Since “Thousand-Hundred-Ten project” started in 2006, China has positioned the service outsourcing as an important and strategic industry. Regarding outsourcing model cities as the main subject, outsourcing enterprises as the final object and policies as the core measures, China has been promoting the industry development with a “top-to-down” way. Up until now, the 21 service outsourcing model cities designated by MOC of China have become the leading power of China’s service outsourcing industry. Apart from that, there are more than 30 cities that have incorporated the service outsourcing industry into the core development strategy of city. The model and non-model outsourcing cities are competing intensively in many aspects like investment inviting and industrial agglomeration etc.
Then, which ones would stand out from numerous cities in this intensive competition?
Devott deems that the genuine leading cities of service outsourcing shall own three characteristics as follows:
1) Service outsourcing industry must achieve a certain scale. The development of industries and economy is always determined by the enterprises’ concentration and growth. Therefore, the industry data like the industrial capacity, the amount and quality of enterprises and employment is the principal element to measure the comprehensive strength of a service outsourcing city.
2) The capability of sustainable development. The keys of the capability of sustainable industry development are accurate industrial and market positioning, perfect industrial development initiatives, marketing and investment attracting system which constitutes a scientific industry promotion system.
3) Closely combining service outsourcing with overall economic development of the city. Service outsourcing is in fact an industrial pattern which can optimize social division of labor and promote the industrial upgrading and development. Therefore, the development of service outsourcing must be combined with city’s overall economy and development of every individual industry so as to form a benign city industrial ecosystem.
Based on relevant researches and theories on city competitiveness and the Outsourcing International Operating Protocol (OIOP) model co-designed by Devott and TPI, combining with the special industrial characteristics of service outsourcing and summarizing investment-inviting practice and experience of Chinese service outsourcing cities in the past 10 years, Devott deems that the investment attractiveness of service outsourcing city is mainly divided into 4 aspects: economy environment, industry environment, facilities and government environment that contains several sub-elements and indicators: working environment, education environment, living environment, operation cost and living cost, which eventually formed the IEEG assessment system of Investment Attractiveness of China’s Service Outsourcing City (see the chart below). Devott Service Outsourcing Research Center (DSORC) did a professional research on the 50+ Chinese service outsourcing cities jointly with Chinasourcing website (www.chnsourcing.com) and published a China’s service outsourcing city ranking on the investment attractiveness and “Report on Investment Attractiveness Assessment of China Service Outsourcing Cities 2011” on 25th September 2011.
Introduction to assessment system of Investment Attractiveness of China’s Service Outsourcing CityIn the IEEG system, the core elements that affect the development of city’s service outsourcing industry, especially the investment attracting are as follows:
1. Human Resources Supply Environment:
Service outsourcing is a labor-intensive and knowledge-intensive industry, which has a high requirement to employees. At present, the talent supply environment of service outsourcing city mainly contains 3 aspects: 1) sustainable supply of human resources, which includes local schools and training institutions, yearly graduates, inflow and outflow of the talents, etc. 2) the comprehensive quality of the talents, mainly reflected on the job applicability of the talents including acceptance of industrial knowledge, professional skills, language level and other qualities. 3) High-end talents availability, which mainly consist of entrepreneurship talents or leaders, project managers and marketing talents. Currently, apart from first-tier cities like Beijing, Shanghai, Guangzhou, etc, many Chinese cities present various degree of scarce of talents, especially the high-end talents. The relatively stable industrial atmosphere could only be formed when the employment reaches certain scale no matter in which city. An effective city talent supply system could be organized only when the flow of employees are well restricted in the city rather than brain drain. These are closely related to city infrastructure and comprehensive development such as domestic remuneration level, living environment and overall economic level etc.
2. Transportation and Overseas Communication Environment
Service outsourcing is not involved in large amount of goods transportation, particularly offshore outsourcing. However, the convenience of flow in information, capital, technology and stuff is particularly important, as well as the convenience of the international personnel flow and air traffic. Developed transportation system is capable of providing enterprises with convenient business and living service and satisfying the travelling requirements raised by company and employees. Therefore, the city transportation system, airline and numbers of flights, as well as international communicating environment are important indicators for service outsourcers to choose investment location.
3. Telecommunication Facilities Environment
Developed infrastructure lays a solid substantial foundation for the development of service outsourcing industry and companies. Telecommunication facility is the basic infrastructure that service outsourcing industry highly relies on, which is the core factor of establishing the basic industry environment for service outsourcing city. The telecommunication facility environment is divided into two parts, hardware environment and software environment. Hardware environment mainly contains stable international bandwidth network with sufficient capacity, high-speed routing and switching equipment and enterprise specific network etc. Software environment mainly refers to the service level and content of telecommunication operators. Perfect telecommunication facility is not only the prerequisites for service outsourcing enterprise to survive, but also the core foundation to ensure the service outsourcing enterprises’ normal operation.
4. Industrial clusters environment
With relevant industrial condition, the forming pace of service outsourcing industry clusters is faster than manufacture, but it has higher requirements on relevant industry development factors. Therefore, the present industry scale and industrial clusters environment have a great impact on the development speed of service outsourcing industry of the city. If the city’s service outsourcing industry lacks of strong enterprise clusters, it will probably confront difficulties in obtaining favors from outsourcers and contractors and problems in realizing the expansion of industrial scale, business extension and industry upgrading due to small business scale or high cost relating to certification, management, integration and trading.
5. Government Support Environment
As an emerging but immature and unstable industry, the development of service outsourcing industry particularly need the government’s lead, support and protection. In Devott’s specific research, we found out that almost 100% of service outsourcing enterprises brings government supports into the location assessment model as an important element. Government support environment mainly contains: 1) service outsourcing industry development plan of the city including industry positioning, target, industry promotion system and core initiatives etc. 2) industry preferential policies including tax preference, specific funds, personnel subsidies and innovation support etc. 3) governmental enforcement and work efficiency including the composition of the leadership and work ability, efforts to implement the policy, etc. These are not only the elements that impact the investment inviting most, but also an indispensable element in the process of promoting the development of service outsourcing industry of the city.
6. Intellectual Property Protection and Data Security Environment
Service outsourcing industry is a knowledge-based, innovation-based and high technology-based servicing industry. Both buyers and service providers have higher requirement on information security, dada security and intellectual property protection than other industries. Credit investigation system, the government’s attitude and action on intellectual property protection, relevant policy and incentives, public service and other relevant measures can all enhance the investor’s confidence. Even though every city’s intellectual property protection and data security environment are closely related to the domestic overall environment, service outsourcing cities need to form a comprehensive business environment corresponding to the industry as soon as possible.
In addition, public information service platform has gradually become one of the most important factors to assess a city for enterprises. As a knowledge-based industry against other industries, service outsourcing industry needs more enterprise’s research and innovation, technology exchanges, training and services, and technique promotion and certification to offer professional and quality service.
Service outsourcing city is the carrier for the industry development and the growth of enterprises focusing on. Meanwhile, it also carries service outsourcing employees’ work, life, entertainment, etc. We are delighted to see that many cities have been changing the development idea from host-oriented to enterprise-oriented mode, deeply going into each business operation process and company requirements to construct a brand new industrial promotion system. We hope to see that all these beautiful prospects could be put into practice as soon as possible and get promoted in every city in order to create an overall healthy environment for service outsourcing company’s.
Part of the view is retrieved from “Report on Investment Attractiveness Assessment of China Service Outsourcing Cities 2011”.
