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Japan systems developers outsource to China

TOKYO - Japan's systems development firms are outsourcing more to those in China and other low labor cost countries, aiming to cut costs as clients increasingly demand fee cuts.

NTT Data Corp will increase by more than 30% the amount of work it contracts out overseas.

It will raise the value of work contracted out to a Chinese subsidiary and partner firms in China and India from Y1.5 billion ($US13.82 million) last fiscal year to about 2 billion yen this year.

Nomura Research Institute Ltd last fiscal year boosted overseas outsourcing by 70%, mainly to China, and this year plans to increase such value by about 20% to 4 to 4.5 billion yen.

Although it plans to farm out work to companies in Beijing and Shanghai, it also seeks to diversify its contractors by looking to those based in the interior of that country.

NEC Soft Ltd plans to raise the value of work contracted out overseas from 3.4 billion yen to 4 to 4.5 billion yen.

In addition to farming out more work to firms in Beijing and Dalian, it plans on starting full-scale outsourcing to those in Vietnam.

Hitachi Software Engineering Co is also looking to shift outsourcing to China and Vietnam into full gear, and this year plans to double the value of work contracted out abroad to about 2 billion yen.

But systems developers that increase overseas outsourcing to reduce costs will need to ensure that their foreign contractors will meet adequate quality control standards.

(Asia Pulse)

Jun 25, 2004

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