Why India and China are Losing in the Offshoring Competition
Since the dawn of the global offshoring industry, India and China have formed supremacy as the two most appealing options for Western companies. However, recent changes in the industry landscape have facilitated the emergence of many other promising destinations that pose certain threats to two leading players. Below are 6 reasons why India and China are, somehow, losing the offshoring competition.
NARROWING GAPS IN WAGE
Global wage arbitrage and cost savings are still among the top motivations for Western companies to go offshore. China has recorded the salary growth of nearly 10.6% since the financial crisis in 2008. This narrows the financial gap and makes the country less accessible to foreign companies and investors than other destinations. Luckily, India is still sustaining its competitive base salary as the country only inches 0.2% during the same period.
QUALITY OF THE WORKFORCE
15 years ago, India and China could take pride in their talented graduates in IT and manufacturing. Nevertheless, this advantage has been significantly blurred in recent years. Other destinations now provide professional staff that studied or even worked abroad before coming back to their home countries; therefore, offering much higher work ethics, competencies and efficiency. One striking example would be ASEAN as the bloc saw 92,000 students off to Australia for tertiary and higher education last year.
DATA SECURITY AND COPYRIGHTS
It is unfair to claim that other offshoring destinations have better data security and protection standards than that of India and China. However, data piracy, information leaks and copyrights issues in two countries are impactful lessons for latecomers like Vietnam, Thailand or Brazil. Service providers in emerging destinations now apply security procedures and cloud-based technologies that are near to global standards. They directly tackle the haunting concerns of Western companies when offshoring their confidential functions.
POLITICAL AND SOCIAL INSTABILITY
Political instability and social unrest are new threats to the offshoring supremacy of India and China. While China suffers from ethnic conflict and anti-corruption wars, India also struggles in their fight with many long-lasting, social disputes. This September, the protest in silicon valleys of India even broke into demonstrations and violence, putting all business operations to a halt. This fact definitely leaves Western companies in confusion, wondering if they should opt for more peaceful and stable destinations, such as Ho Chi Minh city, Vietnam.
VARIETY OF SERVICE
On the journey to find competitive edges, multinational corporations decide to widen their offshored functions to finance, call centre, marketing, graphic design and even legal services. India and China are quite slow and conservative in their offerings, still sticking to traditional fields like IT or manufacturing, while the rising stars (Latin America, ASEAN, and Europe) are experienced in building teams in multiple industries. It is obviously beneficial to go offshore in a country where your company can build and develop various teams as the business demands.
CHANGE IN PERCEPTION
Finally, the reason why India and China are losing the offshoring competition is because multinationals start to consider them as markets rather than offshoring destinations. In the end, they are the two most populous countries in the world with a vast number of consumers and booming middle-class spenders. Distributed centres lean more to customisation for local markets than supporting functions for the head office of the company.
If you are still confused about where to offshore your business functions, ASW Global can assist you further and guide you through the whole selection process. We are a trustworthy service provider in ASEAN countries – perfect alternatives to traditional destinations like India and China.