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In China industrial growth suffers from restrictions on its resources and environment, the country has been paying more attention to its services industry in order to make its economic growth consistent.
Software development is one of its targets. In 2006, Chinas software industry achieved a sales of 480 billion yuan, 23 percent higher than 2005. But, more importantly, with the rapid development of telecom infrastructure, software development is no longer centralised.
With a huge talent pool and competitive price, China views business process outsourcing as one of the potential growth sectors in the future. At the recently held International Software Summit a key forum of ChinaSoft 2007 in Chengdu, China- five of the seven enterprise were talking about outsourcing in China.
China marks as clear favorite as it has strong presence of foreign companies. MNCs such as Oracle, IBM, HP and NEC have set up outsourcing centres in the country.
Even though language remains a big issue for China in venturing into English voice-based BPO businesses, its geographic and cultural knowledge of Japan and South Korea has provided China an edge over other competitors in these two markets.
When compare to India, which has the worlds major BPO player, are facing talent shortage and higher attrition rate, experts believe that similar industries in China are expected to grow very fast. In 2006, Chinas overseas BPO business was valued at about US$1.4 billion. It is expected to reach US$5.5-6.3 billion by 2010.
At the same time, manufacturing, the services industry is less constrained by geographic distance and might provide chances for cities in the China to emerge as new BPO hubs. Chengdu, the capital city of Sichuan, is more known for its spicy food and pandas. But less people know that Chengdu is making a strong IT base. In the past few years, it has made considerable achievements in IT manufacturing.
Intel, the world largest chipmaker has invested US$525 million in two assembly and testing facilities in Chengdu. Following the footsteps of Intel, Semiconductor Manufacturing International Corporation (SMIC), the worlds third largest foundry, set up an assembly and testing plant in Chengdu.
Encouraged by the quick development of the IT manufacturing industry, the Chengdu government has chosen software as one of the key areas of focus and they are looking at BPO business in particular.
The citys rich human resources is certainly the most important factor. There are 40 universities and colleges in Chengdu with more than half a million students. IT particularly is a popular major in Chengdu. According to data released by the Chengdu Software Association, there are currently more than 65,000 people working in Chengdus software industry. In 2007, there will be nearly 18,500 new IT graduates from these universities.
The labour cost for the BPO business in Chengdu is about 30 per cent lower compared to major cities, such as Beijing and Shanghai. In addition, the turnover rate, or attrition rate in these cities is more than 30 per cent while that in Chengdu is about 5 per cent. People in Chengdu pursue a more relaxing lifestyle and are less willing to job-hop, unlike their counterparts in the coastal cities
A Chengdu native Ms Zhang returned to this city after a short stay in Canada and set up Sofmit in 2002. And the year 2006 Sofmits revenue recorded was 40 million yuan, about 40 times more than it was four years ago when the company was founded.
To some companies, talent itself has become reason enough for them to set up a branch in Chengdu. Liu Jiren, chairman and CEO of Neusoft Group is one who thinks so. Neusoft is one of the biggest software companies in China. In 2006, it became the first Chinese company to have BPO business revenue exceeding US$100 million.
At the same time, Neusoft also became the first Chinese software company with more than 10,000 staff. To focus more on the BPO business, Mr Liu plans to have more than 30,000 staff within a few years. To hire the additional talent, Mr Liu has shifted his focus from Shenyang and Dalian, the two traditional bases of Neusoft, to Chengdu. In October 2006, a software park in Chengdu invested in by Neusoft started operations. Mr Liu plans to have more than 5,000 staff within five years. The race for talent is on.
The booming BPO industry in Chengdu has also attracted the attention of international players. In February 2007, IBM opened a new global delivery centre in Chengdu, its fourth in China after Dalian, Shanghai and Shenzhen
While Chengdus future as a BPO hub looks promising, there are certain things which may tend in to success. People for BPO will require good language proficiency and communication skills. As fast growth is expected in the future, Chengdu will have to come up with solution to find and groom talents to pronounce itself to become a true BPO hub in China
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