IT Outsourcing to China Increases Despite Drawbacks

CIO: A new report from Everest Group finds that Chinese services exports increased from $1.2 billion in 2007 to $3.5 billion in 2010, and 65 percent of those exports were IT services. The reports authors predict that the Chinese outsourcing market will continue to grow 25 percent over the next three years.

That growth is somewhat surprising given that Chinese IT outsourcing costs can be 30 to 45 percent higher than in India or the Philippines. In addition, the country lacks English-speaking workers and most IT Chinese service providers are fairly small. “Except for modest risk diversification beyond India and the Philippines,” China does not offer a clear advantage, the Everest report states. Instead, companies choose China as an outsourcing partner in order to be close to other Asian markets or to tap into the growing Chinese market.