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While China is known for its huge manufacturing base, in recent years the government has given high priority to science and technology services. This book provides an in-depth, contemporary view on where China is heading, how it is going to get there, and how companies and countries can engage with China's emerging outsourcing capabilities.
- Sales Rank: #11141555 in Books
- Published on: 2010-03-15
- Released on: 2010-03-30
- Original language: English
- Number of items: 1
- Dimensions: 10.00" h x 1.00" w x 6.00" l, 1.35 pounds
- Binding: Hardcover
- 279 pages
Review
'This book provides an in-depth, contemporary view on where China is heading, how it is going to get there, and how companies and countries can engage with China's emerging outsourcing capabilities.' - The Work Style Magazine
About the Author
MARY C. LACITY is a Professor of Information Systems and an International Business Fellow at the University of Missouri-St. Louis, USA. Her current research focuses on global outsourcing of business and IT services. She has published 11 books, most recently Information Systems Outsourcing: Theory and Practice (Palgrave, 2009; coauthor: Leslie P. Willcocks) and Offshore Outsourcing of IT Work, (Palgrave, 2008; coauthor Joe Rottman). More than 50 of her publications have appeared in the Harvard Business Review, Sloan Management Review, MIS Quarterly, IEEE Computer, Communications of the ACM, and many other academic and practitioner outlets. She is Senior Editor of the Journal of Information Technology, Co-editor of the Palgrave Series: Work, Technology, and Globalization and on the Editorial Boards for MIS Quarterly Executive, Journal of Strategic Information Systems, Strategic Outsourcing: An International Journal, and Journal of the Association for Information Systems (JAIS).
LESLIE P. WILLCOCKS is Professor of Technology Work and Globalization at the London School of Economics, UK�and Political Science, head of the Information Systems and Innovation Group and director of The Outsourcing Unit there. He is known for his work on global sourcing, information management, IT evaluation, e-business, organizational transformation as well as for his practitioner contributions to many corporations and government agencies. He holds visiting chairs at Erasmus, Melbourne and Sydney universities and is an Associate Fellow at Templeton, University of Oxford. He has been Editor-in-Chief of the Journal of Information Technology for the last 20 years, and is joint series editor, with Mary C. Lacity, of the Palgrave book series Technology Work and Globalization. He has co-authored 31 books, including most recently Major Currents in Information Systems (Sage, London 2008, with Allen Lee), and Global Sourcing of Business and IT Services (Palgrave, London, 2006, with Mary C. Lacity) He has published over 180 refereed papers in journals such as Harvard Business Review, Sloan Management Review, MIS Quarterly, MISQ Executive, Journal of Management Studies, Communications of The ACM, and Journal of Strategic Information Systems.
YINGQIN ZHENG is a research associate at the London School of Economics, UK. She obtained her MPhil and PhD from Cambridge University. She was a Gates Cambridge scholar. Her research interests include the implications of information and communication technology in social development, information society and information culture, and distributed innovation. She has conducted research in various countries including South Africa, China, Switzerland and the UK. Yingqin has published a number of academic papers in international journals, and conferences. Her work was awarded Best Paper Finalist at the International Conference of Information Systems 2007, and Highly Commended Award at the Literati Network Awards for Excellence 2009.
Most helpful customer reviews
0 of 0 people found the following review helpful.
Excellent - Especially First Chapter
By Loyd Eskildson
In 2002, only 10% of multinationals off-shored IT work; by 2008 it was 70%, per KPMG. KPMG sees the worldwide market rising to over $1 trillion by 2012 ($250 billion in 2008). 'Business Process Outsourcing' (BPO) is also growing, and predicted by KPMG to overtake IT outsourcing within five years. Within that category, KPMG predicts legal process outsourcing to increase from $80 million in 2006 to $4 billion by 2010, animation and gaming to reach $76 billion this year, e-learning (including on-line tutoring) rising to $56 billion by the end of 2010, offshore engineering (high-tech and telecommunications, in particular) growing to about $175 billion by 2020, and pharmaceutical R&D at $7 billion already. India's share alone of IT/BPO outsourcing is expected to hit $60 billion by 2011, again per KPMG. ("A New Dawn - China's Emerging Role in Global Outsourcing.")
China is well known for its immense manufacturing economy, much less as an IT/BPO outsourcing destination. Yingqin Zheng is a senior lecturer at De Montfort University with a speciality in information systems and innovation, provides a much-needed eye-opener on that topic. Her "China's Emerging Software Outsourcing Industry" (the lead article in Mary Lacity's 2010 "China's Emerging Outsourcing Capabilities") begins by telling us that while China's IT outsourcing capabilities began to emerge in the late 1990s, they only picked up momentum in the last 6-7 years. The size of China's outsourcing industry reached $2 billion in 2007, and is estimated to reach $9 billion by 2012. Per Zheng, this is part of the government's recent plan to reduce reliance on export-oriented manufacturing, consumption of natural resources (especially energy), sensitivity to economic cycles, and degradation of the environment, as well as capturing more of the value-chain and providing more high-paying jobs - especially in interior regions. China undertook an investment of $142 billion in IT and communication technologies in 2006. That same year the Ministry of Commerce launched a project to establish 1,000 internationally accredited outsourcing (CMM/CMMI) providers nationwide, attract 100 leading multinational firms to transfer a substantial proportion of their existing IT and outsourcing services to China, build 10 globally competitive outsourcing bases in China, and bring in over $10 billion of revenues by 2008. Local-level governments and software parks now usually provide subsidies and training for new Chinese software company recruits - training includes language (Japanese, English), cultural awareness, and technical and managerial skills (eg. MBA classes, and PowerPoint presentations). An increasing number of Chinese IT outsourcing suppliers now have an overseas background and/or experience from multi-national enterprises in China (eg. Accenture, Gemini, EDS, IBM); similarly, its venture capital investors. Beijing, for example, allows an 80% tax rebate on salaries paid high-level managers and experts in the software industry; other locals compete similarly for talent, as well as providing attractive office locations near customers and high-speed rail and airline transportation. A new government initiative (April, 2009) targets supplying 1.2 million outsourcing personnel/year, while generating 1 million added employment opportunities for college graduates/year (a $650 subsidy is provided IT outsourcing vendors for every college graduate employed at least a year), and growing the outsourcing business to $30 billion/year.
