A recent Forrester report 'China's Diminishing Offshore Role' states while China's percentage of global delivery model resources for the top services firms such as Accenture has dropped, there has been far greater investment into India and the Philippines.

The report based on interviews with a mix of 10 MNCs, Indian, Chinese and Japanese services firms as well as government officials, states that "while the Chinese services firms are supporting a vibrant local IT market, China has not achieved the offshore growth that people expected."

The report quoting an interview says, "China had to be 20 per cent cheaper than India to be viable, and it's roughly at par in terms of rates currently."

According to the report, Japanese clients constitute a major share for Chinese offshore service providers. The business from the US and Europe have been slow to materialise.

On the other hand, the weak demands from clients have impacted the quality of services from providers firms, which are to a large extent limited to project application development work or SAP implementation. "On an average, firms only have 20 to 30 accounts, of which 50 per cent were only doing project works," it added.

The skill base growth of Chinese IT professionals is also very limited and largely focussed on modern language skills such as J2EE. As a result, clients should focus in smaller projects in this realm to limit the exposure to the small supply of higher-end, more experienced technical skills.

On the other hand, the other global delivery model locations such as the Philippines and Brazil are growing at a much faster pace. The Philippines grew at two and half times the rate of China, on the strength of its English-speaking skills and large investments led by Accenture, the report said.

The report says that countries such as Thailand, Malayasia, Egypt and Morocco who are preparing as viable offshore markets, should learn from China's slow pace, and need to focus on advanced skills such as project management and advanced architectural skills. The service providers also require marketing help to build up differentiated specialty skills, it adds.