Companies are moving IT jobs to a widening web of overseas cities — many of them far from Bangalore
Becoming the next Bangalore will mean money in the bank.
Since 2000, the tendency to move key operations outside a home country has added more than 1 million IT jobs to India and an additional 3 million jobs in local services and infrastructure, according to India's IT trade association, NASSCOM.
As labor costs and turnover rates rise in India, companies are starting to send work to other parts of the globe.
Here are 10 cities that are emerging as new outsourcing centers:
1.Buenos Aires, Argentina (Open-source technologies)
2.Bucharest, Romania (Security Systems)
3.Dalian, China (Applications Development)
4. Ho Chi Minh City, Vietnam (Low-to-Medium Applications Maintenance)
5. Mexico City (Custom Application Dev)
6. Moscow (Hi-end s/w R&D)
7. Prague Czech Republic (IT Systems Mgnt Services)
8. St. Petersburg, Russia (Hi-end s/w R&D)
9. Santiago, Chile (IT Infra Services)
10. Sao Paulo, Brazil (Enterprise Resource Systems)
1/13/2007
Outsourcing means opportunity
The news comes down from the executive suite that the organization is outsourcing some or all of its information technology (IT) functions. Reaction to this news runs the complete spectrum from “I'm going to lose my job,” to “Wow, look at all these new opportunities.” As a true IT professional, what does it mean to you?
Outsourcing is a time of massive change for all parties involved. For the IT professional this creates numerous opportunities to demonstrate leadership and help both the divesting organization and the outsourcing company provide value to their customers and ownership.
IT professionals are, by definition, change agents. In times of great change organizations should be able to rely on their IT professionals to make the transition as smooth as possible. The bottom line target for all involved: no deterioration of service to the users of the computer systems during or after the transition. The IT professional is well positioned to ensure this kind of smooth transition through careful planning and attention to detail where technology transfers may be occurring.
These opportunities form a wide spectrum such as learning new technologies, gaining exposure to other businesses and business processes and general opportunities for career advancement.
Take, for instance, the area of new and emerging methodologies, standards and best practices such as ITIL, ISO 20000, ISO 9001, COBIT or SOA. Many organizations would willingly adopt these but may be delayed or deterred by the cost and process impact of doing so. Outsourcing companies tend to be large IT organizations, with national and international presence who have already adopted these practices to ensure they remain the leading players in the industry. These kinds of companies invest heavily in their IT professionals' education to ensure the right skills are available wherever they are needed. They have adopted and use industry best practices as a matter of course.
Significantly, for IT professionals moving to the outsourcing company there can be financial benefits, especially in terms of bonus structures. Many organizations do not pay bonuses, and many of those that do focus their schemes on the performance of the organization as a whole.
Many of the outsourcing companies, because of the diverse geographic market, have performance bonuses at a regional or location level as opposed to corporation-wide.
This means that bonuses are more directly related to personal and local team performance.
As with all major change there can be a down side. If an application maintenance and support (AMS) function is outsourced, the retained IT professionals may need to continue working with older technology and lose touch with the next cool thing. In addition, many IT professionals view AMS as less desirable than development, ignoring the benefits of AMS experience such as the ability to multitask, balance your workload, and write good, structured, maintainable code.
And remember, if your résumé indicates you have been successful in one of the large outsourcing companies, it can add to your credibility when seeking future employment.
The worst-case scenario may mean the IT professional is “released” as a result of remote outsourcing or the terms of the outsourcing agreement.
So overall, outsourcing provides a wide range of opportunities to IT professionals. They can provide the leadership to ensure smooth transition and improved performance for the outsourced organization in the future, while building their own skills and career.
Outsourcing is a time of massive change for all parties involved. For the IT professional this creates numerous opportunities to demonstrate leadership and help both the divesting organization and the outsourcing company provide value to their customers and ownership.
IT professionals are, by definition, change agents. In times of great change organizations should be able to rely on their IT professionals to make the transition as smooth as possible. The bottom line target for all involved: no deterioration of service to the users of the computer systems during or after the transition. The IT professional is well positioned to ensure this kind of smooth transition through careful planning and attention to detail where technology transfers may be occurring.
