China overtakes India in Asia-Pacific outsourcing biz: KPMG

Beijing, Jul 15 (PTI) Aided by low labour costs, China
has overtaken India as the primary destination of outsourcing
and shared services for Asia-Pacific companies -- netting
business to the tune of 20 billion dollars, according to
accounting firm KPMG.
The KPMG survey, which covered 280 senior company
executives across Asia, showed that China's outsourcing and
shared services are rapidly expanding -- winning a substantial
market share over India and other regional destinations.
"Though, at the moment, the country has still not reached
the level of maturity seen in India, the growth of China's
outsourcing market is significant. Many Western companies may
still see India as their location of choice, but for
executives within Asia Pacific the message is clear -- China
is now leading the way," said Edge Zarrella, global head, IT
Advisory, KPMG China, was quoted as saying in the official
media here.
According to the survey, 42 per cent of the respondents
said their companies have set up one of their shared services
centres in China. As many as 41 per cent said they have a
third-party outsourcing provider in China.
Singapore stands second as a popular location for shared
services at 29 per cent, followed by India at 25 per cent.
Figures from KPMG show that in 2007, China's onshore and
offshore outsourcing market stood at only USD 7.5 billion.
That amount nearly tripled to USD 20 billion last year,
according to the Ministry of Commerce.
KPMG predicts that China's total outsourcing market will
stand at USD 43.9 billion by 2014.
Shared services are also expanding rapidly in China. The
survey found that over 80 per cent senior executives employ an
outsourcing strategy, shared services, or a combination of the
two.
Low labour costs was one of the main reasons for China's
growth in the outsourcing business, the survey said, adding
that 51 per cent of the respondents said it was the main
criterion for making their decision.
The key factors used for determining the location of
their shared services centre are low labour cost and language
capabilities (53 per cent each), the KPMG said.
However, Alan Fung, partner of performance and
technology, KPMG China, said that senior executives should
think twice before making their location choices based solely
on the cost factor.
"They should take into consideration the long-term needs
of their business..." he said, adding that language, skills
and infrastructure are all critical. PTI