The influx of Indian outsourcing service providers that have set up camp in China has validated the latter's rising status as a key outsourcing market. But are local players feeling the heat? According to industry observers, however, the pie is set to grow even bigger.
Indian outsourcers such as Tata Consultancy Services and Infosys in recent months announced their intentions to further expand and invest in China.
These companies would be looking to serve the needs of multinational corporations that have expanded to China, said Eugene Wee, IDC's Asia-Pacific senior analyst for services. As such, their emergence could be perceived as a threat particularly to China-based outsourcing service providers that currently cater to the MNC market, he noted.
"The great majority of systems integrators (SIs) in China have their energies focused on servicing the domestic market, and will not feel the heat as much from foreign competitors such as those from India, the United States and Europe," he explained. "It is the larger SIs which are servicing MNCs in China that may feel the heat."
MNCs with long-standing relationships with a foreign service provider may choose to continue the affiliation when the latter establishes operations in China, Wee said.
However, John Cestar, CEO and co-founder of Freeborders, said the pie has just gotten bigger. The U.S.-based IT and applications developer set up operations in China in 2001.
IDC analyst
Currently, "only a few companies" are capable of serving the "lucrative North American and European" markets--which India already serves--where MNCs require service providers with "English capabilities, strong management and experience", Cestar said.
"With India’s move into China, China's outsourcing industry has finally gained recognition and credibility," he said. "More knowledge will be passed on to the Chinese companies [which] will get better, and which will in turn bring in more business [for them]."
IDC's Wee agreed, noting that the trend presents an opportunity for Chinese service providers to "up their stakes and ramp up outsourcing capabilities as well as to get a better grasp of offshore delivery".
Local companies that are currently "doing well servicing local demand for application development" can also benefit from "spillover Indian business", given their lower-cost models, added Wee.
Players such as NCS, a Singapore-based systems integrator, are also unfazed by the competition from Indian outsourcing companies. NCS has offices and operations in various Chinese cities including business hubs Shanghai and Suzhou, Beijing and Chengdu.
NCS CEO Chong Yoke Sin told ZDNet Asia that as user demand grows, the service provider is increasingly looking at "more inland" cities such as Fuzhou, Chongqing and
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