Noting an increased competition coming from the Indian and dragon cities, IDC says both nations are working towards creating a long-term sustainable competitive advantage.
IDC's Asia/Pacific Global Delivery Index, 2010, also indicates that these countries are investing in technology, infrastructure and talent development.
The Chinese government is leveraging its foundation of the 1000-100-10 initiative that was rolled out in 2006 by the Ministry of Commerce. This initiative aimed to accelerate the country's information technology outsourcing (ITO) and business process outsourcing (BPO) services.
Through this project, 22 cities now have been identified as software and outsourcing locations in China.
The government of China has made investments to promote a convergence of fixed line, cable and broadband services and cloud technologies, particularly in Shanghai and Beijing.
IDC expects investment in this convergence known as Triple Play to tip the global delivery scales in favour of the Chinese cities by 2014. Tiger nation, India, has thousands of trained professionals and this gives it a competitive edge in the talent forte.
Apparently, the local governments in India recognise the importance of education to build a strong economy and they are therefore investing heavily in technology schools to churn out graduates with the right skill sets to meet market needs.
"Infrastructure investments, particularly in terms of key technologies, will drive foreign direct investment, which in turn will bring with it foreign talent. If this talent is capitalised upon and can be used to train locals, there will be experienced talent available in China within the next five to seven years, placing the dragon in a dominant position on the global delivery map," said Suchitra Narayan, research manager, services, IDC Asia Pacific.
"India cannot rest on its laurels and rely on its existing differentiators of 'low cost' and 'availability of talent'. It is currently in a position to capitalise on the best practices and years of experience to build out/automate future technologies and solutions that may stand it in good stead for the future. Strategic growth and investments are key for future dominance," added Narayan.
IDC has also noticed more requests for "mixed shore" solutions, whereby services are delivered from more than one location.
Businesses are focused on diversifying risk and according to Narayan, the global delivery landscape is set to move towards 'Offshore 3.0', a mixture of shoring solutions, platforms, best practices, risk diversification, and new technologies such as cloud.
"The economic downturn of 2008-2009 only served to highlight the need for global diversification, to limit the exposure to political instability, currency fluctuations, and the potential unavailability of skill sets," she added.
IDC forecasts further demand for the upcoming services offered in the emerging Tier 2 and Tier 3 cities. Hangzhou and Shenzhen in China and Hyderabad and Cochin in India are set to strengthen their positions on the global delivery map by 2014.