Sharp rise in outsourcing services trade

Exhibition of Zhongguancun software brands at an IT fair. Home to a large number of high-tech firms, Beijing is at the forefront of the country in outsourced services. Sha Lang / China Daily

Beijing has consistently led the country in securing services outsourcing contracts over the past decade, with revenues from overseas orders surpassing $2.4 billion last year, an increase of 59.2 percent over 2010.

"To put it simply, service outsourcing means that via IT and telecommunication technologies, part of the office work from other companies is given to us to do," said Li Jing, secretary-general of Beijing Association of Sourcing Services, to the Beijing Morning Post.

The capital is home to more than 400 companies involved in this business, which covers services ranging from IT and research to industrial design.

Statistics from the Beijing Municipal Commission of Commerce show that the United States, Japan and West Europe are the major source of service orders from abroad, altogether accounting for close to 80 percent of the city's offshore market in 2011.

Of the three, the US is the largest source, with $833 million worth of business from it last year. And Japan took second place, with $376 million in deals signed.

The global offshore outsourcing market scale was about $126 billion last year, with India accounting for $70 billion and China securing some $13 billion.

Beijing accounted for about 18 percent of the country's total. Leading companies based in the capital have shown their edge in the international market.

Among them, high-tech firm iSoftStone generated more than $238 million in business revenue last year, 42 percent of it from international clients, said Zhang Xiaosong, CFO of the company.

The Nasdaq-listed company acquired a US consulting service firm Adventier Consulting Group in 2011. When it was founded in 2001, it had a staff of 40, which has since grown to more than 10,000.

The upcoming China Beijing International Fair for Trade in Services is expected to offer more opportunities for exchange and promotion, Zhang said.

His firm's cost competitiveness will help draw more high-end international projects, he added.

"By taking outsourcing service orders from overseas clients, we have made substantial progress in software development, quality control and project management," said Chen Lifeng, president of VanceInfo, another IT service provider in Beijing.

"After heavy investment in infrastructure, demand for services - especially those influencing production or management efficiency - is growing, which in turn brings an enormous market," said Wang Bin, board chairman of local IT firm Beyondsoft.

Thanks to policy support by the government, prospects for outsourcing services are bright, said Qu Lingnian, president of the Beijing association.

"In the future, companies will depend more on their professional technological expertise, high-quality service delivery and tailor-made products to win orders, rather than purely price competition," Qu said.

In spite of less than 20 years of development, the services outsourcing sector has grown rapidly in China.

With a great number of software and IT firms in Zhongguancun, Beijing's high-tech business hub, the capital was among the earliest Chinese cities to be known for outsourcing services, and it maintains a leading position in this field.

After a group of international software giants began operations in Beijing around 1995, they started outsourcing more services to local firms. Many local private investors sensed the opportunity for start-ups.

Now five Beijing companies involved in services outsourcing have gone public on Hong Kong and US exchanges. Of the top 10 Chinese outsourcing service providers, four are from Beijing.

zhuanti@chinadaily.com.cn

(China Daily 05/25/2012 page20)