Offshoring in China to hit $10 billion by 2015

18 November 2011

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20 November 2011 | Adam Leach

Outsourcing of business services to China will more than double in value by 2015, research has predicted.

GlobalLocations Compass: China, published this week by the Everest Group, forecasts that the global services export market in the country will grow by between 20-25 per cent each year until 2015 hitting an overall value of $9.5-$10 billion (£6-£6.3 billion).

The report said the market in the country for IT outsourcing (ITO), which accounts for 65 per cent of its revenues, and business process outsourcing, which accounts for the remaining 35 per cent, has increased from $1.2 billion (£700 million) in 2007 to $3.5 billion (£2.2 billion) in 2010. It contends that the growth rate will continue and lead the value of the industry to hit around $10 billion (£6.3 billion) in 2015. It noted a number of recent developments in the Chinese market that will support continued growth, with the country benefitting from the economic development of the Asia region.

Commenting on the findings, Amneet Singh, vice president of global sourcing at Everest Group, said: “China offers a compelling regional language advantage and cost arbitrage and is thus best leveraged to serve the Asia region, which accounts for 60 per cent of China’s global sourcing revenues.”

The study revealed that more than 15 new delivery centres were established or expanded in the country over the past year and that services delivered by China’s second-tier cities (provincial capitals) have grown at a rapid pace, nearing the quality of service provided by tier-cities (including Shanghai, Beijing and Guangzhou). The report also forecast that cost arbitrage will remain favourable for the next 13-14 years, enabling companies to take a relatively long-term strategy on offshoring.

Singh believes that while competing countries, such as India and the Philippines offer better language skills to European and American businesses, China will continue to attract business from the regions. He said: “While lack of clear cost and language skills translate to a limited competitive advantage over India and the Philippines for work exported to North America and Europe, these regions still account for about 40 per cent of China’s global sourcing exports. China can serve as a risk diversification alternative to serve North America and Europe.”

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