China unlikely to overtake India in outsourcing in a hurry: US expert

WASHINGTON - China is unlikely to overtake India in outsourcing business anytime soon and it would take not one country but a lot of small ones to knock it off the top, according to a US expert.

‘China is pretty far behind India and even places like the Philippines and Eastern Europe. It’s largely due to a language problem,’ said Robert Kennedy, author of The Services Shift, a new book on off-shoring in an interview with Forbes.com.

‘There are real challenges. Services exports from China will grow, but they won’t overtake India anytime soon,’ he added.

Only government policy could offset the growing trend of globalisation, said Kennedy, director of the Global Initiative at the University of Michigan’s Ross School of Business.

‘But there are about 200 countries in the world, and about 150 of those are developing countries. If you look out over the next five years, 90 percent will be open to the global economy.’

‘A decade ago, if you wanted to cut costs it was an India story. We identified 30 countries that have policies in place to promote service exports. All of the parking tickets in New York City are processed in Ghana, he said. ‘It won’t be one country that will knock India off the top. It will be a lot of small countries.’

Tremendous liberalisation on the policy side is a key driver of outsourcing on a macro level, he said noting ‘In the mid- to late-1980s, the global economy consisted of the US, Europe and Japan.’

‘Places like India and China were behind Central and Eastern Europe and parts of Africa. They weren’t really engaged in the global economy. That’s completely changed. Roughly 3 billion people have entered the global economy.’

The digitisation of business processes is another driver, he said noting, ‘Perot Systems has a huge claims processing operation in India… In the past it was done by middle-income Americans, but now it’s done by middle- or high-income Indians.’

The low cost and high speed of computing and telecom besides a global pool of talent around the world were the other drivers. ‘There is a lot of engineering talent in India and China, which leads to the last trend-the rise of a global business culture,’ Kennedy said.

‘It’s much easier for someone at Citibank or AIG to do business in India if they’ve been to the same schools and they use the same software like PeopleSoft. That’s made it much easier to go abroad, as well,’ he said.