Why outsourcing to china

Why outsourcing

Outsourcing is a fast growing industry which restructures business and can strengthen companies' core competence by breaking down the manufacturing chain. The information technology (IT) industry has been one of the foremost industries to adopt outsourcing as a means of cutting costs and optimizing resources.

Offshore outsourcing in China

Offshore Outsourcing is the fastest growing sector in the China IT services market. China has been successfully attracting investments into IT services projects. This is mainly due to the well-educated and cheap labor force in China. Indigenous companies could make a profit by offering outsourcing services or improve efficiency by contracting the subordinate projects to the service providers. And at the present, the offshore software outsourcing projects in China are not only software testing work but also software development and structure design. For those companies who are seeking offshore outsourcing IT services, China is a good choice.

Multi-country approach

Several years ago, In the face of declining profits in the domestic market, Chinese software companies started to focus on the more advantaged outsourcing business from overseas markets.

After years of doing software outsourcing for Japan and South Korea where they have an advantage both due to the geography and language, Chinese IT companies are now eager to gain a foothold on other international outsourcing projects in the US or Euro market.

Compare with India

India remains the No. 1 choice for many U.S. companies because of the maturity of its outsourcing market. But The Chinese Government and the IT service providers are working at various levels to compete with the dominant Indian participants in the global IT outsourcing market.

The number of Chinese engineering graduates and software applications professionals from skilled resources colleges and universities has grown considerably in recent years. These people coming out are well educated in basic computing and mathematics. They are disciplined and readily trained, making them better at tedious jobs than most Indians are. They're quite competitive with regards to their Chinese counterparts. Moreover India's lead in English skills is shrinking as more people in China take language classes and deal with foreign customers.

India used to be cheaper, but now salaries in India are jumping at 25 percent or more annually and staff turnover at IT companies can reach 30-40% a year. In China, lower costs Chinese IT professionals including software engineers and project managers cost roughly one-sixth of their U.S. counterparts which is now very competitive.

Capability Maturity Model (CMM)

Capability Maturity Model (CMM) is the de-facto global standard for established offshore operations and ‘perfect score' for IT which provides a practical guidance for Chinese organizations to improve software product quality. Indigenous companies have realized that certification like CMM is a passport to markets in the West and are working to attain high level of it. Now many companies in china achieved SEI CMM Level 4 assessment and there are a few companies, such as UFIDA software engineering who have been accredited to Level 5.

Political stability and Government Support

Besides The World Trade Organization, China is also member of APEC (Asia-Pacific Economic Cooperation). The government has adopted preferential policies, including taxes, high-tech parks and other incentives to attract and develop the high-tech industry.

A concern that European and American customers have, relates to weak protection of intellectual property rights (IPR). In recent years the Chinese government has attached importance to the IPR protection. Laws that protect private ownership and intellectual property have been passed and enacted. For instance: No unit is allowed to use unauthorized software products in its computer system; selling of pirated software shall be punished severely.

There has been a crackdown on software pirating and software copyright registration etc is encouraged.

The government has forged partnerships with multinational firms to train its IT workforce and accelerate the creation of a first-class high tech labor force. And the country is making remarkable improvement in increasing English speaking software engineers to sustain IT offshore projects. The offshore IT corporation have invested in employee training provided by universities and institutes, which greatly reduces on the job training time.

Chinese overall strength makes China a new business center. The government is making serious efforts to attract investors and widen its revenue from the IT sector. We believe China will become the world's biggest provider of software outsourcing in the near future.

Return