The reality is, however, that even businesses in China and India, where there is little arbitrage in labor and operating costs, actually outsource some business functions.
Not that cost-cutting is the only possible benefit from outsourcing. As the region’s companies are beginning to realize, outsourcing has other more subtle advantages: enhanced competitiveness because of access to global best practices, for example, and a greater ability to focus on core competencies.
A study by KPMG concludes that outsourcing in Asia-Pacific seems to be more pervasive than generally thought. Confounding conventional expectations, outsourcing is quite popular with companies in the region. Half of the surveyed executives (54 percent) say that they currently outsource IT solutions, while a third (35 percent) outsource accounting, debt collection and tax processing.
Outsourcing as a business strategy looks set for growth in Asia ― about a third of respondents say they plan to outsource human resources management in three years; and a quarter each intend to outsource information technology solutions, data collection and report writing.
It is not only companies in expensive economies that are outsourcing but also those in China and India, where labor and operational costs are low. Traditionally, companies outsource primarily to cut business costs and so Asian outsourcing clients are expected to come mostly from labor-short and expensive places like Australia, Japan, Hong Kong and Singapore. Because they operate in the same country as the outsourcing providers, enterprises in lower-cost China and India are seen as not really interested in these services.