Outsourcing Infrastructure - China Tier 3 Towns Surpass India Tier 1 Cities

In a comprehensive report on IT services / China Technology published in mid-2010, equities research firm Credit Lyonnais Securities Asia (CLSA) explores the enablers and hurdles of China-based IT outsourcing, while providing a contrast to the outsourcing environment in India.  Authors Nimish Joshi and Bhavtosh Vajpayee compare key  factors to consider when conducting due diligence on outsourcing destinations.

Infrastructure is listed as one of key factors, with China receiving a maximum four stars while India is awarded a single star:

"India's physical infrastructure development has failed to keep pace with growth in its IT industry. Indeed, it is creditable that the software industry has grown despite the poor infrastructure. Yet, Tier-2/3 towns that have been identified as potential outsourcing destinations lack even the basic infrastructure and this is likely to impede their development...

The Chinese government remains focused on building better road and air connectivity and mass rapid public transportation systems in these cities. In fact, infrastructure in the smaller Chinese cities is much better than even the Tier-1 Indian cities. These designated model cities are much better connected by air/road/rail and the public transport system in these cities is also well developed. Figure 35 compares airport capacity of India Tier-2 cities. Moreover, utility costs in the Chinese cities are lower than the Tier2/3 Indian cities, most of which continue to face constraints on good office space and power."

Source: CSLA Asia-Pacific Markets Research

My first trip to India was while on business with Hewlett-Packard back in 1999. A colleague and I were traveling from HP Silicon Valley headquarters to the HP Bangalore offices on a knowledge transfer mission to train our offshore counterparts. One of us forgot to carry a laptop power supply, so we spent the next two weeks passing a single power supply between the two of us. Finding it too risky to wait until one of our batteries was nearly out of power before passing the chord, we ended up sharing power every twenty minutes. The building's power went out on a daily basis, and we couldn't be guaranteed that it would return before one of the laptop batteries ran out. We made sure to keep both batteries topped with power.

I have not traveled to India for some time, so I can't personally comment on the current environment there. Yet from CSLA's research it doesn't appear much has changed, at least on a relative basis.