Devott Insight: People is the Foundation of China’s Prosperity and the Driving Force of the Great Dream of Chinese Nationality – Devott’s Interpretation of Premier Li Keqiang’s Address
Source: Chnsourcing.com.cn View: 260 Date: 2015-01-02

On November 26th, Premier Li Keqiang, chairing the Executive Meeting of the State Council, delivered a keynote speech on developing service outsourcing and provided roadmaps from many aspects. This means that the service outsourcing has become a key industry in China and will have strategic meaning for promoting the service industry and driving other industries to transform economic structures. The meeting is beyond doubt a powerful incentive for Chinese service outsourcing and substantial dynamic for enterprises in this industry.

Service outsourcing is an asset-light and knowledge-intensive industry highly driven by people. People reflect the core value and vision of the industry, making co-development of them and the industry vital. The Premier’s opinions on developing service outsourcing give a clear signal of the government highly emphasizing on the industry and imminent reforms and supportive policies. The service outsourcing has entered into a new era, what vicissitudes will we see and where will the industry be?

Three Highlights:Insights into the Future of Personnel Training of Service Outsourcing

Highlight One:“The government will adhere to reform and innovation, speed up the development of high-tech and highly value-added service outsourcing that’s environment-friendly and targeted at the global market. Encourage people to start business and innovate. Make competence come from investing personnel instead of lowering cost. It’s of great importance for structure adjustment, for forming a new support for industrial upgrade, creating a new drive for modern service development and increasing employment channels. “ Enlarging jobs goes into encouraging business startups, employment idea sees a top-down change, the service system for employment and business startups maturates.

Service outsourcing is known for providing jobs and attracting senior talents and is observed as an important channel by local governments and educational authorities to help undergraduates employment - 5.991 million people have been in the service outsourcing industry by Oct. 2014, including 3.994 million with bachelor's degrees or above - that's 66.7% of all practitioners.

7.49 million students will graduate in 2015, hitting new record. The Plan on Guiding Undergraduates to Startup Businesses released this year claimed to drive 800 thousand students to start their own businesses. Notification on Strengthening Employment and Business Startups of 2015 Undergraduates by the Ministry of Education states that macroscopic employment will face pressures with the number of students are increasing and job creation hardening. The Ministry of Education requires to strengthen the service system for employment and starting business and to get more students employed or to start their own businesses. Colleges and universities should establish flexible school system allowing students to start a business by leaves of absence, invite entrepreneurs, investors, experts and scholars as part-time tutors to deliver one-on-one instruction. In the meantime, the ministry will implement trainings for business startup and preferential policies on administrative registration and taxation, provide students with more fund for starting businesses, raise funds from channels financial institutions, social organizations, industrial associations, enterprises and public institutions. Colleges and universities should allocate areas specific for innovation activities and business startups. Engineering research centers, labs, teaching devices and equipments managed by the Ministry should be, in principle, open to students. The notification also requires them to set courses for startups and innovation and rate them in credit management, to organize students to attend innovation and entrepreneurship competitions, entrepreneurship simulations and other relevant activities.

Devott believes that policies enacted above reflect government’s determination and strength to encourage undergraduates to start up businesses. The Premier has stressed, for many times in speeches, the importance of business startups, especially by undergraduates. In 2013 when Premier Li Keqiang inspected TEDA, he said both Bill Gates and Steve Jobs started their business from a low beginning, undergraduates should spend their college years on more than libraries and laboratories, but in developing the awareness to start businesses. On Jan 17,2014, Li Keqiang addressed at a symposium held in Zhongnanhai that “We have made plans to boost employment, now we need ones to boost business startups.” On April 30th,2014, the Executive Meeting of State Council chaired by Premier Li, enacted policy measures for  undergraduates to start businesses: extend terms of policies on social security subsidy for small and micro businesses hire undergraduates, enforce the Plan on Guiding Undergraduates to Startup Businesses, offer social security subsidy to undergraduates within 2 years after graduation, further support undergraduate who have difficulty in finding a job, ask state-owned enterprises to publicize undergraduates hire, streamline employment and settle-down processes for undergraduate. On Set 10th, 2014, Premier Li Keqiang stated at the opening ceremony of the Annual Meeting of the New Champions 2014 in Tianjin that the government will remove constrains of systems or mechanisms on development to open up space for independent startups, and create an innovative atmosphere in society and develop in people a spirit of independent development. By virtue of reform and innovation, China will see a trend that everyone can start their own businesses. The government will keep improving people's wellbeing, deliver basic public service in an equitable way, improve social security, strengthen social security to offer guarantee to those who fail to start business and a second chance of starting over.

