China's Promise

Steve Hamm

The people who criticized my posting comparing programming skills in India versus China are absolutely right. It was a shallow exercise. Still, I thought some of the responses from commentators made it worthwhile.

Here’s some more potentially controversial data points on China outsourcing that I picked up at Outsource World in NYC yesterday. It adds to the picture of a nascent Chinese outsourcing industry that could become a serious player in the future.

--Talent: China is expected to produce 400,000 computer science and software grads this year, about the same number as India. That’s up from 250,000 last year and 189,000 in 2004. So the tech workforce is growing mighty fast. It’s interesting to note a recent NASSCOM report out of India that showed that only about 25% of the new grads there are immediately employable in tech service jobs. The Indian tech service outfits have become the de facto finishing schools for the country’s engineering graduates.

--Exports: China is expected to produce $1.293 billion in software service exports this year. That’s an ant compared to the $20 billion plus produced by India. But, remember, it wasn’t too long ago that India’s software exports were ant-like, too.

--Customer plans: Gartner says that in 2004 only 8% of US business leaders surveyed said they would outsource work to China. Forty percent now say they expect to play the China outsourcing card by 2008. That’s a steep curve.

--Cost comparisons: Cyrill Etschinger, CEO of IT United, one of the top outsourcing firms in China, provided some labor cost comparisons, which are suspect considering who he is. In tier-one cities, he says hourly labor rates are 3-5% lower than in comparable Indian locations. In tier-two cities, the gap is 12-15%. Seems to me I had heard Chinese wage costs were actually higher. ??

--Attrition rates: Eric Liang, CEO of LongTop International, says his attrition rate is just 4%. If other Chinese outfits can do that well, it’s a big deal.

Before it's here, it's on the Bloomberg Terminal.