These opportunities form a wide spectrum such as learning new technologies, gaining exposure to other businesses and business processes and general opportunities for career advancement.
Take, for instance, the area of new and emerging methodologies, standards and best practices such as ITIL, ISO 20000, ISO 9001, COBIT or SOA. Many organizations would willingly adopt these but may be delayed or deterred by the cost and process impact of doing so. Outsourcing companies tend to be large IT organizations, with national and international presence who have already adopted these practices to ensure they remain the leading players in the industry. These kinds of companies invest heavily in their IT professionals' education to ensure the right skills are available wherever they are needed. They have adopted and use industry best practices as a matter of course.
Significantly, for IT professionals moving to the outsourcing company there can be financial benefits, especially in terms of bonus structures. Many organizations do not pay bonuses, and many of those that do focus their schemes on the performance of the organization as a whole.
Many of the outsourcing companies, because of the diverse geographic market, have performance bonuses at a regional or location level as opposed to corporation-wide.
This means that bonuses are more directly related to personal and local team performance.
As with all major change there can be a down side. If an application maintenance and support (AMS) function is outsourced, the retained IT professionals may need to continue working with older technology and lose touch with the next cool thing. In addition, many IT professionals view AMS as less desirable than development, ignoring the benefits of AMS experience such as the ability to multitask, balance your workload, and write good, structured, maintainable code.
And remember, if your résumé indicates you have been successful in one of the large outsourcing companies, it can add to your credibility when seeking future employment.
The worst-case scenario may mean the IT professional is “released” as a result of remote outsourcing or the terms of the outsourcing agreement.
So overall, outsourcing provides a wide range of opportunities to IT professionals. They can provide the leadership to ensure smooth transition and improved performance for the outsourced organization in the future, while building their own skills and career.
Value of outsourcing contracts shrinks
Outsourcing providers face increasing challenges in 2007, according to the latest Quarterly Index from outsourcing advisor TPI.
The final quarter of 2006 was the worst fourth quarter in five years in terms of the value of outsourcing contracts awarded. In addition, the value of contracts entirely new to the market (excluding the retendering of existing contracts) declined by eight per cent on 2005 levels.
The trend towards shorter and smaller contracts, and more specialist and single process deals, means that tendering activity nevertheless remains frenzied, with a record number of 350 contracts being agreed in 2006 – smashing last year’s 341, the previous record.
Duncan Aitchison, managing director of TPI EMEA and Asia-Pacific, said: 'In practice, the trend towards shorter contract duration means that outsourcing providers are obliged to compete more often in order to secure the same level of business. For many the cost of sale can become a major issue. Consequently service providers need to be increasingly selective in terms of the contracts they pursue.'
At the same time, competition has been heightened with more providers competing for market share – the number of providers winning contracts has increased by 64 per cent in the last four years, from 55 in 2002 to 90 in 2006.
'In general terms, this increased competition is clearly good for buyers,' said Aitchison. However, greater diversity and specialisation amongst suppliers, combined with more frequent tendering, does mean more complexity in both the procurement process and the management of outsourcing contracts.'
Those service providers headquartered in India, such as Wipro, Tata, and Infosys are reaping the benefits of the trend towards single-process and specialist deals. In 2006, the India-based providers achieved 7 per cent of the total market share. This is a massive increase compared with their 2002 market share of less than half a percentage point.
The final quarter of 2006 was the worst fourth quarter in five years in terms of the value of outsourcing contracts awarded. In addition, the value of contracts entirely new to the market (excluding the retendering of existing contracts) declined by eight per cent on 2005 levels.
The trend towards shorter and smaller contracts, and more specialist and single process deals, means that tendering activity nevertheless remains frenzied, with a record number of 350 contracts being agreed in 2006 – smashing last year’s 341, the previous record.
