Analysis: Many companies have already successfully outsourced to India. Virtually every large company, and many that are not so large, have now figured out how to make Indian outsourcing work. True, wage inflation and employee turnover are an ongoing problem, but overall it is working for most companies. With that behind them, the next frontier is China. Many see China as the solution to the turnover and wage issues in India. Ironically, even many of the large Indian firms (Wipro, Infosys, Tata) already have a presence in China. Many large US technology firms, such as Cisco and Oracle, have large installations in China.
China is most definitely not the same as India. The most obvious issue is the language barrier. It is relatively easy to find skilled Indian personnel who speak English. Because India has so many dialects, many Indians use English as a common language even among themselves. This is not true in China, which has far fewer English speakers. Finding skilled technical personnel who speak English is not easy in China.
The culture and history of China are more alien to Europeans and Americans. India was a part of the British Empire for a long time, and during that time many elements of the two cultures commingled. India is a democracy, which is a familiar model to Westerners. China is not a democracy and does not have the close relationship with the West that India has experienced. Consequently, cultural issues are much greater than in India.
Economic issues abound in China for prospective outsourcers. The Chinese economy is growing rapidly and enjoys a huge trade surplus with the US. The local companies, such as Huawei, are becoming multi-nationals competitive with US or European companies. Jobs are plentiful for Chinese technical workers, both with foreign and local firms. Many large US companies have had a major presence in China for many years. Such large companies are ideally positioned to hire the best and brightest.
Costs are escalating. While it is true that salaries are much lower in China than in the US, salaries are only one piece (admittedly usually the biggest piece) of the cost pie. Real estate costs in the more desirable areas are more than in many locations in the US. For example, desirable tech park locations near Beijing command lease rates significantly higher than in the best areas of Silicon Valley. Communications costs to anywhere in China are quite high. It is common to pay 2-3x as much as for data lines in China than for comparable lines in the US.
Overall, outsourcing to China is something that everyone should probably consider, but the decision is not a simple one based solely on lower salaries. Overall costs must be taken into account, along with whether or not the amount of money to be committed to China is enough to gain critical mass. China is not a virgin territory waiting to be plundered! On the contrary, it is more like the Wild West, where entrenched powers are already in place and the unwary get fleeced.
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