China's software outsourcing industry is considerably smaller than its much-heralded counterpart in India but it is growing fast, and unlike Indian firms, many Chinese companies are working on cutting-edge product development for the world's major technology firms, rather than information technology (IT) projects for back offices。
"We are going to double our size by the end of this year," said Jacob Hsu, chief executive officer of Symbio, a software outsourcing company based in Beijing. Symbio has about 1,500 staff and more clients place bigger projects with the company. Clients include many major technology companies, such as Nokia, Eriksson, IBM, Microsoft and PayPal. Symbio is not alone. Beijing-based Vanceinfo Technologies has more than 9,000 staff and plans to more than double its workforce to 20,000 over the next two to three years. Its clients include Microsoft, Tibco and Expedia。
China's software outsourcing revenue from the offshore market will climb to $6.8 billion in 2013, or 16.2 percent of the worldwide market, from $2.4 billion in 2008, according to market researcher IDC. That is growth of 23 percent a year, compared with the forecast worldwide average of 6.2 percent over the same period。
Price is not the key factor for Western companies to outsource their software development to China. "Compared with India, in fact, China's rate is not very cheap," said Hsu. In Hsu's view, Western companies come to China to tap a different source of talent. Most Indian firms work on IT projects for back offices, information management systems for their various business processes, said Hsu. These require people who understand the "domain expertise" - for example, how Citibank works internally。
China's engagement with the world economy is more recent. "They have expertise in Chinese business processes but not Western," said Hsu. The domain expertise for developing back-end office systems is not there. Moreover, the language barrier makes it even harder for Chinese developers to work on projects involving Western business processing. "Overall, we expect Chinese firms to face tough competition from Indian IT services firms in this segment," said Wei of JP Morgan. On the other hand, "China is good at basic technology and engineering. There are many universities training students to be great software engineers," said Hsu, "Also, China is a big market for technology products, such as mobile phones, Internet portals, social networks and so forth. Developers here can develop cutting-edge technology products."