China's offshoring ambitions

Patrick Thibodeau has a story in this week's Computerworld that examines China's IT offshoring ambitions.

Some of the developments that Patrick describes are not new. I've previously discussed two of them: the Chinese government's efforts to protect and/or build critical IT industries, and why China lags behind India in attracting international offshoring revenue.

However, Patrick fills in a few details that I missed, especially concerning how far China lags behind India in its drive to attract foreign offshoring projects: China's international offshore revenue was about $600 million last year, compared to about $17 billion for India. Also included in the article was a suprising assessment from a Chinese executive, who believes the Chinese offshoring market will expand, "particularly as the nation enters the World Trade Organization, hosts the 2008 Olympics and sees a boost in IT spending by the Chinese government."

If I were to pick three factors that would potentially help China increase foreign offshoring projects, the list would not include multinational trade agreements or a one-off sporting event. It would include factors that are far more important to American companies looking to offshore IT projects in other parts of the world: costs, the availablity of IT skills, and various management issues.

While China has shown the world it is competitive in terms of cost, and has a large pool of programmers and other technical talent, management issues are more problematic. These range from not having enough English-speaking developers and IT project managers, to bureaucratic issues involving joint ventures and the Chinese legal system.

Certainly, the Chinese central government (as well as local government entities) have recognized the importance of building a modern infrastructure to support IT offshoring projects, as evidenced by the new software office parks cited in Patrick's article. However, building a few office buildings and golf courses and hosting the Olympics aren't enough to make China a serious competitor with India in attracting IT offshoring projects from the United States. More fundamental changes are required, ranging from increasing English education at China's technical schools and universities, to reforming parts of the legal system.