China’s Outsourcing Market - A Perspective
Kevin S. Parikh & Ziying "Magic" Tan
Since 2006, China’s market for the outsourcing of technology services (outsourcing services) has experi-enced fast growth. Over the past 5 years, both foreign IT service providers and home grown IT and BPO service providers have established and expanded business operations in China primarily to serve domestic and East Asian region customers. The Chinese outsourcing services market has now attained such a position of importance that its value proposition cannot be ignored by those contemplating global sourcing strategies. This paper provides a perspective on the market dynamics and potential of China’s outsourcing services market. Below are some key insights that Avasant’s analysts have observed with respect to China’s development as a hub for outsourcing services:
- The growth in China’s outsourcing services market has been powered by unique geographic and political factors. The outsourcing services market has grown 43% over the past 5 years. The Chinese gov-ernment has been actively involved in the development of the industry to an atypical degree, providing a myriad of incentives and benefits to local and foreign companies to invest in China. In addition, China’s presence as a regional power with the ability to provide specialized support to the diverse markets of the Asia-Pacific region has also spurred the growth of the outsourcing services industry.
- China will continue to play a leading role in the Asia-Pacific region as an offshoring center as well as a strategic location for Asia-Pacific based multi-national corporations (MNCs).
- Vast differences in economic development, culture and labor skill-sets have provided outsourcing cities with their own specialized competencies (e.g. Dalian with Eastern Asia Language support, and Shanghai with back office for Financial Services.)
- Companies interested in establishing a presence in China will need to employ a structured ap-proach in order to select the right city/industry park in China to meet business objectives
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