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Outsourcing in China to Hit US$10bn, says Everest

by: Karen Cayamanda

Monday, November 21, 2011 |

It looks like the next few years will be great for the offshoring and outsourcing industry in China. Advisory and global services research firm Everest Group predicts that by 2015, China’s global services exports may reach a compound annual growth rate (CAGR) of 20-25 percent, valued at US$9.5 billion. This is a significant increase from US$3.5 billion posted back in 2010.

According to a recent Everest study entitled “Global Locations Compass: China”, the country’s global services exports rose to US$3.5 billion in 2010 from US$1.2 billion in 2007. IT outsourcing accounted for 65 percent of the total services export revenues of China. The rest (35 percent) came from business process outsourcing or BPO.

With the country’s 2010 market growth, it has been re-classified as a mature offshoring location in the Market Vista Locations Maturity Map of the Everest Group. It also comes close to India and the Philippines in the Offshore Locations Survey, also of the Everest Group.

Vice-president - Global Sourcing Amneet Singh said China may not have an advantage in terms of cost and English communication skills compared to India and the Philippines, but the country can still be seen by the US and European markets as an alternative to reduce risks. The country has a regional language advantage and cost arbitrage is predicted to stay sustainable in the next 13 to 14 years.

Expansion of delivery centers

The study also shows that in the last 12 months, more than 15 delivery centers were developed or expanded in Tier-1 and Tier-2 cities. The efforts and incentives of the Chinese government also drove the growth of the market.

Vice-president - Global Sourcing H Karthik advised companies that intend to tap or expand in the Chinese market to pay attention to talent, keep track of data protection policies, and assess Tier-2 cities for cost reduction.

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