China and India are key destinations for European companies that wish to leverage lower-cost economies and also enter exciting new markets.  At present, China is particularly renowned for its competitive manufacturing base, while India has been highly successful in outsourced processes.  However, the two countries are both major players in all aspects of offshoring, and we expect to see further convergence as the governments implement plans to rebalance their economies.

In business process outsourcing, experience gained in recent years is driving two key trends:

• Companies are moving from ‘low-cost’ to ‘added-value’ goals: The aim is no longer simply to save money by doing the same things at lower cost, but also to do things differently, better and to eliminate some activities all together.  Offshoring accesses local workers whose education and capabilities often exceed those of their European equivalents.  Whilst call centers remain big business, the trend in offshoring activity is now focusing on activities with a higher intellectual content, including accounting, HR management, and risk and investment analysis.

In manufacturing outsourcing, experience shows a similar added-value trend:

• Companies are becoming increasingly sophisticated in taking offshoring decisions: Deciding what to offshore, and how, is a key decision, particularly when key intellectual property or know how is at stake.  Companies need to consider carefully which aspects of their business deliver their core competitive advantage and so should be retained domestically, balancing this with demands on customer service, quality and competitive factors.  In China for example, the full range of government incentives is only available to those companies that are producing higher value-added products.

The form of an offshore capability can take many shapes, ranging from agencies and joint ventures to wholly-owned subsidiaries.  It’s important to take the time to understand and evaluate the options, and appoint a senior executive at the home base with dedicated responsibility for managing the transition.  Most of all, it’s vital to work with entrepreneurs and advisers who can provide deep local insight, experience and above all the local connections with customers and officials.

Print this page