Affordable rent, low-cost labour and population literacy are the main reasons why companies still prefer to set up their delivery centres in Indian cities uch as Mumbai and Bangalore. But this offshoring trend is likely to change in the near future, according to a study by IDC.
The analyst group forecast that Chinese cities will soon overtake their Indian counterparts as top destinations for offshore global delivery by 2011, based on the results acquired from its Global Delivery Index (GDI).
The GDI compares 35 cities in the Asia-Pacific region as potential offshore delivery centres based on a set of criteria such as labour and rental costs, language skills and turnover rate. Cities covered by the index include Adelaide, Bangalore, Dalian, Hanoi, and Kuala Lumpur.
According to IDC research manager for Asia-Pacific BPO Research, Conrad Chang, what differentiates the leading cities from the rest is "the focus on deal-clinching factors", including agent skills and political risk.
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"There are different risk factors to consider when evaluating outsourcing, offshoring, onshoring, and nearshoring," explained Chang in a statement on Tuesday. "Some factors are obviously more critical than others."
Chang also noted that while Indian cities scored high on the criteria set by the GDI, the picture could well be different four years from now.
Although the top-ranked Chinese cities — Beijing, Shanghai and Dalian — trail their Indian counterparts in the GDI this year, they are expected to overtake the competition by 2011.
IDC attributed this to China's massive investments in areas favourable towards offshoring, such as infrastructure development, technical skills and internet connectivity.
Talkback
It is hard to separate political from economic risks in calculating offshoring trends. From the European perspective,a search for offshore locations is increasingly including negative domestic reactions not only to a potential for job losses ("delocalization"), but also to popular opinion in India, in particular,which has forced the closing of a variety of special economic zones orginally set aside for economic development, including call desks centers. The US public is currently reacting to a federal problem with food and household imports from China, and with questions of an indirect subsidizing of export prices through currency levels viewed as held at an artifically low level. (EuropaSurvey)