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Outsourcing firms eye the domestic market
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Chinese outsourcing firms should seek opportunities in the domestic market as the industry faces challenges due to decreased overseas demand and a strong yuan, business executives and industry experts said during an industry forum yesterday.
The Global Service and Outsourcing Innovation Summit (2013), part of the World Chinese Entrepreneurs Convention, was held yesterday in Chengdu, Sichuan Province.
It attracted government officials, industry experts and companies like IBM, Deloitte, Infosys, Zhejiang-based Insigma and Beijing-based iSoftstone.
Industry revenue grew 65 percent annually on average in China in the past five years, but it’s expected to increase only 40 percent this year, according to Devott, a Tianjin-based research and advisory firm in the outsourcing sector.
The sluggish Japanese and US economies, higher labor costs and a strong yuan have dented the bottom line of domestic outsourcing firms, speakers told the summit yesterday.
The offshore outsoucing business used to account for 60 percent or more of iSoftstone’s total business. This year, the domestic market will likely be worth 60 percent, said Mou Yongan, the company’s senior vice president.
While 80 percent of Insigma’s revenue still came from offshore business, company president Zhong Mingbo said the domestic market was “no doubt the trend.”
Zhong, however, said he was concerned about price competition and credit problems in the domestic market.
Deloitte China said another challenge is overcoming the shortage of talent in the industry.
All domestic and overseas firms can set up facilities in the Free Trade Zone in Shanghai, which is scheduled to open on Sunday. Special policies will be in place within the zone to help companies develop their business, Jin Shihe, the Shanghai Outsourcing Institute’s deputy director, told the summit.
Outsourcing firms also need to catch up on the latest wave of technologies such as cloud computing and e-commerce.
Big data, cloud computing, social media and mobile Internet are four major elements of the future outsourcing sector, according to Shi Feng, a marketing director with IBM China.
“It’s not just about reducing costs now,” Shi said. “Firms care about new business models and services with the latest technology.”
During the summit, Chengdu’s Qingyang District government signed deals with Zhejiang-based Insigma and Shanghai-based Hwabao Trust, a finance subsidiary of Baosteel.
The two firms agreed to invest in Chengdu to develop services and outsourcing business.
Since 2012, 14 service and outsourcing firms such as Accenture have invested in Chengdu.
From 2008 to 2012, Chengdu’s offshore outsourcing revenue jumped 30 percent annually on average.
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