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]
Peter,
I think Lisa's use of the word "Physical Infrastructure" can be taken the wrong way - she is referring to the F&A BPO services-specific infrastructure - i.e. the current availability within China of F&A service centers, multi-lingual capability and F&A talent that are requirements for F&A-type services. Having visited China many times when I used to live in South-East Asia, I can attest to the fact that language issues, combined with the lack of accouting-specific training will really hold back China from the F&A BPO market for sometime to come. Moreover, as a result of the British colonialization, Indian accountants are trained in both British and American finance pracitses. Accountancy is a more natural fit for India, especially considering the thousands of accounting students graduating each year, in addition to the excellent accountancy training programs being established by Indian-based suppliers like Infosys and the global BPO suppliers like Accenture and Genpact who are investing heavily in their Indian F&A centers. Surprised noone mentioned their airline services....I have them level-pegging and even worse than the US -:)
Posted by: Phil Fersht | Jun 09, 2007 at 06:42 PM
China's infrastructure light years behind India? Not sure what airports or roads the author has experienced in China, but the contrast is the otehr way 'round.
The conclusions are sound, but the rationale cited is spurious.
Posted by: Peter Allen | Jun 09, 2007 at 05:03 PM
BPO tech centers and processes are not at all at the same levels as in India, proven by the fact that all BPO providers have fewer services being run out of China versus other offshore locations at present. Not to say that tech & telecom capabilities aren't there, but for BPO services - and FAO specifically - they are less sophisticated at handling such things so far.
Posted by: Lisa Ross (FAO Research) | Jun 07, 2007 at 01:03 PM
Great post Lisa. One question: You write: "China's physical infrastructure, although improving, is light years behind technology centers in India." I thought China had better infrastructure and higher telecom penetration. Am I missing something here?
Posted by: Apu | Jun 06, 2007 at 06:20 PM
hi,
very good Blog! I am haitao from china, I am running the first portal website of china outsourcing industry, www.chnsourcing.com.Hope I can have the chance to work with you to do some great works in this industry!
Posted by: qi haitao | Jun 05, 2007 at 09:33 PM