Can China challenge India as a BPO powerhouse?


Lisa Ross is a long-time respected analyst in the BPO world and runs her own research organization, aptly-named “FAO Research, Inc” which has taken the industry by storm over the last couple of years. Lisa has spent a lot of time talking with the advisor, supplier and end-user communities to understand the role China can potentially play in BPO – and most notably Finance & Accounting Outsourcing, which has some a heavy offshore component… In advance of the G8 Summit, take it away Lisa:

A sentiment we hear often from buyers, suppliers and advisors in the outsourcing space is that China is fast becoming the next India – but is this really an accurate statement for the Finance & Accounting Outsourcing (FAO) space?

Let’s first look at the glass half empty:

• China’s physical infrastructure, although improving, is light years behind technology centers in India.

• Same with human resources – workers are available and growing in number, yet their proficiency in foreign languages and cultures and process expertise is lacking. For voice-based BPO services, only Japanese businesses are being serviced currently from cities like Dalian which has a high Japanese-literacy rate; however, most Japanese businesses do not like the Japanese being spoken with a Chinese accent, so few of them actually use China-based services.

• There are roughly 220 million middle-class Chinese many of whom are learning English compared to 350 million Indians (more than the US and UK combined). Moreover, Indian pop culture – most notably movies – adds new elements to the Indian English language, which China seems to lack.

• Privacy laws are a mess, causing great security concerns, specifically around F&A issues.

• Financial development has yet to keep pace with the country’s growth, as the Asian Development Bank (ADB) also struggles to reinvent itself.

• Knowledge management – a key ingredient to foster business and process innovation – has yet to be proven in large scale.

And now for the glass half full:

• China is moving from mass poverty as a whole to middle-income living, so the need for overall economic reform is tremendous – the need for FINANCE reform even greater. Enter FAO.

• China has LOTS of money to spend – aside from being a massive exporter of capital, it’s currently a magnet for private capital inflows. And with Chavez angling to unseat the U.S. as Venezuela’s partner in the oil business, etc.

• Many F&A processes require minimal customer contact and are data-centric. With many of the Indian-based sourcing models encompassing 10% of delivery onshore for voice-work and 90% operating offshore, there is every reason why the Chinese can replicate this model.

All-in-all, it seems that China will prosper in the short term with its engineering, manufacturing and technical acumen, but is still someway off becoming a major force in BPO services – namely Finance and Accounting and contact center . Once the middle class populous develops stronger language skills and supplier resources become more sophisticated – which will happen eventually – we can expect to see them compete more prominently in the BPO arena.


Lisa Ross is Chief Executive Officer at leading BPO analyst firm FAO Research, Inc. and can be reached at [email protected]

Posted in : Sourcing Locations


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