The Consideration of Service Outsourcing Industrial Transformation and Upgrading in China
Source: ChinaSourcing Magazine View: 291 Date: 2015-06-30

In recent ten years, service outsourcing industry has gradually become new emerging power in promoting the transformation and upgrading of service industry in China. With the prosperity of new technologies, China’s service outsourcing industry will face a transformation opportunity from traditional cost center to profit center. New technologies represented by big data, cloud computing, mobile internet, internet of things and social media have appeared tend of prosperity, and further connected & integrated with all industries, which driving product innovation and technology revolution of service industry, supporting service enterprises to transform and upgrade.

In recent two years, service outsourcing in China faced multi challenges from international financial crisis, industrial development & transformation period, increasing inner cost; then the total growth declines but is still higher than macro economic growth at the same time. Service outsourcing has become one of active economic areas that promotes transformation & upgrading of industry.

Currently, comparative advantages of China’s service outsourcing have changed from processing services with low cost to high-end services of R & D design and integration with cost advantages. High add-valued service in high-end value chain is continuously increasing; paying attention to make independent innovation and brand has become the only way for China’s service outsourcing industry to rise high-end of global service outsourcing industrial value chain. Some bigger service outsourcing enterprises actively grasp strategic opportunities brought by new technology revolution to rebuild business model “strategic partners with customers” via exploring global market, integrating resources, developing technology and independent innovation, which improves international competitive abilities of enterprises and international influences of “China service”.

At same time, with rapid development in recent years, the industrial scale, enterprise numbers and employee numbers of service outsourcing industry in China all have greatly improved that accomplishes scaled operation of service outsourcing industry to some extent. However, compare with service outsourcing countries such as India and new emerging markets like Philippines, service outsourcing industry in China totally can’t get rid of fate at the end of global value chain. Industrial organizations still have not enough abilities to promote offshore market increasing; outsourcing laws system is not perfect; lack of high-end outsourcing talents; innovative abilities need improve and fierce homogeneous competition all of those problems are obvious; then it is still long way to change and perfect for industrial upgrading in many links. To change situation of small scale, weak undertaking ability and relative low-end service in China’s service outsourcing enterprises, and to get rid of hinders from developed countries, we can improve from three aspects below:

1.       From Enterprises

1)         To strengthen innovative awareness and activist awareness

In order to upgrade to high industrial chain, the relative main bodies of service outsourcing enterprises must strengthen innovative awareness, protection awareness of IP and activist awareness.

The first one is in order to face comprehensive attack brought by new round of technology revolution for service outsourcing industry enterprises must build clear level of innovative system, construct marketing independent R & D system and flexible high-end talent system driven by market demands, build independent brand image in international market, then improve ability of undertaking offshore service outsourcing businesses, finally accomplish transformation and upgrading of enterprises.

The second one is that legislation in aspects of IP and information security in China is still far away from international steps. Compared with multinational companies, many Chinese enterprises don’t have enough attention to protect IP and safety of information. Enterprises have to learn how to control information & products & services of enterprises in a safe situation via efficiently using current laws and regulations, and then improve international competitive abilities.

The third one is in international cooperation, enterprises must clarify the belongings of IP protect IP of self and customers. For example, take hierarchical protection, secrete agreement and etc.

2)         To develop outsourcing new emerging market and area

On one hand, under common depressed situation of economic prospect in the world, service outsourcing enterprises must change their thinking ways. Based on foundation of maintaining traditional markets such as USA, Europe and Japan, enterprises also must pay more attention to develop potentials in international markets such as Latin American and local markets.

On the other hand, intelligent city, cloud center and things of internet are main developing directions for service outsourcing industry in future. Enterprises should strengthen market survey and technology revolution, occupy new emerging markets, play advantages and gradually accomplish exploration and upgrading of self businesses.

2.       From Industrial Level

1)       With the foundation of referencing international quality standards and systems, industry should connected with specific development stage and features of service outsourcing industry in different regions in China to build industrial standards those regulate the whole industry then to improve comprehensive competitive ability and international image of service outsourcing enterprises in China.

2)       Industrial associations and federations must provide a fluent industrial information channel, timely publish industrial information and guiding suggestions to help enterprises to control market direction, to resist risk and to promote enterprises comprehensive improvement in management, independent innovation, professional services and developing abilities of market.

3.       For Regional Level

1)       To promote further opening of service outsourcing industry, to expand its influence regions and scopes, to continuously play inherent advantages of four big traditional industries; to pay more attentions to develop outsourcing industrial potentials in northeast area and central plains. And to gradually put it into industrial system constructions, according to self advantages in each region to build diversified development path.

2)       To promote development of service outsourcing industry from the first-tier cities to the second/third-tier cities; to pay more attention to build local diversified and characteristically development strategies; to play coordinated effect; then to promote whole development.

4.       From National Level

1)       To make whole industrial plan and strategic position

In order to solve some problems such as not clear service outsourcing industrial city position in locations and homogeneous competitions, our country has to publish relative service industrial plan & regulations, to strengthen legal construction, to regulate service outsourcing industry in China, to guide service outsourcing cities/parks to develop local features, then to form orderly diversified layout of competition, to avoid negative competitive phenomenon of price war, battle for projects and talent poaching. Meanwhile, our country should encourage local governments to publish targeted and characteristically local regulations & policies & strategies for service outsourcing industry.

2)       To implement independent innovative strategies & to lead industrial transformation

To strengthen policies and preferential policies of independent innovative technologies and new emerging areas those support service outsourcing industrial transformation; to encourage innovative practices from service outsourcing enterprises such as business model, management mode, talent training mode; to accomplish integration of industry and education via cooperation between colleges & universities and enterprises, industrial experiment parks, talent training and other models. To innovate support policies; to encourage enterprise bodies represented by financial institutions to participate relative regulation making; to pay more attention to provide fluent financing channels for small & middle enterprises.

3)       To build national associations or organizations or institutions in service outsourcing industry

Currently, there are China’s Service Trade Association and local service trade associations in service outsourcing area, however they are still limited development that shows: not timely publish news, slowly update, discrete information; can’t timely reflect market development. Our country urgently need to build a service outsourcing industrial association with international influence: on one hand, it can improve competitive abilities of enterprises to participate international outsourcing market; on the other hand, it also can build cooperation mechanism with international relative industrial associations, strengthen advocating of China’s service outsourcing enterprises to face each problem in trade processing.

4)       To construct comprehensive safety system for service outsourcing industry

When process of making comprehensive safety system such as service outsourcing risk precaution, IP, innovative policies, our governments have to reflect law demands and wishes from main bodies such as industrial associations, enterprises and international outsourcers. To encourage relative main bodies to actively offer advices; to form organic linkage of policy mechanism from industry, region and IP; to maximize the overall effectiveness. To pay attention legal protection system construction in IP, information security, individual property of foreigners; to encourage innovative technologies and awareness; to provide legal protection for information technology services and other remote information delivery services.

Devott Publications
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