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Converting crisis into opportunity

By Diao Ying and Wang Xing (China Daily)
Updated: 2009-01-12 07:56

Much of the credit for the success of the sector, however, lies with the government, which has pegged outsourcing as a major export sector after manufacturing. "The gross profit margin of service outsourcing is 40 percent, and that of manufacturing is 4 percent," said Hong Gang, managing director of Gartner in China. The development of outsourcing industry has gained importance for the government as a way to increase employment without endangering the environment, particularly at a time when the manufacturing gets vulnerable to weakening global demand.

The government now sees service outsourcing as a major industry to garner more foreign investment. According to the 11th Five-Year Plan, the government plans to woo some 100 multinationals to transfer part of their service outsourcing industry to China by building 10 cities with international standards. The government also plans to help 1,000 Chinese outsourcing companies grow into medium to large size enterprises within the five-year period ending 2010.

The government's goal is to double in five years the export value of the outsourcing industry by 2010, Jiang Zengwei, the vice commerce minister, said in an international service outsourcing expo in Chengdu in November 2008.

Despite the opportunities, the outsourcing industry still needs to overcome problems to stay ahead. According to Hong, the name recognition or recall value of outsourcing companies in China is still low compared with India. And it is difficult for vendors to differentiate companies form a variety of cities in China, as most of the second tier cities claim that they are the best outsourcing bases.

In addition, there is a massive pool of engineers and workers at the entry level, but not enough senior project managers. "We are in severe shortage in terms of workers, and you cannot get a good senior project manager simply by spending a lot of money. It takes time and experience," said Hong.

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