Offshoring: The Next Frontier

The website E-Week  has an interesting article about recent research into Offshoring alternatives.  They quote IDC research that discusses the maturing Indian market and attractive alternatives.  They note that salaries for some Indian resources are now 75% of their American counterparts, thus reducing the attractiveness of moving work to India.  However other global sites, notably in China, are rising up the list of Offshoring sites.

The article notes:

Companies that are not pulling out of outsourcing relationships altogether are shifting their offshore office to newer and different regions. A report released by the Aberdeen Group on July 2 found that while India remains the leading offshore destination for most companies—especially if cost savings are the primary driving force—both Russian and Asian providers are maturing quickly and sustaining double-digit growth by competing on both price and quality.

Wage inflation and higher attrition issues, as well as a rising demand for technology professionals in India are causing enterprise customers to shift from tier 1 to midtier providers, finds the report, and argues that companies that want to stay ahead should take advantage of multiple offshoring locations across the globe, or multisourcing.

Three Chinese cities are cited in the report: Dalian, Shanghai and Beijing:

Agent skills, political risk, cost of labor and language skills were all factors considered in the IDC report's ranking of three Chinese cities—Dalian, Shanghai and Beijing. These three cities were ranked by IDC as numbers five, six and seven of the top ten locations for global delivery. IDC predicted that Chinese cities could take over Indian ones as early as 2011.

China is working hard to match and exceed India's capabilities as an Offshoring destination.  Through both infrastructure investments, such as the Shanghai International Airport, high-speed rail services and English-language certification programs, China could easily become the region of choice for global service centers.