China Offshore Outsourcing Capacity with Rapid Growth

As the domestic environment of the service outsourcing sector keeps improving and the homegrown service providers offer better services， the service outsourcing market constantly drives China’s industrial transformation. According to IDC’s latest report Forecast and Analysis on China’s Offshore Software Outsourcing Market during 2012—2016， China’s offshore software market posted a scale of USD 4.123 billion， up 22.8% year-on-year and this market is projected to grow at a compound growth rate of 25.3%.

Looking at different markets across the world， as the European and US markets are more mature and the package distribution business covers the complete industrial chain， the outsourcing service from Europe and the US grows rapidly and therefore Europe and the US have surpassed Japan as China’s most important offshore service source country. Impacted by the earthquake and a declining economy， Japan’s outsourcing business sees slower growth， and furthermore the Japanese enterprises are more concerned about the construction of remote data centers and sharing operation centers as well as disaster relief business.

From the perspective of business segments， with ever greater capacity to provide services， China’s service outsourcing sector is also involving and adjusting. The business range extends from such low-end and low value-added businesses as coding and software testing to the high-end segments like industrial application development， product RD， consulting and solutions. In 2011， the industry solution segment accounted for a share of 6.4% in China’s entire offshore outsourcing market with a year-on-year rise of 26.8% in business revenue.

In terms of the development mode of the offshore outsourcing market， China’s offshore software outsourcing sector demonstrates the following features:

The 3rd party platform leads the future development of the service outsourcing market

With the advent of the era that the 3rd platform with mobile equipment and application as the core is supported by cloud service and mobile broadband network， the cloud platform， cloud service and corporate-level mobile applications have become a new focus in the service outsourcing market.

As cloud computing is highly efficient and reliable， more and more clients hope to set up Private Cloud and to migrate their current IT applications to the cloud platform， which may reduce risks. Clients prefer to outsource the cloud platform-related businesses to those professional cloud platform providers as google， Amazon and salesforce. IDC suggests that the domestic service providers need to conduct better cooperation with the cloud platform providers and to research industry solutions based on the cloud platform in a move to help clients successfully turn to cloud computing.

With the rapid development of digital terminals， a large number of enterprises begin to care about how to improve employees’ working efficiency via mobile applications. Fast innovation of mobile technologies and the application as well as management of crossmobile-platform confronts enterprises with severe challenges. Consequently， clients hope to cooperate with professional service providers so as to realize corporate-level mobile applications. IDC suggests that service providers need to wisely take the business opportunities so that they can migrate the current corporate applications to mobile equipment and exert application management; and based on the features of the mobile equipment， service providers may also conduct application development in order to provide more valuable services for clients.

Global support becomes clients’ new focus

To extend business scope and seek new growth points， more enterprises hope to possess businesses across the world. Globalization has spread from manufacturing to financing， retailing and the service sectors. In the course of globalization， how to implement， manage and operate cross-regional IT systems becomes a common concern the enterprises face. As a result， clients prefer to cooperate with those service providers who boast of much experience in offshore business， as these service providers may make full use of their knowledge and global service experience to solve the current problems. In the mean while， as China’s economy grows fast， many enterprises hope to nudge into the Chinese market. IDC suggests the domestic service providers seizing the opportunity in terms of providing clients with such services as system construction and system operating. In this way， service providers may conduct regional and global IT supporting services in a wider scope.

Service providers need to enhance business delivery capacity at all dimensions

As IT is gradually integrating with business， enterprises not only just want IT technologies and products， but also hope to drive business growth by IT investments and to help enterprises quickly adapt to the changing external environment. Therefore， the service outsourcing sector based on market segments has gradually become clients’ focus. According to recommendations from IDC， service providers are supposed to have in-depth knowledge of the features in various sectors and the industrial development trend with a view to providing more valuable services.

With the service outsourcing model is maturing， clients demand package distribution in a larger scope and service providers are in the transition from low-end application development and testing to the entire IT service industrial chain. To better drive business growth， service providers are actively offering end-to-end services and upgrading their service capabilities. Such high-end businesses as IT consulting and solutions account for an increasing ratio in the whole service outsourcing business， facilitating the upgrading and continuous growth of the service outsourcing sector.

Overseas onshore delivery capacity is the key for service providers to expand business

In order to further expand offshore business and form long-term partnership with clients， more and more service providers have set up offshore branches at abroad， aiming at timely identifying and meeting clients’ demands. However， as these branches， in a small scale， are equipped with weak onshore delivery capability， the Chinese manufacturers have encountered bottleneck in exploring client base. To compete with the service outsourcing counterparts from India， the homegrown leading service outsourcing manufacturers including hisoft， VanceInfo and Chinasoft International are taking the initiative to expand the scale of their overseas branches and to enhance delivery capabilities so as to sharpen their own competitiveness and to sustain growth of offshore businesses.

“To become more powerful and stronger in the offshore market， the domestic service providers had better enhance their capabilities in RD and solution providing in their own sector by possessing greater delivery capability and expanding their advantageous market segments. Meanwhile， the domestic service providers need to timely understand the market demands and then to invest in the emerging domains such as cloud computing， mobile application and business analysis by means of MA. In this way， they may offer innovative and high value-added services to clients. With the ever maturing of the framework of the service outsourcing sector in the 2-tier and 3-tier cities， service providers are able to relocate their delivery centers to these cities so that the cost structure can be optimized and their overall competitiveness can then be enhanced，” said Mao Qiong， senior analyst from IDC China Service Research Department.