China''s bid to rival India as BPO destination a "distant dream": Forrester

New Delhi: China''s attempt to emerge an alternate offshoring hub to India''s soaring salary levels and high attrition rates, remains a distant dream as its market is developing slower than expected, says a new study by technology research firm, Forrester Research, released today.

Despite massive government support and huge global visibility, China''s offshore market has not taken off as on the scale expected and it still has a long way to go to become a potential alternative to India, Forrester said.

Multinational firms, considering China as a "quick-fix" solution to deal with rising costs and high attrition in other offshore locations like India, would be sorely disappointed by the country''s slowing offshore momentum, the report said.

John Mccarthy, vice president, Forrester, said, "When we first looked at China''s offshore and IT services global delivery model (GDM) nearly two years ago, the country was widely viewed as the key challenger to India for offshore supremacy. However, the market has not taken off as expected."

He said while Japanese firms were more aware about China''s potential, those from the US and Europe have been slow to respond. "In fact, China''s percentage of GDM resources for top services firm like Accenture has dropped, while India and the Philippines have seen far greater investment," he said.

Mccarthy, who had predicted in 2002 that over three million BPO jobs in the US would go offshore, added that firms with large bases in India should consider other geographies when addressing the risk mitigation issue.

Even countries like the Philippines, Mexico and Brazil could prove to be better alternatives than China for diversifying offshore exposure in terms of skills, language and convenience, he added.

Forrester also said like India, China also faces similar problems of attrition, increasing wages and lack of experienced managers and technical leads. In addition, the appreciation of the yuan against the dollar was hurting margins of companies outsourcing their work to China, the study said.

"The consensus among interviewees was that China still has not overcome clients'' concern about limited English skills, attrition and weak intellectual property protection. One executive went so far as to say that China had to be 20 per cent cheaper than India to be viable," it said.