33% of companies offshoring to China are in the software/IT services industry, and 24% are mnufacturing organizations. Only 26% and 11% of firms offshoring to India are in these two respective industries.
Meanwhile, 17% of firms offshoring to India are in the financial services industry and 11% provide professional firms, compared to just 9% and 3% of firms respectively offshoring to China. The percentage of companies in the healthcare/pharma, transportation/logistics, retail/consumer goods, telecommunications, and other industries offshoring to the two nations are virtually or actually identical.
Different Factors Lead to India or China
While more than 80% of companies offshoring to both India and China cited cost of labor as a factor in their decision, the percentages of companies citing other factors show a clear link between choosing one destination over the other. Much higher percentages of companies who assigned importance to talent pool availability, high level of expertise, language requirements, political stability of host country, and location of preferred service provider selected India than China. The widest differentials occurred in language requirements (more than 50% of companies that selected India compared to almost 30% that selected China) and location of preferred service provider (more than 40% that selected India compared to almost 30% that selected China).
Meanwhile, higher percentages of companies that selected co-locating with existing offshore BPO facilities, co-locating with existing offshore manufacturing plants, quality of infrastructure, supporting existing customers locally, access/increased speed to local market, local government incentives, high regional growth potential, cultural/linguistic proximity, geographic proximity, prior local contacts and expertise, avoiding problems of BPO hotspots such as wages, and other costs besides labor selected China. The disparity between the percentages citing co-locating with existing offshore BPO facilities was minimal (more than 30% for both), while more than 40% of companies offshoring to China and less than 20% offshoring to India cited prior local contacts.
China Has More Diverse BPO Client Mix
In one final interesting comparison between the two BPO destinations, the study finds that Chinese service providers have a more globally diverse client mix than Indian service providers. The percentage of clients headquartered in the US is virtually identical in both countries’ BPO client mixes (64% for China and 65% for India).
However, the remaining 35% of India’s BPO client mix is made up of companies headquartered in the EU, compared to 7% for China. China’s mix also includes substantial representation from companies headquartered in China (16%) and other nations (13%).
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