The outsourcing business is likely to record double-digit growth with small and medium-sized enterprises (SMEs) as a new market for the services, says a local specialist."Outsourcing service still has a long way to grow and develop since an increasing number of firms have started to realise its benefits," said Weerachai Ngamdeevilaisak, the director of the local service provider Professional Outsourcing Solutions.
The value of the global outsourcing market has grown sharply, from US$570 billion in 2002 to an estimated U$1.2 trillion last year, according to the Asia-Pacific Human Development Report 2006 issued by the United Nations Development Programme (UNDP).
India alone represents 40% of the global outsourcing market, and in its success in attracting lucrative information technology and call-centre work has been well documented. Other major Asian providers are China, the Philippines, Malaysia, Thailand and Vietnam. The report says Asia's advantage lies in its growing pool of highly skilled and lower-cost workers.
Domestically, SMEs are becoming increasingly aware of the benefits of outsourcing tasks in which they lack expertise or would face high costs if they did the work themselves. Their key areas of interest include financial and accounting services in order to avoid accounting errors and tax exposure.
"That's because SMEs today have begun to realise that abiding by the laws is in fact advantageous to their own businesses since they can lay better and more accurate business plans based on truthful accounting and financial statements," Mr Weerachai explained.
For Professional Outsourcing Solutions, SMEs now represent 20% of its business while multinational companies account for 51% and listed firms 13%.
Founded in 1986, Professional Outsourcing Solutions was once a part of the now-defunct Arthur Andersen group before it became an independent practice in 2002. Its main services are finance, accounting and payroll. It has 100 client accounts, among them large businesses including Krungthai Card, Siam City Cement and Citibank,.
The company's revenue has grown steadily, from 20 million baht in 2002 to 45 million last year. This year, it has a conservative projection of 50 million baht.
Mr Weerachai said the company had not been affected directly by ongoing political and security tensions. A bigger factor is increasing competition in the market from both existing players and newcomers, which has led to a price war.
"Such price wars won't do any good to the industry in the long run since it could reduce the quality standards of the services," he said.
To build a sustainable business for the long term, he said outsourcing providers need to find their niche and strengths.
"And our niche is to focus on quality of service. We've also offered value-added services that others can't, and have not jumped into the pool of the price war."
As a result, he said, the company has maintained a satisfactory service renewal rate of almost 100%. "Besides, we're always obtaining new customers through word-of-mouth."
1/28/2007
Global outsourcing is cause for optimism
Despite the many challenges facing the pharma industry, drug developers should be optimistic, and one of the reasons is the increasing reliance on global outsourcing to speed development and reduce costs, says new report.
According to the Tufts Center for the Study of Drug Development (CSDD), the pharma industry has suffered in the past few years but the higher usage of outsourcing, largely motivated by the need to augment capacity and contain rising R&D costs, has had a very positive impact on drug makers
Since 2001, spending by drug developers on clinical research services has grown 15 per cent annually – outpacing the 11 per cent rate of overall spending on development – as pharma firms have increased their reliance on contract research organisations (CROs).
“It is proven that companies who outsource stages of the drug development tend to have fewer problems, more accurate results, and are also more likely to achieve a higher level of performance,” Tufts CSDD director Kenneth Kaitin told OutSourcing-Pharma.com.
“Higher efficiency and cost effectiveness have resulted in greater utilisation of outsourcing by pharma companies.”
According to Tufts CSDD, CRO usage growth has been driven by rising volume and complexity of global clinical trial activity and the increasing number of smaller firms conducting clinical research studies.
While smaller companies have been outsourcing in the US in the past, according to Kaitin, the main change is that they are now also off shoring the outsourcing process to take advantage of lower costs characteristic of developing countries.
“We are now seeing small and mid-tier pharma companies outsourcing to foreign countries, outside the US and Western Europe, such as China, India, Eastern Europe and Latin America, where development costs are substantially lower,” said Kaitin.
He added that there was an increasing collaboration between big pharma and small pharmaceutical companies, in particular emerging biotech companies.
This collaboration has taken different shapes, including the increase in funding by big pharma into small firms, the growing Mergers and Acquisitions (M&A) activity, and the overall higher interested of big pharma in smaller companies' activities.
“While drug developers have understood that their long-term viability depends on improving R&D productivity – and have taken steps to address the issues – they are about to see their efforts pay off in terms of improved success rates and greater numbers of new medical products reaching the market,” said Kaitin.