Duncan Aitchison, managing director of TPI EMEA and Asia-Pacific, said: 'In practice, the trend towards shorter contract duration means that outsourcing providers are obliged to compete more often in order to secure the same level of business. For many the cost of sale can become a major issue. Consequently service providers need to be increasingly selective in terms of the contracts they pursue.'
At the same time, competition has been heightened with more providers competing for market share – the number of providers winning contracts has increased by 64 per cent in the last four years, from 55 in 2002 to 90 in 2006.
'In general terms, this increased competition is clearly good for buyers,' said Aitchison. However, greater diversity and specialisation amongst suppliers, combined with more frequent tendering, does mean more complexity in both the procurement process and the management of outsourcing contracts.'
Those service providers headquartered in India, such as Wipro, Tata, and Infosys are reaping the benefits of the trend towards single-process and specialist deals. In 2006, the India-based providers achieved 7 per cent of the total market share. This is a massive increase compared with their 2002 market share of less than half a percentage point.
Outsourcing to China: Watch out, India
From The Economist print edition
China is way behind India in the business of outsourced services, but it has n
ow started to catch up
IN A vast curtained room in Xian in western China, rows of dark, pony-tailed h
eads are silently bowed, fingers moving quickly and expertly. They might be in
any Chinese factory—except that they are not assembling shoes, nor soldering
circuit boards, but sitting at computer terminals processing medical-claim fo
rms from New York and car-loan applications from Detroit and marking examinati
ons for high-school students in Melbourne, Australia. “This is the future of
the global back office,” says Michael Liu. Mr Lui, founder of CompuPacific In
ternational, one of China's few indigenous business-process outsourcing (BPO)
firms, returned after a decade in health-care IT in
America, determined to prove that China can do just as well as India in outsou
rced services.
It is fitting that this future should be emerging in Xian, an old imperial cap
ital that was the final stop for caravans travelling east along the Silk Road
from central Asia and the entry-point for new cultural and scientific ideas. T
hough tourists know Xian for its army of terracotta warriors, the capital of S
haanxi province is quietly becoming one of China's most modern cities. Xian is
the birthplace of the nation's space programme, its aircraft-construction hub
and home to one of China's biggest technology parks—a 35-square-kilometre Ch
inese Silicon Valley housing 7,500 companies and supported by more than 100 un
iversities that churn out 120,000 graduates a year, half in computer sciences
alone. And that is just the start. The Xian High-Tech Industries Development Z
one will eventually span 90 square kilometres at a cost of 100 billion yuan ($
12 billion), says Jing Junhai, its director.
The sheer size of this undertaking betrays China's ambition to become a global
power in software and services to match its pre-eminence in manufacturing. At
tracting outsourced business is central to this. The worldwide market for offs
hore spending on IT services for (predominantly) Western companies will reach
$50 billion by 2007, according to Gartner, a consultancy, and is growing in do
uble digits. The market for BPO, which encompasses processing bills and credit
-card applications to managing entire human-resources operations, should be wo
rth another $24 billion by next year, and is expanding even faster.
India has captured the bulk of this work. While China is the world's top locat
ion for contracting out manufacturing, it has just $2 billion of the outsource
d-services market, reckons Bill Lewis, the founder of Temasys, a Singapore-bas
ed consultancy. What activity there is happens mostly in Dalian, a north-easte
rn city where, for reasons of history and geography, many locals speak Japanes
e and Korean, and which therefore handles back-office functions for companies
from Japan and South Korea. Xian's annual outsourcing revenues are a tiny 300m
yuan ($40m), according to official figures. Over 90% of that comes from Japan
.
But China has plenty of potential. Its workers are well educated in basic comp
uting and mathematics. They may lack creativity, but they are disciplined and
readily trained, making them better at tedious jobs than most Indians are. Thi
s suits the BPO business. “These are repetitive, rules-based tasks which you
can train an army of people to do,” says Sujay Chohan, Gartner's research dir
ector. “They are not tasks that require innovation.”
