China starts IT services push

Von Patrick Thibodeau

All it takes to understand China"s growing ambitions in the offshore market is to watch Jin Cao"s slide show depicting numerous large office complexes, too many to quickly count, nestled in comfortable office parks.

Multinational companies that opt to locate offshore facilities in these office parks will also get access to a wide range of government-backed services, including recruitment assistance, bilingual schools and other support facilities -- including golf courses.

According to Cao, U.S.A. director of the Dalian Software Park in northeastern China, the government is developing software parks to serve as centers for offshore IT development and business process outsourcing operations. They will also serve as "captive centers" that house offshore facilities owned and operated by foreign firms, in addition to China"s own offshore companies.

The push is heavily backed by the Chinese government, which hopes to lessen its dependence on foreign technology, develop a domestic technology market and drive its own brands internationally, according to attendees at a China IT services conference here this week.

The event was sponsored by the International Executive Association in Edison, N.J.

The emergence of China was underscored by Sharon Allen, chairman of the board at Deloitte & Touche USA LLP, who said her firm plans to spend US$150 million in China in the next few years to increase its 3,300-person workforce there. China is "poised to reclaim its place at the very top of the international economic ladder," Allen said.

Much of Deloitte"s investment will be spent on training and developing its growing workforce, Allen said, noting that "finding skilled workers in many sectors is very difficult and becoming expensive."

China does not have a big share of the international offshore market; the majority of its services revenue, 85 percent, comes from the domestic market. International offshore revenues last year were about $600 million, said Walter Fang, vice president and chief technology officer at Neusoft Group Ltd. in Shenyang.

In contrast, India"s international offshore revenue exports were $17.2 billion for the 12 months that ended March 31, according to India"s National Association of Software Companies in Delhi.

But Fang foresees expansion in China, particularly as the nation enters the World Trade Organization, hosts the 2008 Olympics and sees a boost in IT spending by the Chinese government.

Part of China"s IT strategy is to reduce its dependence on foreign IT products and develop its own brands, said Jamie Popkin, an analyst at Gartner Inc.