China has become a major outsourcing destination, with the ITO market accounting for over 50% of the total outsourcing value. Key industries driving outsourcing include software development, IT services, pharmaceutical R&D, and engineering design. While outsourcing is growing rapidly, risks include different business cultures, intellectual property protection, and a limited talent pool. However, the government is taking steps like training programs and tax incentives to promote the outsourcing industry in China. Projections indicate continued high growth in ITO, KPO, and BPO through 2020.

1. China
An Emerging Global Outsourcing
Conventional long form: People's
Republic of China Conventional
short form: China

2. Country Overview
Fact:
• Capital: Beijing
• Independence: 1 October 1949
• Population: 1,355,692,576 (July 2014 est.)
• Languages: Standard Chinese or Mandarin
• National Symbol: Dragon
• National Anthem Name: "Yiyongjun Jinxingqu" (The March of the
Volunteers)
International Relation:
• Time: GMT +8:00
• Fiscal Year: calendar year
• Currency: Chinese Yuan
• GDP - Gross domestic product: 9.24 trillion USD (2013) World Bank
• GDP Per Capita: 6,807.43 USD (2013) World Bank
• Inflation Rate (Consumer Prices): 2.6% (2013 est.)

3. • Exports: $2.21 trillion (2013 est.)
• Exports - Commodities: Electrical and other machinery, including data
processing equipment, apparel, radio telephone handsets, textiles,
integrated circuits
• Exports - Partners: Hong Kong 17.4%, US 16.7%, Japan 6.8%, South
Korea 4.1% (2013 est.)
• Exchange Rates: Renminbi yuan (RMB) per US dollar -6.2 (2013 est.)
• Imports: $1.95 trillion (2013 est.)
• Imports - Commodities: Electrical and other machinery, oil and mineral
fuels; nuclear reactor, boiler, and machinery components; optical and
medical equipment, metal ores, motor vehicles; soybeans
• Imports - Partners: South Korea 9.4%, Japan 8.3%, Taiwan 8%, United
States 7.8%, Australia 5%, Germany 4.8% (2013 est.)
• Government: Communist state, Socialist state, Single-party state
Country Overview

4. Available infrastructure for ITO,
KPO, or BPO
Most Successful Types of ITO, KPO, or BPO
Big Data Market Split by Industry
• Internet: 14.9%
• Government: 14.9%
• Telecommunications: 10.6%
• Finance: 10.6%
• Medical: 8.5%
• Manufacturing: 8.5%
• Energy: 8.5%
• Retail: 6.4%
• Logistics: 4.3%
• Education: 4.3%
• Transportations: 4.3%
• Others: 4.3%
•Product R&D, Industrial Design
and Engineering Design
•Design and development of cartoon
animation and online games
•Analysis and data mining
•Intellectual property right research
•Pharmaceutical and
Biotechnological R&D and testing
KPO:
28.4%
•Software Development
•IT software training
•Software product support
•Application implementation
•Integrated circuit design
•Software testing
•IT advising
•Hardware Support
ITO:
56.1 %
•Human Resources
•Customer Management
•Finance & Accounting
•Procurement
BPO:
15.5%
Status of ITO, KPO, or BPO industry

5. Competitive strengths as a ITO, KPO, or BPO venue
Pharmaceutical R&D: China has
become a major destination for
pharmaceutical R&D transfer given to
its cost and talent advantages. China
boasts relatively low-cost professionals,
processes a competitive edge in areas
where scientific research
infrastructures are already well
developed, and enjoys relatively lower
R&D costs and technologies that are
continually upgraded.
Cloud Ecosystem: Cloud
ecosystem is a term used to
describe the complex system
of interdependent components
that work together to enable
cloud services. Enterprises
tend to increasing capitalize on
the cloud ecosystem to gain
competitive advantage and
capture value via coordinated
activities.
SSCs: MNCs –
Multinational Companies
set up of SSC-Shared
Service Centers to
support front-office
operations as well as
back-office operations.
Leading
Players
INSIGME
NEUSOFT
HI SOFT
CHINASOFT INTENATIONAL
DHC
ISOFTSTONE
VANCEINFO
BEYONDSOFT
UFIDA
ACHIEVO

6. Risks
Different
Business
Culture
Decision making process
can take up to 6 months
Takes money, time, and patience to
build relationship
High Cost High income tax and social
security costs
Difficult and costly customer service
due to geographic diversity
Limited Talent
Pool
Language skills need to be improved
Insufficient IT-ready talent pool
High cost to relocate senior
management/ >20% attrition rate
Business
Development
Different business focus and
mentality
Deal size normally
small
Intellectual
Property
Protection (IPR)
and Information
Security
No real IPR protection or information
security in industry
Process to recover from any
IPR violations strenuous
Government
Intervention
Fiscal Measures
•-Government subsidized HR training
•-Tax breaks for technologically advanced
enterprises
Talent Training
•-Opportunities for university student internships
in service outsourcing
•-Award credit for job-oriented training
Promotion of Global Presence
•-Chinese services sponsored or participated in
overseas conference and fairs
Chinese service providers
upgrading ISO certifications
•-8,321 certifications including 3,688
international certifications
Major Risk Factors

7. In 2012, China’s total
outsourcing value was
USD 46.6 billion,
which was an
increase of 43.8%
over the previous
year (ITO 56.1%/
BPO 15.5%/ KPO
28.4%)
Previous
Trends
ITO market close to 50%
annual growth in 2012
•Biggest share in outsourcing industry
•Cloud Computing, Big Data and e-
Commerce big
KPO grew over 100%
between 2010-2012
•Pharmaceuticals and IT industry clients
the biggest contributors
BPO has high prospective
growth, but currently the
smallest
Projections
High growth rate until 2015
2015-2020 growth rate will
slow, but continue to steadily
increase for all of ITO, BPO,
KPO
Projections for Growth

8. OUTSOURCE ITO
• ITO market immature BUT IT software testing and training has been
a focus in recent years
• Majority of service providers main offering is ITO
• Fast growth in model cities and ITO accounts for over 50% of total
outsourcing value in China
• Government has invested in new technology
• Big Data and cloud technologies are emerging
– Can create competitive advantage
• e-Commerce has seen fast growth
• ITO is becoming customer centric and innovative solutions have
been growing
• Main concern of IPR protection is a main concern in China, who has
focused on ISO certifications
Recommendations

9. 1. Glenn, Keeny, and Luis Reategui. "Information Technology Ousourcing in Merging Market."
(n.d.): n. pag. June 2002. Web.
2. Central Intelligence Agency. Central Intelligence Agency, n.d. Web. 11 Feb. 2015.
3. Entry Strategy for China ITO – BPO – KPO Market. (n.d.). Retrieved February 21, 2015,
from http://survey.nasscom.in/sites/default/files/researchreports/softcopy/KPMG_Entry
Strategy for China ITO-BPO- KPO Market.pdf
4. Knowledge Process Outsourcing (KPO) on the Chinese mainland: A new opportunity for Hong
Kong services | HKTDC. (n.d.). Retrieved February 22, 2015, from http://economists-pick-
research.hktdc.com/business- news/article/Research-Articles/Knowledge-Process-Outsourcing-
KPO-on-the-Chinese-mainland-a-new- opportunity-for-Hong-Kong-
services/rp/en/1/1X000000/1X09UKIU.htm
5. http://www.forbes.com/2010/10/07/china-india-outsourcing-markets-information-technology-
kpmg.html
References: