China’s Golden Sourcing Opportunity

A decade ago, the sourcing market share of Indian-heritage service providers was a puny 1 percent. Today, it is approaching 20 percent. Will an emerging group of Chinese service providers achieve similar growth and reshape global competition in the process?

TPI has been working with the Chinese Ministry of Commerce (MOC) and the China Council on International Investment Promotion (CCIIP) since 2009 to accelerate development of the sourcing market and establish protocols designed to make the country more attractive to multi-national corporations seeking to diversify their global sourcing footprints.

The China Sourcing Summit we organized last summer with the MOC and CCIIP, aimed at promoting development of the domestic outsourcing industry, not only identified the challenges for clients and service providers wanting to capitalize on these opportunities, but also shared ideas on how they can overcome them.

While rapid growth is a possibility for this group, the outsourcing environment today is different in four important ways:

  1. Global service delivery is the new normal. Today, two thirds of all transactions include offshore delivery.
  2. More contracts are multi-sourcing arrangements instead of large, exclusive contracts with one provider. This increases opportunities for providers as more companies were multi-sourcing at a higher volume in 2010 than any company was sourcing at all in 2000.
  3. Today there are more providers with more capabilities in more locations. With a greater number of providers competing for a share of the global market, service providers are standing out by touting their geographical locations, specializations and better costs.
  4. Outsourcing clients are saving more money (about 33 percent more than seven years ago).

Traditional concerns about the Chinese market (IP and data privacy issues as well as language) could be constraints. But so far, opportunities in the outsized domestic market and the strong support of the national government have been too enticing for global service providers, large captive centers and organizations looking to expand their China business to pass up.

Those that do not consider China in their long-term strategies risk losing the opportunity to take part in the growth that will accompany the shift from an early adopter phase to an expansion phase in China.

About the author

Mr. Rehkopf brings 30 years of experience in operations, strategy and sourcing, working for Australian, Canadian, German, Japanese and US companies in business process and IT to ISG’s clients. He applies his diverse industry experience with his university background in finance and accounting, IT and dispute resolution to assist clients in the development of business strategies and the implementation of sourcing strategies, including the associated evaluation, negotiation and organizational change.