* What India thinks of China as an outsourcing rival
The movie colloquialism “Be afraid…be very afraid,” is appearing to apply to Indian companies wondering about what their Chinese neighbors are up to. In an online news article published last April, Sudip Banerjee, the president of enterprise solutions for Bangalore-based WiPro Technologies spoke about China as a potential outsourcing rival.
WiPro, Infosys and Tata Consulting are India’s “big three” IT consultant companies. The article interested me because it is clear that powerhouse Indian technological companies are aware that China’s attractive wage rates, technology prowess and plethora of highly-trained engineers and scientists lend itself well to outsourcing projects.
In the article, Banerjee said that from WiPro’s vantage point there were two main advantages to outsourcing in China: 1) There is an extremely large labor pool, just like in India, and 2) If you want to develop projects for Asian cultures, you do away with any potential culture barriers. Interestingly, Banerjee mentioned that many Chinese are also fluent in Japanese. This is fascinating because we in the west are so accustomed to English that we do not even equate the fact that a third or more of the world speak in some sort of Asian language.
He went on to say that there were three big issues the Chinese have to grapple with before they are on par with India: 1) They do not speak English very well, 2) They have a problem with protecting intellectual property (i.e., you might lose intellectual property rights to something you develop in China), and 3) they aren’t very good project managers.
He went on to pooh-pooh almost every reason why someone would consider China for outsourcing, essentially relegating China to second-class outsourcing status suitable only for those small “ma-and-pa” – projects. When posed the extremely low Chinese wage argument, for example, Banerjee countered that, yes, Chinese programmer wages were about 10% to 15% lower than in India, but supervisory/manager/project manager wages were 25% higher. I would like to see some hard figures backing up that claim. I found it to be not very palpable.
Banerjee said that nonetheless WiPro does have a “small” development shop in Shanghai, consisting of hundreds, not thousands of workers and that the other Indian companies are also exploring ways of getting in on the Chinese action. Banerjee said that he didn’t anticipate WiPro actually taking on projects in India for Chinese or other Asian customers. Instead, he believes that any Asian development work would take place in WiPro’s Shanghai office.
I guess it is no surprise, but personally, the tone of Banerjee’s responses came across like this to me: “Yes, we’re aware that the Chinese are breathing down our necks, but we’re so far ahead of them that we’re not really concerned about it.”- He is a senior executive of a very powerful organization that employs a large segment of the Bangalore workforce.
Moreover, the interview came across to me as what it must have sounded like when Americans were being interviewed years ago regarding the Indian “threat.” My counsel would be for Indian companies to pay attention. The dragon is raising its head in this area and could be an extremely formidable opponent in just a few years’ time.
As always, I’d love to hear your ideas and input.