Premier Li Keqiang frequently mentioned promoting innovation and business startups, creating an environment for nationwide business startups, demonstrating a huge change in governmental ideas about employment. Ability of innovation and business startup is crucial for senior talents, a contributing factor to an innovative nation. These can reduce employment pressure and guide society to be more innovative and more willing to start businesses. Pursuing innovation and business startups are beneficial for undergraduates to realize self-worth and improve comprehensive qualities. Service outsourcing, with a high requirement on expertise and high technologies, yet has a low entrance for starting up businesses, making it easy for undergraduates to step in. Over the years, governments and educational authorities have never stopped exploring to encourage and support undergraduates to innovate or start businesses in service outsourcing, measures are taken such as innovation and entrepreneurship competitions for undergraduates and pertinent education. Right now ther have started to yield results. In Devott’s view, a mature service system for undergraduate business startups needs supports in administrative examination and approval, taxation, subsidies, rental, social security, settlement and  so that they can focus on works. With an increasing number of talented people and startup projects, Devott thinks that a more mature service system for business startups, service outsourcing will be a wonderland for undergraduate to start businesses.

Highlight Two: “The government will publish guidelines of key areas in service outsourcing and expand industrial sectors, promote service outsourcing in information technology, R&D, finance, government polices and other sector,elevate the industry to the high range of the global value chain, create more opportunities for undergraduate employment.”: it shows two things: connotation and denotation of service outsourcing expand; the top priority is cultivating cross-sector talents.

Since the 2014, industrial reforms never stop and cross-sector fusion is ever powerful,connotation and denotation of service outsourcing are expanding, enterprises deepen their integration with vertical industries, the integration of service outsourcing with cloud computing, the internet of things, mobile networks, the internet, IT, e-commerce, manufacture, finance, telecommunication and other vertical industries is challenging current service outsourcing industry and forces it to transform. Service outsourcing is not longer confined to technology development. Technological innovations and stronger service ability are the only ways of service outsourcing enterprises to get out of the wood of high cost and low profit. Industrial experience, industrial solutions, senior industrial experts, ability to optimize and reinvent business process are core value or core competences of service enterprises. With service outsourcing further integrate with vertical industries, it’s bound to have higher requirement on practitioners in terms of comprehensive qualities and expertise. Only after knowing customers’ application environment and operation process can service outsourcing better streamline work flow with professional IT skills and come up with practical industrial solutions.

With the rising of high-tech industries like big data, the internet of things, mobile network, cloud computing, traditional service outsourcing focusing on reducing cost are no longer fit and will be replaced by a new type emphasizing “intelligent service of sharing”. Driven by technologies, industrial reforms require more on comprehensive qualities and expertise: in old times, Chinese service outsourcing enterprises operated for reducing cost for buyers, while application of new high technologies reduce the cost of social and economic activities run on extremely low cost. More buyers, therefore, turn their eyes on new business models, prefer to cooperate with companies that provide innovative services and share risks as well as profits. That from “reducing” to ”increasing” is the global mainstream of service outsourcing.

When new technologies lead industrial reforms, personnel that enterprises need most are versatile personnel and technique specialists. On the one hand, industries concerning new technologies have distinctive features and need personnel who know the industry and every aspect of technologies involved and can put forward practical plans from different perspectives. Versatile personnel are now most needed. On the hand, the proficiency of technique specialists directly defines the depth and width of corporate plans.

New technologies give new requirements on the width and depth of service outsourcing practitioners’ industrial knowledge: they should equip themselves with strong abilities of information technologies and practices, a complete knowledge structure and sound theoretical knowledge. That makes it a must that colleges and universities need to cultivate compound talents by teaching them not only technologies but to apply them to practices as well. At the same time, innovative curriculum should, in accordance with guidelines of key areas in service outsourcing released by the country, open optional courses of popular vertical industries to enlighten students industrial knowledge and operational processes and how to apply their IT expertise to real projects.

Highlight Three: “Support enterprises, especially industrial enterprises, to buy professional non-core-businesses”. This shows government’s strong determination to integrate IT application with industrialization and to reform education.

The integration of IT application and industrialization is a new requirement as well as a new strategy of development in industrial informatization by the country and the party, the 16th CPC National Congress proposed to “industrialization and informatization should drive each other ”, the 17th “developed modern industrial system, strengthened the integration of informatization and industrialization”, the 18th “ prioritized “for modernizations in synchronization” which focused on deeply integrating informatization with industrialization, this progress shows that informatization plays an important and active role in national economy. It is vital to improve industrial efficiencies and expand markets, improve products’ techniques and competencies in the market. Encouraging industrial enterprises to purchase professional non-core-businesses is requisite to promote the integration of IT application and industrialization, which means Chinese enterprises will have a larger demand on services of software and information. The increasing number of outsourcing businesses from industrial enterprises is a challenge as well as an opportunity for service outsourcing companies, considering that industrial enterprises are providers of information services, along with the mainstay of leading industrial reforms.

