BEIJING - The software
outsourcing business of China's capital city
Beijing will grow at an annual combined rate of
40% in the next couple of years, reaching US$842
million by 2008, according to newly released
market research.
The Research Report of
Beijing's Software and Information Service
Outsourcing Industry says large outsourcing
enterprises with more than 10,000 employees and
sales volume exceeding US$100 million will emerge
by then.
According to the report,
Beijing's software and information service
outsourcing industry is developing sharply, with
the market reaching $307 million in 2005, soaring
36.4% year-on-year. In 2005, the industry had
49.8% of its business from Japan, 45.5%
from
Europe and the United States and 4.7% from India,
Hong Kong and other countries and regions.
The proportion of business from Japan
shrank remarkably, while that from Europe and the
US grew rapidly. Software development projects
accounted for the biggest proportion of the total
business volume, hitting 39.9%. The whole industry
is gradually shifting toward the high-end of the
industrial chain.
Data show that Beijing
has about 200 enterprises engaged in software
outsourcing at present. Among them, 30 are large
(each with 300 employees and annual sales
exceeding 30 million yuan (US$3.8 million ),
making up 15% of the total. The largest has about
2,000 employees; and the remaining are all small
and midsize enterprises, with the smallest
enterprises having only 13 employees.
Of
the large and midsized outsourcing enterprises,
many haven't shaken off the workshop operation
mode, and they generally lack advanced software
production technology, quality operation, good
management and strict quality monitoring measures.
Currently, Beijing-based enterprises
obtain projects from international contract
issuers in three main ways: from subsidiaries of
transnational companies in China or offshore
development centers located in China (33.1%); from
foreign contract issuers or foreign upstream
contract acceptors (49.96%) and intermediary
bodies (2.11%).
Though the largest number
of projects comes from direct issuing of contracts
and subcontracts, their business volume was far
less than that of those received offshore because
most of the former are low-end businesses.
Experienced software and information
service outsourcing personnel in Beijing have a
high turnover and are in short supply. The average
lifespan of enterprises is fairly short, and their
pay scales are mostly small. The turnover rate
averaged 18.28%, which is related to the lack of
training, instability of business sources and
irrational payment mechanisms.
Due to the
rapid development of the industry, talent is in
great demand. It is particularly difficult to
recruit local expertise and senior and
middle-grade executives, and many had to be
recruited through headhunting companies. It is
expected that the industry's human resource
problems will continue in the years to come.
Software outsourcing enterprises of
Beijing serve more than 25 industries, but,
generally speaking, they haven't formed any
obvious industry advantage and characteristics.
They now are concentrated in such fields as
finance (27.71%), telecoms (25.29%) and
manufacturing (19.28%).
However, such
factors as experience, strength, intellectual
property protection and lack of definite
industrial position, have also prevented
outsourcing enterprises from accumulating
industrial application technologies and experience
in order to build up an industry advantage.
Chinese governmental departments have
issued dozens of policies to support the
development of the software industry, but none of
them specifically concerns software outsourcing.
The report shows that only 19.4% of
enterprises have applied for policy support, of
which only one-fifth can obtain related
preferential treatment. According to findings of
the survey, large enterprises benefit most from
preferential policies.
On average, about
24.7% of large enterprises and 18.3% of midsize
enterprises have applied for policy support, while
only 7.7% of small ones have applied. This is
related to few policies aimed at supporting the
development of small enterprises.
Hu
Jinyan, director of the Service Trade Department
of the Ministry of Commerce, recently revealed
that new policies on supporting the development of
the software industry, formulated by related
ministries and commissions, will be issued in the
near future and that the software outsourcing
business will get preferential support.
