Communist China is racing to become the world for offshore outsourcing destination. With many government initiatives in this regard, it is estimated that actually moves offshore outsourcing to achieve supremacy.

Strong government initiatives, an education system creating a more skilled workforce and the unique economic conditions in the country has positioned itself to challenge the dominance, even in India for offshoring.

While the favored destination for foreign manufacturers due to their low wages, China is striving to move up the value chain and capture a significant part of information technology services and back-office market, too. However, China has major challenges to overcome, as the companies seeking to establish operations there.

Atul Vashistha, the CEO of consulting firm in San Ramon neoIT relocation and co-author of the book The Offshore Nation: Strategies for Success in Global Outsourcing and offshoring, “says that” China is certainly becoming a more attractive destination. ”

Moreover, said that the nation of the IT industry was until recently the country was focused on the development of market and business in Japan, but in the last couple of years that has changed. The Chinese government is trying to unify the efforts of various organizations to promote the country’s IT parks and special economic zones for outsourcing from the United States and other Western countries. It is also studying the outsourcing industry in India and the United States.

While these efforts are far more fragmented than similar moves in India, which are starting to come together, Vashistha said.

China is an attractive candidate, especially for IT outsourcing. Offering many of the same characteristics that have made India the top destination for offshoring IT and other services. Despite moves to open its economy in the past two decades, China remains economically apart from the rest of the world, wages are much lower than in most places at a cost of living wage that makes possible . At the same time, central control over the education system has created a skilled labor supply widely distributed.

A number of outsourcing centers have developed – most famous among them, Beijing, Shanghai, Shenzhen and Dalian, where 40 years of Japanese occupation (1905 to 1945) left the Japanese language skills and cultural orientation, which has helped the region in northeast China to develop business relations with Japan. Although the country still lags behind India, large IT companies like IBM Corp. have opened operations in China, as have prominent Indian outsourcing companies, including Bangalore-based Infosys Technologies Ltd., headquartered in Fremont, EE . .. UU

However, China faces major challenges. Cynthia Kroll, a senior economist at UC-Berkeley Haas School of Business, who has researched the global outsourcing, institutional differences cited as a difficulty. India is much closer to the United States in an institutional sense, making it easier for U.S. companies to settle there, he said.

Chinese in big cities or areas where the government has taken an interest, the government will address infrastructure and other problems, said Kroll. But in small and remote towns, companies may find less room for the local government and practice areas will also be less Westernized.

Another problem is the lack of mid-level managers with global experience, Vashistha said. With the huge Chinese market, domestic firms have focused – not global – operations.

A major challenge is the language, but the Chinese government has been working to overcome that obstacle with several campaigns since July 2001 when Beijing was awarded the 2008 Olympics.

Vivi Wang, editor in chief of the Chinese Taipei LiveABC based education publisher, which publishes English-learning materials for the Asian markets, said that organizations around the local government of Beijing has made learning English a priority. The goal is to have more people speak English – the taxi drivers, shopkeepers and people on the street. The government wants to use the Beijing Olympic Games to show how an international city and English is considered helpful.

NeoIT’s Vashistha predicts China will become a serious contender for the information technology and outsourcing back-office after the Olympics.

While China’s biggest attractions include lower wages and a large force of skilled labor, labor markets in major Indian cities like Bangalore have been tightened, driving up both wages and the volume of business.

In response to that change, based in San Ramon Achieve Corp., which provides software and IT outsourcing services, has focused on China. Achieve President and CEO, Robert P. Lee said China’s pervasive system of education is an advantage, since it extends the skilled workforce in small towns.

Achieve has established operations in several Chinese cities and plans to open more on the premise that wage growth as the largest metropolitan areas, the company will be able to keep the savings for customers.

Going beyond the large cities may have additional benefits, said Lee. A high proportion of workers in big cities have migrated from other parts of the country. In China, where the family is highly valued, working closer to home is an important benefit, even if the pay is lower.

As American companies have learned in India, hire and retain skilled workers are among the most difficult challenges. Lee stressed the importance of overcoming the high turnover, affecting the efficiency and costs.

Lee said his company also maintains a staff of more front-end in different countries – with a ratio of two IT staff in the client’s country of every seven in China – to help the efficiency of projects.

These factors leave much business to consider. Lee said that the companies have to look at the strategic role of outsourcing and see if there are advantages in a particular country.

NeoIT’s Vashistha, who has consulted on outsourcing in several countries, it offers three main points to consider: the strategy, the source and governance. He said that a company should begin by reviewing its processes and its ability to outsource them.

Next, the company must look at the skills available in a given country. English if necessary, China is probably not the answer, at least not yet, but for some IT tasks – for example, the software embedded in the chips – then China has the experience and skills. Companies need to match their long-and short-term capacity plans and trends in a country.

Finally, Vashistha said, companies must commit to investing in the operation and management of the outsourcing vendor.

Another strategic issue for large companies is the presence. UC-Berkeley Kroll said that for many multinational companies, the cost advantage is only part of the decision. “If you want to sell in China, must have a presence in China,” he said, outsourcing is a way to establish that presence.

And the mass market in China is a big draw, giving another advantage in competing for the relocation of businesses.

“China is coming up and is in many ways,” said Kroll. And his role in outsourcing is certainly going to grow.