Informatization services of industrial enterprises have a high standard for IT, relevant expertise and practices of practitioners. Now most undergraduates are adequate in basic IT practices while know little about vertical industries and what industrial enterprises’ real need. Lack in practice and expertise is common weaknesses among them, making the contradiction between human supply and demand more intense and giving a sign that China has structural personnel shortage and education reform is imperative.

Lu Xin, undersecretary of the Ministry of Education, stated on the China Development High-Level Forum on March 22, 2014, that the Ministry would shift focus of over 600 local colleges and universities to application and vocational education. According to statistics, there are about 1200 colleges and universities in China, which means 50% of them will strengthen practices instead of mere theories to offer more suitable people for enterprises.( Mar,23rd People’s Daily)。 As of now, the Ministry of Education hasn’t published any official announcement to back Lu Xin’s words but these words give a clear direction of education reform on the policy level. Devott can tell that the Ministry has realized to prioritize narrowing the gap between higher education and social needs and to build a new education system focusing on vocational education. Vocation education is not the opposite of traditional undergraduate education but a mutual compliment to it. The latter focus on cultivating students’ comprehensive qualities, theoretical knowledge and thinking, vocational education itself focus on practices and proficiency, they both are irreplaceable to improve students’ professional qualities and working skills. Now China has entered a key era of economic development, whether undergraduates are qualified and sufficient will define industrial reforms, market demand may become a new drive to education reforms as well.

Four Suggestions on the Direction of Service Outsourcing Personnel Cultivation

Suggestion One: Innovate Education to Fasten the Cultivation of Practical Personnel

Traditional higher education is highly constrained by systems and mechanisms and curriculum reform lags far behind the market demand, these are most reasons for the disconnection of education to the market. Devott’s view is that innovate education is crucial to cultivate practical personnel and to achieve this, governments should make better use of the market and encourage privates to build schools, colleges and universities should adopt a more flexible school-running system and set up an independent school of service outsourcing of joint-stock system or diversified ownership. The transform of property right structure and distribution will help reduce unnecessary administrative interference so education will have more freedom in decision-making, mainly having 3 advantages:

First of all, colleges and universities are the main part of specialty setting and curriculum reform. They can establish market research committees and set up a research team to investigate representative cities, parks and enterprises, participate in industrial activities and strengthen communication with enterprises to better understand the industry and make reform plans accordingly. Plans will be submitted to the board of school or equivalent departments for approval to execute. This method gives a true picture of the industry, shortens examination and approval period and mobilize colleges and universities to reform. Secondly, colleges and universities can cooperate with enterprise more deeply and tightly. Traditional educational systems prevent the cooperation from getting further when enterprises invest money and technologies unilaterally, making it hard to form a lasting win-win situation, ending up enterprises losing passion and little achievements. So, what it takes to set up a mechanism for last cooperation between schools and enterprises is to integrate resources and open education. Thirdly, double competency teaching staffs are attainable. Reforms in HR management and more flexible talent mobility and job rotations will help inexperienced young teachers, who continue to work in schools after graduation, to apply their theoretical knowledge to practices and better impart it to student. Proper temporary posts in enterprises may also help teachers understand the market, demands from enterprises so they can tune teaching emphasis. Besides, colleges and universities can introduce outstanding project managers as tutors of practice to enhance students’ cognitive and practical abilities.

Suggestion Two: Long-long Vocational Education will Help Cultivate Middle and Senior Talents

Current service outsourcing in China is at its turning point of rising to the high range of the value chain, the Executive Meeting pointed out that “the government will give high priority to the development of service outsourcing in software, IT, R&D, finance, government service and other sectors, elevate service outsourcing to the high range of the value chain, support service outsourcing enterprises in highly value-added businesses like KPO and BPO, open up new markets, businesses and marketing network.” Service outsourcing enterprises should proactively expand business areas and constantly reinvent business models, build brand awareness, improve innovation and in the end to increase added value of their products and services. What’s more, a rationally structured and experience team is the prerequisite of service outsourcing enterprises rising to high range of the value chain. Middle managers are the connection between senior executives and employees and their capabilities largely define performances of employees, even the fate of the enterprise. Whether top designs can be well executed depends directly on middle managers’ initiatives, execution, innovation, abilities to improve other people and lead, understanding of customers’ needs, and more importantly, expertise. Senior service outsourcing personnel are masterful of technologies as well as management, their forward-looking strategies, insight, business negotiation skills will keep the enterprise ahead of its competitors in the fierce competition.

