Numerous studies have shown that India is the most attractive destination for offshore outsourcing. AT Kearney released a report on country attractiveness for outsourcing and offshoring in 2004.

The report placed India at the top of all the studied countries, followed by China and Malaysia. Various factors such as availability and education of human resources, cost considerations including wages, infrastructure cost and taxes, and the overall political stability and intellectual rights security were used to find an attractiveness index for each country.

India ranked highest in the availability of talented, skilled and experienced work force. India also offers the best financial structure as it has a favorable tax and regulatory environment, labor costs and infrastructure costs. The research findings are summarized in Table 5.

Table 5: Attractiveness Index for Offshore Location

Source: AT Kearney

Though China is next to India as an attractive destination, it lags behind India in a number of parameters. Table 6 compares the two countries for their suitability for IT outsourcing based on factors such as talent pool, government support, education, etc. Clearly, India has a larger talent pool which is proficient in English and which produces better quality work using superior infrastructure. The Chinese government is, however, taking steps to improve China’s value proposition for an offshore hub in services. It is focusing on providing excellent higher education to its youth by starting about 100 technological institutions similar to the IITs. The Chinese government has also made English compulsory in schools to increase the number of English speaking people.

Table 6: Country Comparison for IT Outsourcing: India vs. China