Several years ago, "services outsourcing" was a strange concept except, perhaps, for industry insiders and academics. Now, it is an important factor in the development of China's economy.
For this reason, the Beijing—Hong Kong IT Services Outsourcing Cooperation Symposium was held to discuss recent developments in services outsourcing in Beijing and opportunities that may exist for cooperation with Hong Kong, during the two-day Beijing—Hong Kong Economic Cooperation Symposium on November 5 and 6, 2007.
Services outsourcing usually refers to business activities in which enterprises focus on their main lines of activity and hire professional service providers to handle basic, non-essential Information Technology (IT) business functions and IT-based procedures of value to the company. Service outsourcing includes Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO).
The country's Outline of the Eleventh Five-Year Programme (2006—10) indicates that policy-makers nationwide "…should transform the growth model of foreign trade and try hard to develop the services outsourcing industry…to establish several services outsourcing bases." They should get involved in the international services industry, and "…seize the opportunity of global industrial structural adjustment to promote the development of our own services outsourcing industry."
Services outsourcing, an important part of modern services industry is high-tech intensive, yields high added-values, requires a low consumption of natural resources, is environmental friendly, and it is an ideal job creator. This also corresponds with the needs of economic restructuring and changes in the industrial mix of Beijing. That's why Beijing has been designated as one of the 11 services outsourcing base cities by China's central government.
The services outsourcing industry in Beijing has experienced rapid growth. It now accounts for one-third of the whole outsourcing industry in China. Professional consultant IDC predicts that the services outsourcing industry of Beijing will grow at an annual rate of 40 percent in the following years. Beijing is an ideal place to develop the services outsourcing industry, because it has the talent, access to information and technologies needed and it has a suitable infrastructure for the industry's growth.
Of the more than 400 companies involved in services outsourcing in Beijing, ITO is now their major business. ITO companies reported total revenues of US$1.5 billion in 2006, and are expected to continue to grow at an annual rate of about 40 percent. However, it is starting to shift to BPO services such as finance, consultation and human resources management, which is making the services outsourcing industry mature and complete.
Foreign-invested companies are leading the development of Beijing's services outsourcing market. In 2006, they accounted for 64.5 percent of offshore services outsourcing. Offshore development centres of multinational companies account for 33 percent of the market. These companies are not simply outsourcing recipients; they are also clients.
Much of the outsourcing business in Beijing involves Japanese clients. In 2006, software exports to Japan increased to US$210 million, accounting for 58.2 percent of the total revenues from software exports of Beijing. However, outsourcing contracts from Hong Kong and the United States are increasing rapidly, by 57 percent and 24 percent in 2006.
Still, although the industry is seeing rapid growth, Beijing has some bottlenecks. It has few problems in providing sufficient personnel, technicians and applied technologies, but it is poor in senior professionals experienced in management, client networking, and marketing.
Universities in Beijing turns out tens of thousands of graduates every year, but a vast majority of them need training to become competent for work. It is unrealistic for companies to provide such training entirely on their own, because the initial costs are high. In addition, there are still problems in intellectual property rights protection despite the progress the city has made in this regard.
Hong Kong has a highly developed services outsourcing industry based on advanced operational models, senior management personnel, a relatively complete IPR protection system and close ties with the international market.
During the symposium, Chester Soong, a representative of Hong Kong Information Technology Federation, shared his experiences on the qualities that a services outsourcing provider and its personnel should have.
Soong said a good outsourcing provider will be familiar with specific fields and their related procedures; keep up with the most advanced technologies and developing trends in specific fields; use the most modern software and equipment; have a skilled, specialist staff; and it will be able to provide evidence of its service capabilities and successes and its pricing.
He said senior managers of services outsourcing companies should be familiar with international models of business operations, understand the needs of clients, and they should be rich in commercial knowledge, and have excellent communication skills.
Soong also outlined requirements for an ideal services outsourcing base. It is likely that his suggestions will be used for future planning of the industry in Beijing.
