India's traditional supremacy in the IT offshoring stakes is being challenged by China which plans to quadruple its outsourcing exports by 2010, according to this InformationWeek story.
software outsourcing China skillnet.gifAs EngagingChina has noted before, China is starting from a low base but growing fast. In 2007, China's software outsourcing services are predicted to reach €1.7bn according to German consultancy Skillnet-- see chart.
Nevertheless, China still has a lot to do to convince western customers and software houses that its competencies and skills are comparable with those of India.
In its latest initiative to address these issues, China hopes to convince 100 multinationals to outsource to the country and encourage the development of 1,000 large and mid-size indigenous outsourcers.
Unlike India, China's outsourcing industry remains highly fragmented and none of its indigenous outsourcers are household names in the west.
Most outsourcing experts say China's technical skills are -- or soon will be -- comparable with those of India. But there are a lot more factors that come to play in choosing an outsourcing partner and the lowest-priced bid does not always win.
TifoSoft, a Chengdu-based outsourcer, recently announced it would set up operations in Singapore, presumably in a bid to address the unease that some western customers may have about dealing with a Chinese company. Singapore is home to many multinationals and so western fims will presumably have less qualms using an outsourcing partner based on the island nation, even though the bulk of the work will be done at TifoSoft's facility in Chengdu, where labour costs are only a fifth of those in Singapore.
Also the IT outsourcing theme, ChinaTechNews has an interesting interview with Eric Rongley, CEO of Bleum, one of the first firms to spot the potential of China for offshore software development. To counter the communication problems that can occur with western clients, Bleum has an "English only" policy and provides English classes for its staff . Bleum is one of only a handful of companies in China to boast CMM Level 5 certification -- the highest quality certification.
The company was recently awarded Gold Partner certification by Microsoft in recognition of its expertise in Microsoft technologies.
1/30/2007
The China Question: When, Not If, Will It Rival India?
For as long as we can remember, folks have been talking about China as the “next India.”
Every region of the world — from Latin America to Eastern Europe to Africa – wants to be the “next India.” Yet China seems to be the only country with the population, the skills and, perhaps most important, the drive to make it happen.
As fast as India’s outsourcing economy is growing, China’s is growing faster – 36 percent a year, according to Analysys International, which projects it will reach $4 billion by 2009.
Some executives, like the CEO of software development firm Freeborders, insist Chinese developers are more creative thinkers than their Indian counterparts. And the country’s infrastructure tends to be more reliable, at least partially due to government economy-building initiatives.
Indian firms like Tata Consultancy Services are rushing to beef up their Chinese presence. Tata, which is in a joint venture deal with Microsoft, expects to multiply its Chinese workforce by more than 10 times over the next five years, to 5,000 employees. Other major investors in China include IBM, HP and Siemens.
It’s also becoming a destination of choice for management types hoping to hone their skills and get a leg up in the global economy. A Dallas Morning News article quotes a Texas attorney who accepted a position there as saying China is “the industrial revolution in early 19th-century America all over again.”
That bit of hyperbole notwithstanding, there are, of course, challenges: cultural differences, concerns over intellectual property and, oh yeah, a Communist regime.
Some observers, like an executive quoted in this BusinessWeek article, say it will be at least a decade before China’s IT outsourcing industry will rival India’s.
Yet few seem to doubt it will happen. The question is “when” rather than “if” — a question that no other country appears ready to pose just yet.
Every region of the world — from Latin America to Eastern Europe to Africa – wants to be the “next India.” Yet China seems to be the only country with the population, the skills and, perhaps most important, the drive to make it happen.
As fast as India’s outsourcing economy is growing, China’s is growing faster – 36 percent a year, according to Analysys International, which projects it will reach $4 billion by 2009.
Some executives, like the CEO of software development firm Freeborders, insist Chinese developers are more creative thinkers than their Indian counterparts. And the country’s infrastructure tends to be more reliable, at least partially due to government economy-building initiatives.