Army is the right word: this business needs millions of low-cost workers, and
China has them. India used to be cheaper, but salaries for graduates, engineer
s and programmers have been climbing fast and staff turnover at IT companies c
an reach 30-40% a year. China, where an entrylevel BPO staffer is paid around
$300 a month, one-tenth of the comparable American wage, is now very competiti
ve. Henning Kagermann, chief executive of SAP, one of the world's biggest soft
ware companies, gave warning in January that India was becoming too expensive
to outsource work there. China's big coastal cities are getting more expensive
, but prices inland remain keen. Foreign firms are looking beyond Xian at citi
es such as Chengdu and Wuhan. Kaoru Miyata, head of NEC Xian, says both rental
and salary costs in Xian are 40-50% lower than in Beijing and Shanghai, while
Yasuo Noshiro, head of Fujitsu Xian system engineering, says the city is chea
per than fast-growing Dalian; and staff, with fewer opportunities to job hop,
are more loyal.
Throw in China's superior infrastructure, tax breaks (though India's are also
generous) and strong support from the state, plus the desire of multinational
companies to spread risk away from India, and it is clear why many large compa
nies are turning to China. IBM, Hewlett-Packard, Microsoft, Siemens and Infine
on have been in China for several years and all are busily adding staff. Japan
's consumer-electronics giant, NEC, has 180 people doing research and developm
ent in Xian and rival Fujitsu has 120 writing software.
The latest lot of companies to discover China, is, revealingly, the very India
n firms that make their money from outsourcing services. Tata Consultancy Serv
ices (TCS), the biggest, has a campus in Hangzhou. Infosys and Wipro are in Sh
anghai and Beijing and plan to increase their workforces from a few hundred to
5,000-6,000 each over the next few years. Genpact, the former offshore BPO ar
m of General Electric, also based in India, intends to triple its staff in Dal
ian from 1,800 to more than 5,000.
This expansion is being driven by burgeoning demand from overseas clients who
want lower costs, a better spread of risk and local support for their growing
Chinese operations. There is also a trickle of business from domestic Chinese
companies. TCS is designing and installing a new software system for Huaxia Ba
nk, China's 12th-largest. With every Chinese state-owned company hungry for ba
sic IT and back-office support, that trickle could turn into a flood. James Am
achi who runs the Xian office of GrapeCity, a Japanese IT outsourcing firm, sa
ys the domestic market is taking off sooner than he expected it to: “We thoug
ht it would be two or three years before we saw Chinese clients, but we are al
ready working on a big domestic telecom project.”
Yet China is still five to ten years behind India, say most observers. It has
two big disadvantages. First, although many Chinese can read English, they spe
ak and write it badly. That's a problem in services that require frequent comm
unication with overseas offices. Infineon employs two full-time English teache
rs in its Xian outpost. Michael Tiefenbacher, the managing director there, say
s: “It looks bad if our people cannot talk to their counterparts elsewhere. P
eople confuse language competence with technical ability.”
Theoretically yes, in practice no
What's more, few Chinese engineering and computer graduates are as good as the
ir qualifications suggest. While they often have a more solid grasp of theory
than their European counterparts, few leave university able to apply it to rea
l-life problems, such as developing software. “It is as if they can describe
a hacksaw and how it works perfectly,” says Mr Amachi, “but have no idea how
to build a door with it.” On a recent hunt for software developers, GrapeCit
y received 1,200 applications from Xian's six best technical universities. Onl
y seven of them were suitable.
One reason is a lack of vocational training and few links between business and
academia. In Europe and India, by contrast, engineering degrees demand work e
xperience. And university teachers educated in a rigid, theory-based system ar
e not able to prepare students for the real world. Wang Yingluo, a professor a
t Xian Jiaotong University and a member of the Chinese academy of engineering,
says “a lot of us are not from industry and have no experience of the commer
cial world.”
