Software Outsourcing: The Asian Region

Feb 07, 2008

Up until now, India benefited from close cultural affinities with the United Kingdom and was the most cost effective location, considering the fact that with the same amount of money that is needed for an American employee in the Unites States one could hire four Indian similar specialists in Bangalore. In India, the English language is a base language but there have been several strong reactions from American or European customers regarding the strong Indian accent which is present without exception in every conversation and which makes the communication difficult. This negative aspect has been a downfall for Indian support call centers in which a fluent and easy to understand communication is crucial. Also, in India the cast system is still present, making it's way through every hierarchy which includes young employees and older ones. The young and fresh graduates are being inhibited by the elderly which can not be offended or come to contradiction with, so decisions are not a subject to debate and evolution and progress are greatly affected and delayed. This tradition represents a cultural aspect of Indian life which is not easily assimilated by Occidental clients which have to put in a lot of effort and training into Indian employees.

The Philippines have been pushing hard to advertise their own IT resources and capabilities but it seems that this is not enough to make it on the tough outsourcing suppliers market with near by competitors such as India or China. The Philippines have been well known for their semiconductor foundries that were initiated by Intel or Motorola. They have a good history with call center outsourcing since English was set to be one of the primary languages by the government. What the government failed to do is to take initiatives when seeing the Indian success and made Philippine to lack the size and scale of the Software Industry because Philippine companies do not yet posses major certifications such as SEI CMM.

China is one nation that seriously poses a threat to India as a competitor on the outsourcing market. With the largest population in the world it produces each year the largest amount of engineers a country could ever have. It has the figures and low cost structure that make it a cost effective location and, moreover, the cost to set up a business is even lower as compared to India which gives China the advantage. Taking a step ahead, China decide to offer tax breaks to foreign companies which decide to offshore operations there. According to Li Bing, deputy director of the Department of Computer Software in China’s Ministry of Science and Technology, “software companies pay zero tax for the first two years of operation and then a favorable rate for years three to five.” This aspect comes as a compensation for the difficulties it imposes on new foreign businesses because of the rigid enforcement of intellectual property rights and language barriers.

Malaysia is one of the rising stars in the BPO fields (Business Process Outsourcing). Its attractiveness consists of low costs, especially for infrastructure and a strong score in providing a good business environment which have enabled Malaysia to rival India's position in BPO. A distinct Malaysian advantage is that of a multilingual labor pool that speaks English, Malay, Mandarin, Cantonese, Hindi, and Tamil. The downside is that Malaysia has just a mere 20 million population and its economies of scale do not allow it to obtain other competitors level of expertise. There have also been concerns regarding data piracy which are affecting the industry.

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Software Outsourcing: The Asian Region