Quite a challenge, considering that, according to recent research, approval rates for standard new drug applications have plummeted in the last two years, from 38 per cent in 2003 to only eight percent in 2005, as the US regulator seem to get tougher on new drug approvals
According to the Tufts Center for the Study of Drug Development (CSDD), the pharma industry has suffered in the past few years but the higher usage of outsourcing, largely motivated by the need to augment capacity and contain rising R&D costs, has had a very positive impact on drug makers
Since 2001, spending by drug developers on clinical research services has grown 15 per cent annually – outpacing the 11 per cent rate of overall spending on development – as pharma firms have increased their reliance on contract research organisations (CROs).
“It is proven that companies who outsource stages of the drug development tend to have fewer problems, more accurate results, and are also more likely to achieve a higher level of performance,” Tufts CSDD director Kenneth Kaitin told OutSourcing-Pharma.com.
“Higher efficiency and cost effectiveness have resulted in greater utilisation of outsourcing by pharma companies.”
According to Tufts CSDD, CRO usage growth has been driven by rising volume and complexity of global clinical trial activity and the increasing number of smaller firms conducting clinical research studies.
While smaller companies have been outsourcing in the US in the past, according to Kaitin, the main change is that they are now also off shoring the outsourcing process to take advantage of lower costs characteristic of developing countries.
“We are now seeing small and mid-tier pharma companies outsourcing to foreign countries, outside the US and Western Europe, such as China, India, Eastern Europe and Latin America, where development costs are substantially lower,” said Kaitin.
He added that there was an increasing collaboration between big pharma and small pharmaceutical companies, in particular emerging biotech companies.
This collaboration has taken different shapes, including the increase in funding by big pharma into small firms, the growing Mergers and Acquisitions (M&A) activity, and the overall higher interested of big pharma in smaller companies' activities.
“While drug developers have understood that their long-term viability depends on improving R&D productivity – and have taken steps to address the issues – they are about to see their efforts pay off in terms of improved success rates and greater numbers of new medical products reaching the market,” said Kaitin.
Quite a challenge, considering that, according to recent research, approval rates for standard new drug applications have plummeted in the last two years, from 38 per cent in 2003 to only eight percent in 2005, as the US regulator seem to get tougher on new drug approvals
Outsourcing in China goes high tech
CNN) -- When company executives think of IT outsourcing, places such as India's Bangalore often come to mind. But that may soon change -- more and more companies are turning to China as not just a cheap source of low-end manufacturing labor but to harness high-tech intellectual might.
One of the companies leading the way is Freeborders, a 7-year-old company that creates customized software for Fortune 500 companies around the world. Headquartered in San Francisco, the bulk of Freeborders' staff of 500 programmers is based in Shenzhen, China, across the border from Hong Kong.
"We think the future of (outsourced) programming is in China," says Freeborders CEO John Cestar. Certainly, it's a fast growing field in China -- the country's outsourcing market is growing by 36 percent a year and is expected to be a near $4 billion-a-year business by 2009, according to Analysys International. This year, the company -- which creates custom software to handle billing, finance and other back-office applications -- plans to quadruple its work force in China to 2,000 employees.
In July the company received an Outsourcing Excellence Award from Forbes Magazine for creating a trading platform, fastextile.com, which links textile mills directly to garment manufacturers worldwide. The company was named one of the world's 50 best managed vendors by "The Black Book of Outsourcing."
CNN spoke with Cestar about the rising profile of China's programming might.
CNN: Why did your company choose China over India for its pool of programmers?
Cestar: About eight years ago, everyone caught on about programming in India and there has frankly been very little interest in other country possibilities. What India has pioneered is a software factory model -- sort of a "price per pound" approach; we can do "X" amount of programming for you at $10 an hour. Really, it makes IT workers very much like assembly line workers in the apparel industry. They are not asked to be creative.
In China, when I first went there 15 years ago to set up operations for another company, I was hugely impressed by how creatively the programmers thought ... they were able to bring a lot of problem-solving skills to the table. It just seems an obvious reservoir to tap for the global market, especially for research and development.
Also, China has much better infrastructure than India ... many companies there have to build their own power plants on site because the local power supply is so dicey; that's not an issue here. And the domestic market for programming has much larger potential than India.
CNN: But don't you have a problem with English language ability in China compared to India?
Cestar: That's more a perceived problem than an actual problem. According to NeoIT (an IT analysis firm) there are 5 million who graduate from university in China every year, and a million of them are studying computer science. Of those, at least a third have strong English language skills; of those, about half are conversationally fluent.
