IT Outsourcing market 2011-2015
After becoming the manufacturing center of the world, China has unveiled a plan to capture the IT outsourcing market in the coming years. According to several studies, the global IT outsourcing market could reach $ 500 billion by 2015. This year China's Ministry of Commerce will launch a campaign with an annual budget of $25 million USD to persuade 100 global companies to transfer some of their IT works to China. At the same time, government sets goal to have 10,000 companies in 20 major cities ready to provide IT outsourcing services. If China succeeds in its efforts to attract more IT outsourcing dollars, the impact could be enormous.
However, many experts do not believe China can succeed in its quest to capture the IT outsourcing market. Although, China has better IT infrastructure than India but a majority of Chinese IT workers do not speak English well which will be a major weakness in getting outsourcing business. Although both countries are struggling to improve their education systems, the results are so far not very impressive. Among million of graduates each year, only 23% are suitable for industry jobs. Although China's top schools, such as PekingUniversity, TsinghuaUniversity and FudanUniversity are world-class universities but a majority of other universities are still have an archaic training programs, most of their graduates do not have skills to work in the IT job market. Industry experts pointed to the data that China's 's outsourcing business is reaching approximately about $15 billion which is a small fraction of India's almost $100 billion last year. However, Chinese government officials hope to close that gap soon due to their heavy investment in education and training.
Despite many improvement attempts, its education system has not making much progress. The current education system is still based on a lecture-based style that puts emphasis on theory, book knowledge and rote memorization. Student knowledge is measured by passing national exams which emphasize memorization resulting in most students do not have the practical skills to work in IT job market. Few years ago, a top PhD student at Tsinghua University named Wang Yin wrote a 15-page open letter, titled "The Smashing of the Tsinghua Dream", explaining his reasons for dropping out of its computer science program. He attacked the school's obsession with producing "meaningless research papers, rather than focusing on practical training". After the open letter was placed on his website and sent to many newspapers, over 100,000 students send emails to support him and demand better education reform.
Unfortunately, due to government encouragement, China's university enrollment is growing from ten million to thirty million students per year. Most universities are burdened with too many students and larger class sizes. Most professors have to use microphones to lecture and rely on harder tests to eliminate students rather than to encourage them to learn. China's traditional education favors the degree as the symbol of knowledge than practical skills. Most of its graduates are still facing significant difficult transition from the classroom knowledge to the workplace skills.
Another major disadvantage is China does not have enough skilled executives and middle level managers to manage the fast changing industry. The government study showed that 78% of Chinese companies lack "suitable candidates for executives and middle level management”. Most executives and middle level manager usually came into their current positions based on their past achievement which dated back several decades. Many continue to manage even in their late years (60s, 70s) which is a major problem as many companies continue to lose money. The success of manufacturing have raised the costs of doing business in China, make it more difficult to compete with nearby countries such as Vietnam, Malaysia and the Philippines in IT outsourcing.
Although India is doing very well in IT outsourcing for many years, its success has brought another issue. With the effort to help millions poor people, especially the “lower caste”, Indian government have set quota to increase number of student enrollment in its universities and requires them to quickly graduate as many students in IT as possible. This law and quota of graduates have many universities worried that they will lose their academic quality. According to new study from India industry, the law of fairness and helping poor students from the lower caste has produce several hundred thousand IT graduates but over 70% of them do not have the skills to work in its IT industry. It already damaged the “slow to change education system” that provided skilled workers that this country needs. Last year, an Indian scientist named Radhakrishna Rao warning that India's education system is on its "deathbed". In a letter to the Prime Minister, Mr. Rao highlighted the threat faced by the overwhelming enrollment of students in the field that most of them do not qualify. He concluded with the claim that "Indian education will be finished in the next few years as its universities have completely dried up."
The current issues of both India and China has open opportunity for other countries such as Russia, Eastern European (Poland, Hungary, Romania, Czech republic, etc.) and Brazil. These countries have seen significant increase in outsourcing business in the past few years as both India and China have shortage of skilled workers and could not meet the global demands. Russia is now occupied the number three position in the IT market. As Eastern European countries improve their education system steadily, with number of skilled workers who also speak English well, the competition for the $ 500 billion dollars market will be tough in the next few years.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
