China replaces India as preferred outsourcing destination

NEW DELHI - China has replaced India as the primary destination of outsourcing and shared services for Asia-Pacific companies, according to the accounting firm KPMG.

The China Daily quoted the KPMG survey, which covered 280 senior company executives across Asia, as saying that China’s outsourcing and shared services are rapidly expanding and winning 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.

According to the survey, 42 percent of the respondents said their companies have set up one of their shared services centers in China. With regard to outsourcing, 41 percent said they have a third-party outsourcing provider in China.

Singapore stands second as a popular location for shared services at 29 percent, followed by India at 25 percent.

Figures from KPMG show that in 2007, China’s onshore and offshore outsourcing market stood at only 7.5 billion dollars. That amount nearly tripled to 20 billion dollars last year, according to the Ministry of Commerce.

By 2014, KPMG predicts that China’s total outsourcing market will stand at 43.9 billion dollars.

The survey finds that over 80 percent of senior executives employ an outsourcing strategy, shared services, or a combination of the two.

Senior executives across the Asia-Pacific also view China as the preferred destination for setting up shared services centers.

The survey also revealed low labor costs as one of the reasons for contracting outsourcing providers. (ANI)