Indian firms like Tata Consultancy Services are rushing to beef up their Chinese presence. Tata, which is in a joint venture deal with Microsoft, expects to multiply its Chinese workforce by more than 10 times over the next five years, to 5,000 employees. Other major investors in China include IBM, HP and Siemens.
It’s also becoming a destination of choice for management types hoping to hone their skills and get a leg up in the global economy. A Dallas Morning News article quotes a Texas attorney who accepted a position there as saying China is “the industrial revolution in early 19th-century America all over again.”
That bit of hyperbole notwithstanding, there are, of course, challenges: cultural differences, concerns over intellectual property and, oh yeah, a Communist regime.
Some observers, like an executive quoted in this BusinessWeek article, say it will be at least a decade before China’s IT outsourcing industry will rival India’s.
Yet few seem to doubt it will happen. The question is “when” rather than “if” — a question that no other country appears ready to pose just yet.
China, the aspiring scientific superpower
Celebrated as the inventor of development milestones such as the compass and printing, China is aspiring to become a global player in science and technology in the 21st century, casting off decades of neglect of academia and political persecution of intellectuals.
A leading British think-tank predicted this month that China is on the way to becoming a scientific superpower, thanks to the massive increase in its spending on research and a trend for scientists to return home from abroad.
"The center of gravity of innovation has started moving from the West to the East," the newly released report by the London-based Demos, "The Atlas of Ideas: Mapping the New Geography of Science", says. It goes on to warn that the pre-eminence of the United States and Europe in scientific innovation can no longer be taken for granted.
The Demos report is not the first to pinpoint China's efforts at reviving its scientific capabilities. A recent study by the Organization for Economic Cooperation and Development (OECD) claimed that in 2006 China had overtaken Japan as the world's third-largest spender on research and development (R&D) after the United States and the European Union, spending a total of US$136 billion.
The drive to implement the concept of "scientific development" has indeed become one of the tenets of China's top leadership in recent years. President Hu Jintao has called on China to transform itself into an "innovative country" by 2020. The government's target for China is to establish itself as a scientific powerhouse is 2050.
The top leadership's ambitious agenda has resonated with the public. A recent television documentary broadcast by China Central Television, The Rise of the Great Nations, received high rates of approval for showcasing innovation as a key element in creating a superpower.
"We need to undo the influence of our Confucian heritage in thinking that dutifully pursuing knowledge is everything," wrote an anonymous netizen on an Internet forum. "The examples of the US and Japan show that only by fully embracing technology and science can a country achieve great power."
Optimistic projections aside, in terms of concrete scientific achievements China's figures are less impressive. In 2005, China ranked No 10 globally in the number of international patent applications filed, according to the World Intellectual Property Organization. The same year China spent only $30 billion on R&D.
Experts believe the surge in research spending in 2006 reported by the OECD is partly tied to foreign companies moving some of their research operations to China, and to the fact that a lot of research talent and advance equipment is internationally mobile.
Chinese government officials have tried for years to persuade multinationals to invest in local research sites but these efforts have been hampered by the weakness of China's intellectual-property-protection regime. The United States has complained for years and recently threatened a World Trade Organization copyright case against Chinese companies producing illegal optical disks and computer software.
Nevertheless, government pledges to support scientific development and improve standards of intellectual-property protection have succeeded in persuading a range of multinationals, in telecommunications and computer industries in particular, to site their research centers in China. Last year many pharmaceutical multinationals such as Pfizer, Roche, Novartis and Bayer announced they were also forging ahead with research initiatives in China.
The trend of outsourcing R&D to China is expected to continue, with the country poised to become the second-largest if not the largest market for cars, mobile phones and other products.
The rising number of multinational research centers, the steady return of Chinese scientists from abroad, and the growing pool of China's own university graduates are seen as some of the factors that will determine China's emergence as a scientific superpower, according to the Demos report.
"Beijing's university district alone has as many engineers as all of Western Europe, and you can imagine how dynamic the potential is," James Wildson, co-author of the Demos report, was quoted by the official China Daily.
The Chinese leadership has unveiled plans to boost investment in scientific R&D to 900 billion yuan ($116 billion) by 2020. By then, Beijing hopes research spending will account for 2.5% of gross domestic product.