It's really more of a (human resources) problem -- you have to give incentives to your staff to constantly improve their English; they know that if they want to succeed in the company to a managerial position, they'll have to have strong English skills. We have four English professors on staff for training.
CNN: When people think "China" and "software," they often think of "piracy." How do you combat that?
Cestar: Clients sometimes ask me, "(Is) the Chinese government going to have a backdoor into your facility?" In Shenzhen, we bring in standards for security which have been approved by international (industrial verification accreditation). When you walk in, the facility is just like anywhere in the Silicon Valley.
To be honest, handling all the compensation information for 8,000 employees of a bank isn't something that you can peddle on the streets of Shenzhen. In fact, clients often say, "Better you than us" to handle this, because the real problems are if the information is leaked within the company -- this information wouldn't mean anything to you unless you were an employee.
The biggest issue is making sure we have internal isolation and controls in place so competitive information can't reach a competitor ... something they can divine by the nature of project the client has hired us to do. We have internal walls in place between clients who are also competitors.
CNN: What's the biggest challenge for working with programmers in China?
Cestar: We need to work with our employees in China to understand billing and HR systems, to learn how a financial services company issues a receipt or a bill. You have to incorporate a constant learning environment, so they understand the needs of a company in Chicago putting out payroll.
One of the companies leading the way is Freeborders, a 7-year-old company that creates customized software for Fortune 500 companies around the world. Headquartered in San Francisco, the bulk of Freeborders' staff of 500 programmers is based in Shenzhen, China, across the border from Hong Kong.
"We think the future of (outsourced) programming is in China," says Freeborders CEO John Cestar. Certainly, it's a fast growing field in China -- the country's outsourcing market is growing by 36 percent a year and is expected to be a near $4 billion-a-year business by 2009, according to Analysys International. This year, the company -- which creates custom software to handle billing, finance and other back-office applications -- plans to quadruple its work force in China to 2,000 employees.
In July the company received an Outsourcing Excellence Award from Forbes Magazine for creating a trading platform, fastextile.com, which links textile mills directly to garment manufacturers worldwide. The company was named one of the world's 50 best managed vendors by "The Black Book of Outsourcing."
CNN spoke with Cestar about the rising profile of China's programming might.
CNN: Why did your company choose China over India for its pool of programmers?
Cestar: About eight years ago, everyone caught on about programming in India and there has frankly been very little interest in other country possibilities. What India has pioneered is a software factory model -- sort of a "price per pound" approach; we can do "X" amount of programming for you at $10 an hour. Really, it makes IT workers very much like assembly line workers in the apparel industry. They are not asked to be creative.
In China, when I first went there 15 years ago to set up operations for another company, I was hugely impressed by how creatively the programmers thought ... they were able to bring a lot of problem-solving skills to the table. It just seems an obvious reservoir to tap for the global market, especially for research and development.
Also, China has much better infrastructure than India ... many companies there have to build their own power plants on site because the local power supply is so dicey; that's not an issue here. And the domestic market for programming has much larger potential than India.
CNN: But don't you have a problem with English language ability in China compared to India?
Cestar: That's more a perceived problem than an actual problem. According to NeoIT (an IT analysis firm) there are 5 million who graduate from university in China every year, and a million of them are studying computer science. Of those, at least a third have strong English language skills; of those, about half are conversationally fluent.
It's really more of a (human resources) problem -- you have to give incentives to your staff to constantly improve their English; they know that if they want to succeed in the company to a managerial position, they'll have to have strong English skills. We have four English professors on staff for training.
CNN: When people think "China" and "software," they often think of "piracy." How do you combat that?
Cestar: Clients sometimes ask me, "(Is) the Chinese government going to have a backdoor into your facility?" In Shenzhen, we bring in standards for security which have been approved by international (industrial verification accreditation). When you walk in, the facility is just like anywhere in the Silicon Valley.
To be honest, handling all the compensation information for 8,000 employees of a bank isn't something that you can peddle on the streets of Shenzhen. In fact, clients often say, "Better you than us" to handle this, because the real problems are if the information is leaked within the company -- this information wouldn't mean anything to you unless you were an employee.
The biggest issue is making sure we have internal isolation and controls in place so competitive information can't reach a competitor ... something they can divine by the nature of project the client has hired us to do. We have internal walls in place between clients who are also competitors.
CNN: What's the biggest challenge for working with programmers in China?
Cestar: We need to work with our employees in China to understand billing and HR systems, to learn how a financial services company issues a receipt or a bill. You have to incorporate a constant learning environment, so they understand the needs of a company in Chicago putting out payroll.
