Chinese gov't initiatives to boost domestic advantage in global delivery
By Enterprise Innovation Editors | 2011-02-21
Continued investment by the Chinese government in improving its infrastructure and developing its talents will tip the scale of the global delivery center game to its favor, according to research firm IDC.
The Government of China continues to build heavily on its foundation of the 1000-100-10 initiative rolled out in 2006, with 22 cities now identified as software and outsourcing locations in China. As the battle for supply of global delivery heats up, the investments made by the government in China to promote "Triple Play" --a convergence of fixed line, cable and broadband services and cloud technologies, particularly in Shanghai and Beijing-- will tip the global delivery scales in favor of the Chinese cities by 2014. India, with an abundance of engineering graduates and experienced professionals, will continue to dominate in the talent forte. The local governments in India are investing heavily in technology schools to churn out graduates with the right skill sets to meet market needs.
"Infrastructure investments, particularly in terms of key technologies, will drive foreign direct investment, which in turn will bring with it foreign talent. If this talent is capitalized upon and can be used to train locals, there will be experienced talent available in China within the next five to seven years, placing the dragon in a dominant position on the global delivery map." says Suchitra Narayan, Research Manager, Services, IDC Asia/Pacific. "India cannot rest on its laurels and rely on its existing differentiators of 'low cost' and 'availability of talent'. It is currently in a position to capitalize on the best practices and years of experience to build out/automate future technologies and solutions that may stand it in good stead for the future. Strategic growth and investments are key for future dominance," adds Suchitra.
Supply, however, is only one side of the story. The demand for global delivery has also seen a shift of seismic proportions in terms of the decision making criteria. There is now a keen focus on diversifying risk and IDC is seeing more requests for "mixed shore" solutions, whereby services are delivered from more than one location. "IDC expects the global delivery landscape to move toward ‘Offshore 3.0’, a mixture of shoring solutions, platforms, best practices, risk diversification, and new technologies such as cloud. The economic downturn of 2008-2009 only served to highlight the need for global diversification, to limit the exposure to political instability, currency fluctuations, and the potential unavailability of skill sets," adds Suchitra.
This will create further demand in the market for the upcoming services offered in the emerging Tier 2 and Tier 3 cities. Apart from traditional tier 1 cities, IDC sees Hangzhou, Shenzhen, Hyderabad and Cochin strengthening their positions on the global delivery map by 2014. In addition, Chennai has moved up the charts significantly to compete with the likes of Bangalore, Beijing, and Shanghai. The need for expansion and location diversity, along with the output available for the technical skill sets, is driving this change. Refer to Figure One.