There is much false chest thumping as usual from china in this thread. It's arrogance does match the realities on the ground. There are reasons that make China IT outsourcing still a game of high risks vs India :
(1) Enterprise buyers (especially those who have sourced work in India) often compare a rate card from a Tier 1 vendor with operations in India (i.e. IBM, Accenture, Tata, Infosys or Wipro) to a rate card of a tier 3 or tier 4 vendor in China. Simply comparing a rate card for a specific skill set is not a proper comparison because the elements built into a rate that is quoted by a vendor include elements of disaster recovery, and business continuity
(2) Comparison of pure wage rate charts. For example, if you look at some wage rate charts in China, you may see a quoted number such as 9K per year for specific for a programmer. However, the total cost to the employer is far more because China has a federal tax that is required (similar in nature to US social security taxes) which are currently 50%. Therefore, the cost to the employer is actually 13.5 K (9K plus 4.5K). Beyond that, if the programmer requires a certain level of English proficiency, a premium of of 10 to 15% must be factored into the wage rate above and beyond the market based rate.
(3) Assuming competency and skill sets in China and India are equivalent. A project manager or business analysts or even a programmer as designated on an human resource inventory in each of the respective region are not at all equivalent. Project management expertise is quite different. For example, at this particular juncture, a “experienced’ project manager in India can claim a track record of projects involving significant complexity and project size that simply has not yet materialized in China as of yet. Also, the label of of progammer or software engineer in China often refers to someone with experience with embedded (R&D) engineering expertise versus the more commonly used reference in India is related to Enterprise Apps skills.
(4) Assuming that there is one singular China cost structure. China is a vast country with over 20 designated hub cities. Cost structures across these various cities may vary by as much as 30%.
(5) incorrect Calculation of Total Cost of Sourcing or Risk Adjusted Total Cost of Sourcing. Quite often enterprises do not properly account for or comprehensively analyze the following:
- multi-year sustainability of cost structures
- do not include differentials in program and project management overhead costs
- cross cultural communications impacts on costs
- vendor competency and execution differentials
- risk mitigation and/or risk management costs
- potential currency rate fluctuation
China faces challenges foreign to India. And its problems aren't easily or quickly solved by throwing money at them—serious security and intellectual property concerns, management immaturity, cultural conflicts with Western enterprise customers, and most importantly, lack of customer confidence.