As a result, foreign companies in China are spending a small fortune “subsidi
sing China's education system”, as one puts it. Fujitsu's Mr Noshiro has put
some 40 Chinese workers through intensive training in Japan, at a cost of $30,
000 a year each. “They need two years of full-time training just to become a
middle-level engineer and four years to get to be a project manager.” Mr Amac
hi says even after three years of training “only 10-20% of programmers ever g
et to a really good level and can become an architect. China has so many colle
ges and so many graduates, but the degrees are not as good as they sound.”
The same can be true for China's infrastructure. GrapeCity found its building
and its computers flooded when it rained heavily the day after it moved into i
ts new home in the Xian office park.
The fragmentation of China's domestic outsourced-services sector does not help
. Most companies have fewer than 1,000 staff. CompuPacific has under 600 emplo
yees, compared with 60,000 at India's TCS. Though small-scale mergers will hap
pen—CompuPacific has been approached by a local rival, a venture capitalist,
and an American outsourcer looking to diversify out of India—local politician
s hinder consolidation, sometimes blocking mergers with firms outside their re
gions if they risk losing influence. India, by contrast, has a national trade
body, Nasscom, which can encourage developments such as consolidation that loo
k likely to help the industry.
Meanwhile fears about piracy of intellectual property—more rampant in China t
han India—will constrain growth. Though foreign companies in China say that c
opying sophisticated IT processes is difficult and can be thwarted by relative
ly simple safeguards, the perception that sensitive business information is at
risk is likely to slow development.
All this suggests that, for the moment, China is likely to capture an increasi
ng share of low-level BPO tasks, such as data entry, form processing and softw
are testing, while India continues to dominate higher-value functions, such as
research and design, which require greater creativity and language skills. Ho
wever, this will change as more western firms demand support in China and dome
stic opportunities grow. And it isn't just pure competition between the two co
untries: last year, TCS signed a deal with the Chinese government and Microsof
t to build China's first big software company, which aims to provide IT servic
es for the Olympics.
China is way behind India in the business of outsourced services, but it has n
ow started to catch up
IN A vast curtained room in Xian in western China, rows of dark, pony-tailed h
eads are silently bowed, fingers moving quickly and expertly. They might be in
any Chinese factory—except that they are not assembling shoes, nor soldering
circuit boards, but sitting at computer terminals processing medical-claim fo
rms from New York and car-loan applications from Detroit and marking examinati
ons for high-school students in Melbourne, Australia. “This is the future of
the global back office,” says Michael Liu. Mr Lui, founder of CompuPacific In
ternational, one of China's few indigenous business-process outsourcing (BPO)
firms, returned after a decade in health-care IT in
America, determined to prove that China can do just as well as India in outsou
rced services.
It is fitting that this future should be emerging in Xian, an old imperial cap
ital that was the final stop for caravans travelling east along the Silk Road
from central Asia and the entry-point for new cultural and scientific ideas. T
hough tourists know Xian for its army of terracotta warriors, the capital of S
haanxi province is quietly becoming one of China's most modern cities. Xian is
the birthplace of the nation's space programme, its aircraft-construction hub
and home to one of China's biggest technology parks—a 35-square-kilometre Ch
inese Silicon Valley housing 7,500 companies and supported by more than 100 un
iversities that churn out 120,000 graduates a year, half in computer sciences
alone. And that is just the start. The Xian High-Tech Industries Development Z
one will eventually span 90 square kilometres at a cost of 100 billion yuan ($
12 billion), says Jing Junhai, its director.
The sheer size of this undertaking betrays China's ambition to become a global
power in software and services to match its pre-eminence in manufacturing. At
tracting outsourced business is central to this. The worldwide market for offs
hore spending on IT services for (predominantly) Western companies will reach
$50 billion by 2007, according to Gartner, a consultancy, and is growing in do
uble digits. The market for BPO, which encompasses processing bills and credit
-card applications to managing entire human-resources operations, should be wo
rth another $24 billion by next year, and is expanding even faster.
