Chengdu turns into service outsourcing hub

A corner of Tianfu Software Park in Chengdu. The park has helped create a favorable "ecological environment" for local high-tech companies, which recorded offshore outsourcing contracts worth 44.5 billion yuan ($7.15 billion) in 2012. [Provided to China Daily]

When AAXIS Commerce, a US-based e-commerce consulting firm landed in Chengdu in 2007, they found no specialist in ATG, later acquired by Oracle into Ora-cle Commerce.

Attracted by the talent pool, strong support from govern-ment and the IT environment of Chengdu, which is home to several IT colleges and universities, AAXIS Com-merce decided to set up.

Of the 46,000 graduates from Chengdu's information technology schools, most went to first-tier cities like Shanghai and Shenzhen to seek a job.

The following years have witnessed an explosive growth in the city's software industries. Now more than 35,000 software engineers work for 300 plus software and service outsourcing companies in the city.

Duc Hang, executive di-rector of Global Delivery at AAXIS Commerce, and president of AAXIS China, said 80 percent of his 200 staff has a Sichuan back-ground. This means that they are either graduates from Chengdu colleges and uni-versities, or born in Chengdu and surrounding areas, or have family connection here.

This composition provides precious stability to AAXIS Commerce, with a client base such as 21 Century Fox, Universal Cinema and Dis-ney. Large movement of workers is a common com-plaint for many IT company bosses.

To Hang and his fellow staff, in addition to the city's strategic location, convenient international travel links, strong local government support, the cost of labor is also a major concern when they decided to move here.

"Chengdu produces 46,000 college graduates in IT every year. If only a half of them are harnessed, the power could be incredible,'' Hang said.

The vision is exciting, but the reality could be tough. Hang and his team had to start from zero.

They started from a train-ing program in the e-commerce software field. The training spanned the past six years. They dispatched a number of people from United States to establish the training program and the ini-tial team.

For AAXIS, this meant millions of dollars in spend-ing each year and as of now, the Chengdu center has not yet made a profit for the par-ent company.

But Hang believed the money was worth it. Work-ers in his company became skilled engineers and project managers in the niche soft-ware market. From the Chengdu center, they can provide professional consult-ing service directly to AAXIS's global customers, according to Hang.

"For IT consulting firms, it's very difficult to deliver service to China and Asia-Pacific from a Europe or US based team, due to language and cultural fac-tors," Hang said.

"As of now, the best capa-bility in terms of Oracle Commerce technology in China exists in Chengdu,'' Hang said proudly.

When asked if he could catch the latest trend of his industry in Chengdu, he said he didn't have to because his company is the trend.

Expanding the domestic market is a proud priority.

In the fourth quarter of last year, his company signed a short-term contract with a multinational in UK with a presence in Shanghai. This January, they signed a multi-year project contract with a large project of an-other multinational in Suzhou. (He declined to specify the names of the multinationals). Inspired by these projects, he is planning to increase his staff by 20 percent this year, and moving his office to an-other building in Tianfu Software Park.

They are already talking about transforming the cost center into a self-sustained profit center.

"In the first five to six years, we focused on 'capability building'. Since last year, we began to expand our local business, and we expect more and more local clients in our business portfolio,'' Hang said.

He appreciated the "eco-logical environment'' created by the Tianfu Softwar ePark, which houses 350 similar companies, of which 40 per-cent are foreign invested.

"In addition to routinely held seminars, we are also closely situated to each other. It is very easy to reach out and network other executives in the park,'' he said.

AAXIS's story is one of the many stories in the park, an emerging service out-sourcing hub and interna-tional R&D base that as-pired to become another Bangalore in China.

In 2012, the 1,200 service outsourcing firms in Chengdu executed off-shore outsourc-ing contracts worth $986 million, a 61 percent surge from the previous year. By last year, the output of Chengdu's outsourcing com-panies totaled 44.5 billion yuan ($7.15 billon), accord-ing to the city's commercial department.

And the story of the service outsourcing is also a part of the bigger success story of Chengdu's IT industry, now the largest industry for the 14 million Western metropo-lises.

Chengdu, once little known on China's IT map, now is home to world-famous high-tech companies such as Dell, IBM, Texas Instruments Inc and Symantec Corp.

In 2012, Chengdu's soft-ware and IT service industry hit 175 billion yuan, and the industry has kept annual growth of more than 40 per-cent in the past five years, according to Du Tingting, general manager of Tianfu Software Park.

Hang is among hundreds of expatriates who have wit-nessed the city's miraculous growth. He grew up in the United States and is a global traveler.

He said he didn't know any other place in west China that experienced this level of growth.

"Just seeing it developing in the last five years is amaz-ing: from no subway lines to two subways lines, and to more than ten subway lines in the future. When you com-pare that type of growth and investment in Chengdu with other places, it's indeed a very exciting place to be," he said.

"I believe Chengdu is not just another tier-two city. If you compared the investment in the software park with other places, there is a big margin between them. Hopefully it can become a top tier city in the future,'' he added.