China Aims to Gain from Satyam Mess

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To be sure, the Indian companies have been responding by setting up operations of their own in China. Satyam, for instance, was aggressive in expanding in the country. So, too, were Infosys and Tata Consultancy Services (TCS.BO). But executives from small, China-focused companies argue they still have an advantage over their Indian rivals. "We will live or die on our capabilities to deliver in China," says Keane of Dextrys. Indian companies "are not as motivated to make [doing business in China] work."

Acquisition Opportunities?

Regardless of which company is doing the work, China still has a long way to go before it can begin to match India's performance in services outsourcing. China's services companies can't come close to the size or expertise of the Indians, says Benni. "We don't yet have any player in China that has at least $1 billion in outsourcing revenues," he says. And the Chinese don't have the global reputation yet to win big jobs. "Multinationals that would look at larger deals are looking for partners with the capabilities and size to support them," Benni says.

While the Satyam scandal is prompting some companies to think twice about their current outsourcing arrangements in India, getting them to make the change to a new, unfamiliar environment won't be easy. "If we don't have a player of a decent size, trust will be difficult to build," says Benni. But the global economic downturn could present acquisition opportunities for some China-focused outsourcing specialists looking to gain the critical mass they need to compete. "The crisis could actually be a catalyst for China," he says. "There are clearly companies [worldwide] with depressed valuations that could make exciting targets for Chinese companies to access global markets and increase talent."

For a look at the world's leading countries for outsourcing, click through BusinessWeek.com's slide show.

Einhorn is Asia regional editor in BusinessWeek's Hong Kong bureau.