China's service outsourcing set to jump
By Zhang Fengming |
May 11, 2010, Tuesday
|
Print Edition
Print Edition
CHINA'S service outsourcing market is expected to grow at a compound annual rate of 26 percent to US$43.9 billion by 2014 as demand continues to increase, a KPMG industry report said yesterday.
"The service outsourcing industry is a fairly new business model concept in China but is growing rapidly," said Ning Wright, a KPMG partner, in Shanghai.
Increasing investment by overseas companies in China is sparking a bigger demand for outsourcing services.
Wright said she expects more merger and acquisition activities in the industry in China in three to five years as domestic suppliers build up their scale to compete with bigger rivals overseas, such as those in India.
Domestic service outsourcing firms find it difficult to secure offshore contracts due to a lack of economy of scale.
In the past 18 months, domestic suppliers have quickened their overseas M&A activities, she said.
The impact of the global financial crisis on China's service outsourcing suppliers is limited as the contribution of offshore work is relatively low unlike India whose outsourcing industry is massive. The contribution of the offshore segment was 22 percent in 2009 and is expected to rise to 35 percent by 2014.
In 2009, there were 60,247 service outsourcing contracts signed, a surge of 143 percent from a year ago. The contract value was worth US$20 billion, an annual rise of 186 percent.
China's service outsourcing companies have more than doubled to over 9,000 from 2008.
"The service outsourcing industry is a fairly new business model concept in China but is growing rapidly," said Ning Wright, a KPMG partner, in Shanghai.
Increasing investment by overseas companies in China is sparking a bigger demand for outsourcing services.
Wright said she expects more merger and acquisition activities in the industry in China in three to five years as domestic suppliers build up their scale to compete with bigger rivals overseas, such as those in India.
Domestic service outsourcing firms find it difficult to secure offshore contracts due to a lack of economy of scale.
In the past 18 months, domestic suppliers have quickened their overseas M&A activities, she said.
The impact of the global financial crisis on China's service outsourcing suppliers is limited as the contribution of offshore work is relatively low unlike India whose outsourcing industry is massive. The contribution of the offshore segment was 22 percent in 2009 and is expected to rise to 35 percent by 2014.
In 2009, there were 60,247 service outsourcing contracts signed, a surge of 143 percent from a year ago. The contract value was worth US$20 billion, an annual rise of 186 percent.
China's service outsourcing companies have more than doubled to over 9,000 from 2008.
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