Zheng continues, pointing out that China's software services outsourcing (SSO) is relatively unknown compared to India's, it is emerging from a much larger domestic market. This foundation largely is attributed to another government policy - 'informationalizing' the country in health, commerce, banking, insurance, education, government, etc. Red Flag Linux, a complex OS program, was developed by a Chinese company as a replacement for Windows OS, again at least partly at the government's urging. By year-end 2007, China's software industry claimed almost 9% of the global software market, generating about $83 billion in revenue (though only 2.5% from exports - mostly to Japan and Korea). Hong Kong, Europe, and the U.S. have since become major SSO target markets.
China's software industry is now about twice as large as India's, though its software exports are only about one-third India's. Further, Zheng tells us it is highly fragmented - by the end of 2008 there were about 4,000 Chinese SSO firms, with a total of over 330,000 employees. Many use cost-cutting to attract clients in an environment of severe competition. I suspect the Chinese practice of creating geographic industry clusters will assists current IT providers and potential SSO firms to develop open-source industry software that can both be modified for individual firms and those in other nations. Zheng also states that the most successful Chinese SSO firms are those aligned with local demands and their own corporate development strategies. Examples: China has the world's largest number of mobile phone users, and in turn has developed long-term IT outsourcing relationships with manufacturers such as Nokia and Sony-Ericsson. Neusoft, China's leading IT firm (15,000 employees, with subsidiaries in the U.S., and elsewhere, plus four IT training institutes in China), selects clients that help build capability and future growth. Other Chinese IT firms have similarly used an incremental capability-development approach, starting with simple data collection and then moving to projects requiring greater capabilities.
Chinese IT firms are now competing with India for $10-20 million-sized projects. Industry consolidation will increase this - its ten largest IT suppliers now only account for 20% of the market, vs. India's three largest accounting for more than 46% of its IT exports. Already, several Chinese IT firms have revenues exceeding $50 million/year. Boeing, Cisco, Dell, IBM, Intel, H-P, Microsoft, Oracle, Sun, and Symantec are existing large customers customers. China will also benefit from major corporations deciding to diversify their off-shoring locations, as well as continuing national efforts to increase English-language competency among citizens. Other significant Chinese advantages include software developer cost levels only one-third those of India, and and enormous 600,000 engineering graduates/year (vs. 400,000 in India and 70,000 in the U.S.). Indian firms, leery of being left behind, are establishing IT and BPO branches in China (DNAIndia.com); China, in turn, gains knowledge of both IT and BPO outsourcing, as well as credibility.
Unfortunately, Zheng did not extend her excellent coverage of Chinese SSOs to also include BPO opportunities - a market KPMG predicts to outpace IT within five years. Accounting and finance already surpass IT as the most common functions conducted by shared services centers in China, while HR work is growing. KPMG, along with other consulting firms on their Asian business-reporting sites, tell readers that China's government is also laying extensive groundwork for growth in this area. For example, China has announced it will not impose operating taxes on IT, BPO, or knowledge processing outsourcing until 2013 in 21 of its key cities (rediff.com). As with its R&D encouragement, the government has also established several 'incubator' ('pioneer') parks with reduced rents to encourage emigres to return to China and start BPO enterprises (RightSite.Asia.com). China is already the preferred location for shared service centers for over 40% of 260+ Asian corporate participants at a recent KPMG conference. Finally, its BPO providers are also working to improve data security, and attaining international certification (eg. ISO) in that area as well. ("The Rise of China BPO" - M&Y Global Services)
Bottom-Line: Distance and language handicaps notwithstanding, China is poised to become a major IT and BPO outsourcing provider targeting the U.S. - much more so than India. Already Any strategy involves risk, but American and European firms will be unable to resist cost-levels one-tenth our own and one-third those in India, as well as the opportunity to co-locate IT and BPO with existing manufacturing and R&D in China. G.E. alone is investing $2 billion in China between now and 2012, including support efforts for its financial and health enterprises, and Microsoft is spending $500 million over the next three years. Already China's Neusoft has begun developing both medical information and cloud computing systems, expected to be major U.S. growth areas; Microsoft has licensed China's iSoftStone technology for its health care cloud computing initiative (Neusoft and iSoftStone sites). Chinese firms are also acquiring U.S. IT/BPO firms (eg. Ascend). While Americans debate and protest the yuan's value, Chinese government support for green energy development, rampant intellectual property piracy, limiting rare-earth sales, rigging procurement to favor Chinese firms, the requirement that firms doing business in China establish R&D efforts there as well (about 1,200 foreign R&D centers were in China by the end of 2009), and human rights issues, China has already quietly moved on to another economic battlefront. The 'good news' is that we have KPMG and Yingqin Zheng's warnings.
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