India has captured the bulk of this work. While China is the world's top locat
ion for contracting out manufacturing, it has just $2 billion of the outsource
d-services market, reckons Bill Lewis, the founder of Temasys, a Singapore-bas
ed consultancy. What activity there is happens mostly in Dalian, a north-easte
rn city where, for reasons of history and geography, many locals speak Japanes
e and Korean, and which therefore handles back-office functions for companies
from Japan and South Korea. Xian's annual outsourcing revenues are a tiny 300m
yuan ($40m), according to official figures. Over 90% of that comes from Japan
.
But China has plenty of potential. Its workers are well educated in basic comp
uting and mathematics. They may lack creativity, but they are disciplined and
readily trained, making them better at tedious jobs than most Indians are. Thi
s suits the BPO business. “These are repetitive, rules-based tasks which you
can train an army of people to do,” says Sujay Chohan, Gartner's research dir
ector. “They are not tasks that require innovation.”
Army is the right word: this business needs millions of low-cost workers, and
China has them. India used to be cheaper, but salaries for graduates, engineer
s and programmers have been climbing fast and staff turnover at IT companies c
an reach 30-40% a year. China, where an entrylevel BPO staffer is paid around
$300 a month, one-tenth of the comparable American wage, is now very competiti
ve. Henning Kagermann, chief executive of SAP, one of the world's biggest soft
ware companies, gave warning in January that India was becoming too expensive
to outsource work there. China's big coastal cities are getting more expensive
, but prices inland remain keen. Foreign firms are looking beyond Xian at citi
es such as Chengdu and Wuhan. Kaoru Miyata, head of NEC Xian, says both rental
and salary costs in Xian are 40-50% lower than in Beijing and Shanghai, while
Yasuo Noshiro, head of Fujitsu Xian system engineering, says the city is chea
per than fast-growing Dalian; and staff, with fewer opportunities to job hop,
are more loyal.
Throw in China's superior infrastructure, tax breaks (though India's are also
generous) and strong support from the state, plus the desire of multinational
companies to spread risk away from India, and it is clear why many large compa
nies are turning to China. IBM, Hewlett-Packard, Microsoft, Siemens and Infine
on have been in China for several years and all are busily adding staff. Japan
's consumer-electronics giant, NEC, has 180 people doing research and developm
ent in Xian and rival Fujitsu has 120 writing software.
The latest lot of companies to discover China, is, revealingly, the very India
n firms that make their money from outsourcing services. Tata Consultancy Serv
ices (TCS), the biggest, has a campus in Hangzhou. Infosys and Wipro are in Sh
anghai and Beijing and plan to increase their workforces from a few hundred to
5,000-6,000 each over the next few years. Genpact, the former offshore BPO ar
m of General Electric, also based in India, intends to triple its staff in Dal
ian from 1,800 to more than 5,000.
This expansion is being driven by burgeoning demand from overseas clients who
want lower costs, a better spread of risk and local support for their growing
Chinese operations. There is also a trickle of business from domestic Chinese
companies. TCS is designing and installing a new software system for Huaxia Ba
nk, China's 12th-largest. With every Chinese state-owned company hungry for ba
sic IT and back-office support, that trickle could turn into a flood. James Am
achi who runs the Xian office of GrapeCity, a Japanese IT outsourcing firm, sa
ys the domestic market is taking off sooner than he expected it to: “We thoug
ht it would be two or three years before we saw Chinese clients, but we are al
ready working on a big domestic telecom project.”
Yet China is still five to ten years behind India, say most observers. It has
two big disadvantages. First, although many Chinese can read English, they spe
ak and write it badly. That's a problem in services that require frequent comm
unication with overseas offices. Infineon employs two full-time English teache
rs in its Xian outpost. Michael Tiefenbacher, the managing director there, say
s: “It looks bad if our people cannot talk to their counterparts elsewhere. P
eople confuse language competence with technical ability.”
Theoretically yes, in practice no
What's more, few Chinese engineering and computer graduates are as good as the
ir qualifications suggest. While they often have a more solid grasp of theory
than their European counterparts, few leave university able to apply it to rea
l-life problems, such as developing software. “It is as if they can describe
a hacksaw and how it works perfectly,” says Mr Amachi, “but have no idea how
to build a door with it.” On a recent hunt for software developers, GrapeCit
y received 1,200 applications from Xian's six best technical universities. Onl
y seven of them were suitable.