Cultivating medium and senior service outsourcing enterprises is a complicated job that needs a right understanding of the dialectical relationship of theories and practices. Theories or practices are compliments to each other and either alone will not work. Zeng Guofan said “History rolls on and now here I am, and I shall be peaceful enough to read, even after thousands of battles.” , only by life-long vocational education can a man integrate theories with practices and improve themselves comprehensively after incessant accumulating and musing.

Suggestion Three: International Introduction and Interior Trainings will Improve International Competency of Talents

In recent years, domestic outsourcing markets keep evolving and onshore outsourcing businesses are increasing swiftly, yet off-shore outsourcing does not stand still: during Jan. to Nov. 2014, 168.7 thousand outsourcing contracts were sign whose total contract price is 91.84 billion dollars of which 68.95 billion were executed, respectively enjoying increases of 10.5% and 29.2%. Off-shore outsourcing had shares of 66.25% (60.84 billion) and 67.67% (46.66 billion), 10.5% and 292.% higher than they were last year. Services mainly came from the U.S, Europe, Hong Kong, Japan and countries on One Belt and One Road: during Jan. to Nov. U.S, Europe, Hong Kong, Japan generated total executed contract price of 28.99 billion dollars (U.S.:10.9 billion; Europe 6.69 billion, Hong Kong 6.39 billion, Japan 5.01 billion), that is 62.1% of the total contract price executed. Countries on One Belt and One Road contributed 10.61 billion in terms of total contract price whose 8.05 billion were executed, respectively increasing 22.3% and 31.5%. 4.32 billion of the 10.61 billion came from 11 countries in the southeast Asia, 50% higher than that of last year. The Premier said “approval process needs streamlining to accommodate custom clearance, foreign exchange management, international line rental, departure, entry and residence of foreign talents in management and technologies” to make operation more convenient for off-shore outsourcing enterprises. Chinese off-shore outsourcing as a whole will further develop and so cultivate international talents is urgent.

International talents need training in target language as well as in local customs, culture, ritual to bring themselves close to outsourcing clients when negotiating with them to better grasp their needs. Thus, interior trainings on languages and techniques are far from enough for international talents, overseas talents and training agencies should be introduced. Governments should promote policies to attract people studying abroad to come back to China either to work or to start business with their own projects. Advanced technologies and rich experience will help internationalize the industry; foreign training agencies can offer internationally leading teaching systems, idea, culture and advanced technologies. Those agencies offer trainings ranging from advanced ones for middle and senior talents and rudimentary ones for fresh hands.

Suggestion Four: Government departments work together to strengthen support and surveillance in policies and fund

Service outsourcing is becoming more important strategically, so its development is more of a business requiring many departments work together to enact targeted policies mobilizing every link of the industrial chain, than a business administrative department alone. Current policies prescribe that service outsourcing enterprises will receive no more than 4500 yuan as training fee every time when they hire an employee with a bachelor degree or above sign a labor contract over 1 year; service outsourcing agencies will receive no more than 500 yuan as reward every time when a graduate passes an assessment of service outsourcing expertise or skills. Since 2006, the central government and local governments has enacted a number of policies on financial subsidy which are enforce by the Ministry of Commerce or local commercial departments. On May 4th,2014, the Ministry of Commerce, the Ministry of Education jointly published Opinions on Innovating Service Outsourcing Personnel Cultivation System to Further Develop the Service Outsourcing Industry in line with Replies to Further Develop the Service Outsourcing Industry by General Office of the State Council. The opinion gives suggestions on optimizing service outsourcing and personnel structure, improving outsourcing personnel standards, deepening the reform of personnel cultivation, guiding outsourcing-related majors to start businesses, encouraging undergraduates to work in service outsourcing enterprises, promoting policies and organizational on outsourcing personnel cultivation.

Premier Li Keqiang emphasized that relevant department should be more open-minded, act more quickly and enact policies that bring real benefit. On personnel policies, Devott holds the view that financial subsidy policies should be more specific and cover more people, offer talents subsidies by specialty and proficiency, strongly support personnel urgently needed in key areas. The Ministry of Education should subsidize colleges and universities cultivating outsourcing training students more to improve their facilities and strengthen their cooperation with enterprises. In addition to that, there needs to be a lower entrance of receive subsidy to reduce the cost pressure when small and medium-sized service outsourcing enterprises train employees and to improve their competencies in markets. Last but not least, departments should pay joint effort to strengthen fund surveillance to ensure funds are used on fixed purposes.

Devott Publications
The Selection of the TOP Global Outsourcing Destinations – China TOP 15 (TGOD China TOP 15) Ended and Its Rankings and Research Reports are Now Available Worldwide