Indian offshore outsourcing giant Wipro is setting up its first Chinese development centre. The move could prove popular with businesses wanting to spread the risk of IT outsourcing by using multiple locations.

Wipro Shanghai Limited will be the firm's Asia-Pacific regional hub, aiding its plans to be a more complete alternative to IBM, EDS and other IT services giants.

The company is not making the move because it needs a larger pool of resources or lower-cost labour sources, according to PR Chandrasekar, European chief executive of Wipro. "The driver is risk mitigation: some customers don't want to put all their eggs in one basket by having all offshoring activities in India," he said.

Chandrasekar added that locations in Europe were also being evaluated, including the possibility of using sites in Eastern Europe for German companies that want the assurance of local contact.

Many pundits have suggested that a shortage of labour and consequential rising salaries would drive offshoring out of India. A report by analyst firm Datamonitor, says "nearshore" call-centre operations are appealing to Western European firms because of the growing availability of multilingual speakers and improved political stability. UK firms will increasingly send work to the Czech Republic, Poland and Morocco, the report suggests.

However, Chandrasekar insisted that India still has a bright future in outsourcing, citing attractions such as its pool of English speakers, its infrastructure and its cultural resources. "We're running at pretty high staff utilisation levels across the business, but it's not inhibiting our ability to service our customers," he argued.

Separately, Chandrasekar said Wipro is adding more staff in customer countries to assist with project management.

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