Shanghai Surprise: Company To Place Outsourcing Center in China, Not India

India may have the lead when it comes to outsourcing application development but some see China as the offshore destination of tomorrow.

Though India has long been considered the global hot spot for U.S. offshore application development -- due to low-cost labor, friendly laws and a high degree of English proficiency -- Bearing Point, formerly KPMG Consulting, has selected China as the location for its new offshore application-development facility.

The decision was made because China offers the promise of even lower real estate and labor costs than India.

"The biggest driver is the cost advantage we can deliver to firms from being in China," says Judy List, senior vice president of Bearing Point's Services Solutions Group. "Some rode the India wave but now we see China as the next wave and want to get on the bandwagon early."

Additionally, China was seen by Bearing Point as offering a more stable geopolitical environment due to lingering tensions between India and Pakistan over Kashmir.

Bearing Point is looking to woo development projects from U.S. and European firms to the center, which will be located near Shanghai and feature four components. The first will provide "next-generation" software development. The second will offer application integration, such as that required when implementing major software packages. The third area will focus on research and development and the fourth will provide managed services.

"For example, if a company is developing a new account-tracking system, that is something we could develop in China and operate in China or move it back to the U.S.," says List. "If someone has a mainframe and only needs to maintain it, we could do that in China."

The center, which is slated to open in the first quarter, will employ between 300 to 500 people and be staffed with local Chinese labor.

A disadvantage to China, admits List, is a lower level of English proficiency than places like India, where many firms have established call centers. List says, "If you are looking to move your call center offshore, then I would suggest moving to India because of the language skills but if you are looking for software development then China is cheaper than India."