Though China's spending on R&D has increased by 20% a year since 1999, much of the research is tied to developing items for domestic consumers, not scientific breakthroughs. A few high-tech sectors such as space technology and biotechnology have benefited from high-level government support.
The Demos report warns that China's rigid institutional system and unreformed educational system could also hamper China's long-term scientific progress. China's education relies heavily on memorization and fosters little critical thinking.
A leading British think-tank predicted this month that China is on the way to becoming a scientific superpower, thanks to the massive increase in its spending on research and a trend for scientists to return home from abroad.
"The center of gravity of innovation has started moving from the West to the East," the newly released report by the London-based Demos, "The Atlas of Ideas: Mapping the New Geography of Science", says. It goes on to warn that the pre-eminence of the United States and Europe in scientific innovation can no longer be taken for granted.
The Demos report is not the first to pinpoint China's efforts at reviving its scientific capabilities. A recent study by the Organization for Economic Cooperation and Development (OECD) claimed that in 2006 China had overtaken Japan as the world's third-largest spender on research and development (R&D) after the United States and the European Union, spending a total of US$136 billion.
The drive to implement the concept of "scientific development" has indeed become one of the tenets of China's top leadership in recent years. President Hu Jintao has called on China to transform itself into an "innovative country" by 2020. The government's target for China is to establish itself as a scientific powerhouse is 2050.
The top leadership's ambitious agenda has resonated with the public. A recent television documentary broadcast by China Central Television, The Rise of the Great Nations, received high rates of approval for showcasing innovation as a key element in creating a superpower.
"We need to undo the influence of our Confucian heritage in thinking that dutifully pursuing knowledge is everything," wrote an anonymous netizen on an Internet forum. "The examples of the US and Japan show that only by fully embracing technology and science can a country achieve great power."
Optimistic projections aside, in terms of concrete scientific achievements China's figures are less impressive. In 2005, China ranked No 10 globally in the number of international patent applications filed, according to the World Intellectual Property Organization. The same year China spent only $30 billion on R&D.
Experts believe the surge in research spending in 2006 reported by the OECD is partly tied to foreign companies moving some of their research operations to China, and to the fact that a lot of research talent and advance equipment is internationally mobile.
Chinese government officials have tried for years to persuade multinationals to invest in local research sites but these efforts have been hampered by the weakness of China's intellectual-property-protection regime. The United States has complained for years and recently threatened a World Trade Organization copyright case against Chinese companies producing illegal optical disks and computer software.
Nevertheless, government pledges to support scientific development and improve standards of intellectual-property protection have succeeded in persuading a range of multinationals, in telecommunications and computer industries in particular, to site their research centers in China. Last year many pharmaceutical multinationals such as Pfizer, Roche, Novartis and Bayer announced they were also forging ahead with research initiatives in China.
The trend of outsourcing R&D to China is expected to continue, with the country poised to become the second-largest if not the largest market for cars, mobile phones and other products.
The rising number of multinational research centers, the steady return of Chinese scientists from abroad, and the growing pool of China's own university graduates are seen as some of the factors that will determine China's emergence as a scientific superpower, according to the Demos report.
"Beijing's university district alone has as many engineers as all of Western Europe, and you can imagine how dynamic the potential is," James Wildson, co-author of the Demos report, was quoted by the official China Daily.
The Chinese leadership has unveiled plans to boost investment in scientific R&D to 900 billion yuan ($116 billion) by 2020. By then, Beijing hopes research spending will account for 2.5% of gross domestic product.
Though China's spending on R&D has increased by 20% a year since 1999, much of the research is tied to developing items for domestic consumers, not scientific breakthroughs. A few high-tech sectors such as space technology and biotechnology have benefited from high-level government support.
The Demos report warns that China's rigid institutional system and unreformed educational system could also hamper China's long-term scientific progress. China's education relies heavily on memorization and fosters little critical thinking.
1/28/2007
More small businesses seeking experts for non-core tasks
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."
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."
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
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