TEDA Introduces New Policy to Support the Development of the Service Outsourcing Industry
Tianjin Economic- Technological Development Area (TEDA), announces ''Interim Provisions of TEDA to Promote the Development of Service Outsourcing.'' The policy will provide various preferential policies covering areas that include improving infrastructure, encouraging talent imports and training, as well as offering competitive tax support.
n compliance with the policy, TEDA will set up a ''TEDA Fund for the Development of Service Outsourcing,'' with RMB100 million dedicated to supporting the development of service outsourcing. For enterprises and institutions meeting the requirements, in addition to the supporting capital for service outsourcing from the state and Tianjin municipality, TEDA will also provide an additional 50% of that supportive fund. Moreover, TEDA also formulated many supporting policies for service outsourcing enterprises in terms of software export, talent training, financial service and IP service etc. TEDA's support will focus on the service outsourcing of key areas such as software development, R&D design, financial backstage services, finance management, administrative management, HR services and client services, etc.
Recently, three famous domestic software outsourcing companies, namely, Dalian Huaxin, Beijing Beyondsoft and Xi'an Yanxing signed investment agreements with TEDA, who will set up companies in TEDA as significant parts of their development strategies.
As Tianjin Binhai New Area is incorporated in the national overall development planning, TEDA will embrace more opportunities and advantages as a core area. TEDA will make another industrial realignment to develop the modern service based on the advanced manufacturing industry, which and promote industrial upgrading.
About Tianjin Economic-Technological Development Area (TEDA)
Tianjin Economic-Technological Development Area (TEDA) was established in 1984 with the approval of the State Council of the People's Republic of China. It is one of the first state-class economic- is TEDA's strategic choice to optimize the industrial structure technological development areas in the country.
TEDA is located in the center of a larger area bordering Bohai Sea and the east of the Asia-Europe Land Bridge, thus serving as the gate to the two super cities of Beijing and Tianjin, and the throat connecting the northeast of China. By the end of 2005, 4,067 foreign companies have landed in TEDA. Of the Fortune 500 companies, 57 multinational companies, from 10 countries and regions, including such well-established multinational giants as Motorola, Samsung and Toyota, invested in 123 enterprises in TEDA. In 2000, "Fortune" listed TEDA as one of the most highly recommended economic areas in China. In 2002 UNIDO listed TEDA as one of the most dynamic areas of China together with Shenzhen, Suzhou, Wenzhou, Shanghai Pudong and Xi'an High-tech Park.
n compliance with the policy, TEDA will set up a ''TEDA Fund for the Development of Service Outsourcing,'' with RMB100 million dedicated to supporting the development of service outsourcing. For enterprises and institutions meeting the requirements, in addition to the supporting capital for service outsourcing from the state and Tianjin municipality, TEDA will also provide an additional 50% of that supportive fund. Moreover, TEDA also formulated many supporting policies for service outsourcing enterprises in terms of software export, talent training, financial service and IP service etc. TEDA's support will focus on the service outsourcing of key areas such as software development, R&D design, financial backstage services, finance management, administrative management, HR services and client services, etc.
Recently, three famous domestic software outsourcing companies, namely, Dalian Huaxin, Beijing Beyondsoft and Xi'an Yanxing signed investment agreements with TEDA, who will set up companies in TEDA as significant parts of their development strategies.
As Tianjin Binhai New Area is incorporated in the national overall development planning, TEDA will embrace more opportunities and advantages as a core area. TEDA will make another industrial realignment to develop the modern service based on the advanced manufacturing industry, which and promote industrial upgrading.
About Tianjin Economic-Technological Development Area (TEDA)
Tianjin Economic-Technological Development Area (TEDA) was established in 1984 with the approval of the State Council of the People's Republic of China. It is one of the first state-class economic- is TEDA's strategic choice to optimize the industrial structure technological development areas in the country.
TEDA is located in the center of a larger area bordering Bohai Sea and the east of the Asia-Europe Land Bridge, thus serving as the gate to the two super cities of Beijing and Tianjin, and the throat connecting the northeast of China. By the end of 2005, 4,067 foreign companies have landed in TEDA. Of the Fortune 500 companies, 57 multinational companies, from 10 countries and regions, including such well-established multinational giants as Motorola, Samsung and Toyota, invested in 123 enterprises in TEDA. In 2000, "Fortune" listed TEDA as one of the most highly recommended economic areas in China. In 2002 UNIDO listed TEDA as one of the most dynamic areas of China together with Shenzhen, Suzhou, Wenzhou, Shanghai Pudong and Xi'an High-tech Park.
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