New York-based management consulting company, IT Knowledge Solutions (ITK), has recently been acquired by Freeborders. What makes this purchase notable is that Freeborders is to all purposes a Chinese outsourcing provider company, and the deal highlights the rapid development of the Chinese services industry.
Freeborders has acquired management consultant IT Knowledge Solutions.
Although Freeborders is actually headquartered in San Francisco, its differentiation is the extent of its presence in China, and hence its access to the IT skills available there. Freeborders states that China has 350,000 graduates with technology-related degrees, and it is not a matter of chance that it comments almost without a pause that this exceeds by 65,000 the equivalent number in India.
In addition, one of the major advantages that the Chinese provider market has (and hence Freeborders can leverage) is its early state of maturity, in which the supply of potential labor is awaiting demand for services. Consequently, salary levels and expectations there have not started the inexorable climb of those in India, and costs can be expected to be relatively stable.
The rapid rise to success of India’s outsourcing providers constitutes an excellent study model for those Chinese enterprises that aim soon to be their competitors in western markets. One of the most significant lessons the Indian companies learned was to have a local face to the corporate body, rather than present solely an ‘offshore’ image. Freeborders had around 500 employees prior to the acquisition, and is far larger than ITK (which has only around 40 people), but with ITK it adds an East-coast US presence, as well as relationships and experience within customer industries.
This is not a destination on the roadmap of the services industry – just one of the mileage posts. We will see many more acquisitions by companies whose strength is in the Chinese market before too long and, with Indian companies now investing ever more frequently to sustain their own remarkable historic growth rates, the expectation of large-scale consolidation among services vendors is highly likely to prove extremely well-founded.
Source: OpinionWire by Butler Group (www.butlergroup.com)