One reason is a lack of vocational training and few links between business and
academia. In Europe and India, by contrast, engineering degrees demand work e
xperience. And university teachers educated in a rigid, theory-based system ar
e not able to prepare students for the real world. Wang Yingluo, a professor a
t Xian Jiaotong University and a member of the Chinese academy of engineering,
says “a lot of us are not from industry and have no experience of the commer
cial world.”
As a result, foreign companies in China are spending a small fortune “subsidi
sing China's education system”, as one puts it. Fujitsu's Mr Noshiro has put
some 40 Chinese workers through intensive training in Japan, at a cost of $30,
000 a year each. “They need two years of full-time training just to become a
middle-level engineer and four years to get to be a project manager.” Mr Amac
hi says even after three years of training “only 10-20% of programmers ever g
et to a really good level and can become an architect. China has so many colle
ges and so many graduates, but the degrees are not as good as they sound.”
The same can be true for China's infrastructure. GrapeCity found its building
and its computers flooded when it rained heavily the day after it moved into i
ts new home in the Xian office park.
The fragmentation of China's domestic outsourced-services sector does not help
. Most companies have fewer than 1,000 staff. CompuPacific has under 600 emplo
yees, compared with 60,000 at India's TCS. Though small-scale mergers will hap
pen—CompuPacific has been approached by a local rival, a venture capitalist,
and an American outsourcer looking to diversify out of India—local politician
s hinder consolidation, sometimes blocking mergers with firms outside their re
gions if they risk losing influence. India, by contrast, has a national trade
body, Nasscom, which can encourage developments such as consolidation that loo
k likely to help the industry.
Meanwhile fears about piracy of intellectual property—more rampant in China t
han India—will constrain growth. Though foreign companies in China say that c
opying sophisticated IT processes is difficult and can be thwarted by relative
ly simple safeguards, the perception that sensitive business information is at
risk is likely to slow development.
All this suggests that, for the moment, China is likely to capture an increasi
ng share of low-level BPO tasks, such as data entry, form processing and softw
are testing, while India continues to dominate higher-value functions, such as
research and design, which require greater creativity and language skills. Ho
wever, this will change as more western firms demand support in China and dome
stic opportunities grow. And it isn't just pure competition between the two co
untries: last year, TCS signed a deal with the Chinese government and Microsof
t to build China's first big software company, which aims to provide IT servic
es for the Olympics.
IDC: ‘Disruption,’ hyper competition to drive AsiaPac IT market in 2007
By Melvin G. Calimag
Research firm IDC said in its annual "year ahead" forecast that the information and communications technology (ICT) spending and growth for the Asia Pacific (excluding Japan) region will be fueled largely by continued economic growth and increasing market demand across the region, with China and India predicted to have having another outstanding year.
IDC said the IT market in Asia Pacific excluding Japan (APEJ) will reach 2 billion in 2007, a 10 percent rate of growth over 2006.
Together, China and India will make up more than 43 percent of the region’s IT spend, with China remaining the largest IT market consisting 32 percent of the region’s IT spending and India growing at a remarkable 23 percent.
IDC said there will be three major areas of focus in 2007 in relation to the ICT market in the region:
• Innovative and useful services: With the wireless Internet experience becoming a reality for businesses and consumers, this will provide added impetus for companies to roll out mobility services to help us work and play.
• Standardization to simplify and reduce costs: Asian enterprises will simplify and adopt a service orientation in IT architectures by standardizing on components. System Integration vendors will look at reducing risk for project delivery by standardizing their service offerings.
• Smarter approaches to markets: Software vendors in APEJ are responding to the need for competitive offerings, particularly for Small and Medium-sized Businesses (SMB), as larger firms lag with practical and straightforward SMB offerings; Business Process Outsourcing (BPO) vendors are seeking to build longer term relationships with Asian firms, which have been slow to take advantage of the BPO phenomenon.
