IT outsourcing from China growing at 20-40 per cent: report

The information technology outsourcing business in China continued to grow at a decent 20 - 40 per cent even as global outsourcing business declined 39 per cent in the first nine months of the previous year, according to consultancy firm McKinsey & Co.

IT outsourcing from China continued to grow even as global IT outsourcing business saw a decline of 39 per cent in the first five months of the previous year, Alex Peng, a McKinsey partner, said.

On the other hand, China's outsourcing sector, led by companies such as Neusoft Corp and VanceInfo Technologies, is growing at 20-40 per cent a year, he said.

Commenting on China's cost advantage in IT, Peng said if the country were to jump start the growth and multiply growth rate, ''don't miss a huge opportunity here."

McKinsey said while the global outsourcing contracts have shrunk 39 per cent in the first nine months of 2008 to $11 billion, outsourcing business will continue to grow as companies desperately look for ways to cut costs.

Chinese companies will, however, have to better English-language skills and enhance intellectual property rights protection – the two areas India scores over others.

While China lags India in IT outsourcing sector, it can tap its own huge manufacturing sector and the growing number of multinationals to nurture IT sector, said McKinsey partner Enrico Benni.

Chinese IT companies command less than 10 per cent of the global market, but the Chinese government can open up a domestic market big enough to unleash an IT revolution in the country, McKinsey said.

The presence of Indian rivals like Infosys, Tata Consultancy, Wipro Ltd and even Satyam may, however, put pressure on Chinese firms, the report observed.