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Growth of Software Outsourcing Company
added: 2007-06-25

China software outsourcing service market reaches 1.43 billion USD under the overall rapid growth of global market in 2006 with year-on-year growth of 55.4%, which is 10% more than last year.

CCID Consulting analyses the development of China as a service provider for the international outsourcing market in a recent report published through its Software Industry Research Center, written by analyst Zhang Xi.

Outsourcing Market - Grows Rapidly

China software outsourcing service market reaches 1.43 billion USD under the overall rapid growth of global market in 2006 with year-on-year growth of 55.4%, which is 10% more than last year. Global recognition in China's ability as service provider became a driving force behind the increasing demand, with Japanese outsourcers in long-term cooperation with their Chinese partners, as well as some European and US outsourcers who are enlarging their cooperation with China.

Outsourcer Market - Lead by Japan and Followed by Europe & US

Japan has always been the largest outsourcer market for China's SOS with 872 million USD as NO.1 in 2006. However, with efforts from Chinese government in fields of policy, training, international & national communication and overall branding promotion for Chinese outsourcing service in Europe and US markets from 2005, projects and revenue come from these markets have increase in recent years. The business from US and Europe increases with 79.3% and 71.8% respectively in 2006, and US & European outsourcers take more shares in China's SOS Market with 2.9% and 0.5% more respectively in 2006. Compared with general market, Neusoft takes Japan as the principle software outsourcing client. CCID Consulting forecasts that it will have considerable cooperation growth rate on mobile phones with Sony and Panasonic as the partnership is still in a beginning stage.

Business Type -Concentrated at the Low-end

China's SOS Market is still in the bottom of the industrial chain in the world. Chinese outsourcing SP is adjusting their business structure to enhance its business to a higher end. Some service providers expand their business coverage or target market coverage by merging or financing, such as upgrading from localized business from the Japanese market to Europe & US market; and some cooperate more with foreign outsourcer on the other hand to increase project depth, size, cycle or cooperation level to concentrate limited resources for a new market base to maintain good client relationship.

Bottleneck for Development - Short of Experts

Software outsourcing manufacturers could only rapidly develop in scale operation. Yet there are only five companies with a size of over 2,000 employees within more than 10,000 software service suppliers in China. On the contrary, at least 15 firms have more than 2,000 employees in India within less than 3,000 software service companies. Only 7 Chinese firms passed international CMM5 authentication and as requirements of US outsourcers are higher than of Japan, China providers have to upgrade their technical solution capability and firm scale in order to win business.

Take Neusoft for instance, employee internal transfer could be an important technical staff supply for experienced technical employees, while the company recruits a large number of fresh graduates, and provide internal training to them. However, a target growth rate of 50% and 25,000 USD revenue per capita will mean a staff size of 6,000 in software outsourcing in 2007, an estimated addition of 2,000 professionals, which is difficult for the company to depend solely on its own training system.

Mechanism Adjustment - Outsourcing as a Principle Orientation

INSIGMA has peeled off real estate and part of wireless value-added business after a steady and rapid progress in the past six years, and put focus on consulting service with software outsourcing as its core business and breakthrough in construction contract and project management. The company succeeds in exploring two new clients, NTT-DATA and JIP with the SAS strategic investment from Hitachi and realizes a big growth in operation performance. Hengtian has finish its reform and INSIGMA has set up its largest platform for business with US.


Source: PR Newswire

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