The following are the top 10 key IDC predictions that will shape the ICT industry in APEJ in 2007:
1. China and India continues to lead the pack as the next opportunity – emerging Asia – approaches Brazil Russia India and China (BRIC)-like growth rates.
2. Eastern heroes emerge such as UFSoft, Kingdee, Mincom, Ahnlab, and Rising will capture regional and global software markets.
3. Service oriented architecture (SOA) momentum gathers with new entry points, with nearly two thirds of mid-size and large corporate firms in APEJ committing to early stage SOA adoption in 2007.
4. Consulting and Systems Integration vendors refine delivery models to improve profitability.
5. BPO customers test drive before making long-term commitments.
6. Vendors chase the long tail in the SMB market, as 2007 will be marked by an aggressive focus from all major vendors to broaden and deepen their coverage of the SMB sector in the APEJ region.
7. Services get caught in the wireless mesh. After much hype, 2007 will finally be the year where wireless mesh services will emerge in Asia.
8. Fixed-Mobile-Convergence enables massmarket consumer mobility. IDC predicts that telecom network operators will begin initial deployments of fixed-mobile convergence (FMC) services in 2007.
9. The evolution of laptops take over both mature and emerging markets in Asia by storm.
10. Content is king as HDTV and IPTV emerge in Asia/Pacific.
Research firm IDC said in its annual "year ahead" forecast that the information and communications technology (ICT) spending and growth for the Asia Pacific (excluding Japan) region will be fueled largely by continued economic growth and increasing market demand across the region, with China and India predicted to have having another outstanding year.
IDC said the IT market in Asia Pacific excluding Japan (APEJ) will reach 2 billion in 2007, a 10 percent rate of growth over 2006.
Together, China and India will make up more than 43 percent of the region’s IT spend, with China remaining the largest IT market consisting 32 percent of the region’s IT spending and India growing at a remarkable 23 percent.
IDC said there will be three major areas of focus in 2007 in relation to the ICT market in the region:
• Innovative and useful services: With the wireless Internet experience becoming a reality for businesses and consumers, this will provide added impetus for companies to roll out mobility services to help us work and play.
• Standardization to simplify and reduce costs: Asian enterprises will simplify and adopt a service orientation in IT architectures by standardizing on components. System Integration vendors will look at reducing risk for project delivery by standardizing their service offerings.
• Smarter approaches to markets: Software vendors in APEJ are responding to the need for competitive offerings, particularly for Small and Medium-sized Businesses (SMB), as larger firms lag with practical and straightforward SMB offerings; Business Process Outsourcing (BPO) vendors are seeking to build longer term relationships with Asian firms, which have been slow to take advantage of the BPO phenomenon.
The following are the top 10 key IDC predictions that will shape the ICT industry in APEJ in 2007:
1. China and India continues to lead the pack as the next opportunity – emerging Asia – approaches Brazil Russia India and China (BRIC)-like growth rates.
2. Eastern heroes emerge such as UFSoft, Kingdee, Mincom, Ahnlab, and Rising will capture regional and global software markets.
3. Service oriented architecture (SOA) momentum gathers with new entry points, with nearly two thirds of mid-size and large corporate firms in APEJ committing to early stage SOA adoption in 2007.
4. Consulting and Systems Integration vendors refine delivery models to improve profitability.
5. BPO customers test drive before making long-term commitments.
6. Vendors chase the long tail in the SMB market, as 2007 will be marked by an aggressive focus from all major vendors to broaden and deepen their coverage of the SMB sector in the APEJ region.
7. Services get caught in the wireless mesh. After much hype, 2007 will finally be the year where wireless mesh services will emerge in Asia.
8. Fixed-Mobile-Convergence enables massmarket consumer mobility. IDC predicts that telecom network operators will begin initial deployments of fixed-mobile convergence (FMC) services in 2007.
9. The evolution of laptops take over both mature and emerging markets in Asia by storm.
10. Content is king as HDTV and IPTV emerge in Asia/Pacific.
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