China's offshoring capabilities mature - but is it enough for European businesses?
While China is well on the way to establishing itself as an outsourcing hotspot, the country isn't set up for European and Northern American offshoring business just yet, according to new research.
A report by outsourcing consultants Everest rated China - along with India and the Philippines - as a mature offshoring destination, with more than a quarter of businesses surveyed by the company saying they plan to expand their presence in the area over the next two years.
According to Everest, however, most outsourcing work carried out in China is used to support companies' operations in Japan, South Korea and south-east Asia.
"China is a mature offshore services destination but only for regional support," the report noted, adding: "China still lacks several capabilities that global companies seek for supporting North America and Europe."
The most significant capability the country needs is sufficient numbers of experienced project managers able to deal with North American and European clients. A lack of cultural affinity and suitable English skills also hamper China's ability to take on outsourcing work supporting the regions, Everest said.
Concerns over data security are also putting constraints on what type of work Western businesses will send to China, according to the report, meaning projects involving sensitive data, customer details or valuable IP are often not sent to the country.
"While supplier-specific controls selectively help address these concerns, perceptions continue to drive sourcing behaviour. While this does not make China a complete "no-fly zone", it does create restrictions on the services offshored by companies as well as their operating model. In other words, a company that is comfortable sourcing an end-to-end activity from another geography may only source a small portion if it's from China," the report said.