Neusoft readies for global outsourcing wave

As the Chinese corporate saying goes, "Once in business, people talk only of their business." But Liu Jiren, chaiman and CEO of Neusoft Group, China's software souring heavyweight, is an exception - he has a broader vision.

In the past year, Liu has been busy traveling abroad. He was invited to participate in the World Managers' Conference held in Chicago and New York, as well as the 2007 Global Outsourcing Summit hosted by Gartner in Dallas.

There, he delivered a speech about changes in the Chinese software industry, its value and the human resources opportunities it provides.

Before this, he regularly visited Japan, but now his business trips are mostly to the US and Europe.

"It is more important to cultivate the overall image of China's outsourcing sector than that of my own company at a time when Chinese software and IT service companies are just starting to enter the international market," Liu said.

He believes that although the overall revenue of Indian software industry is less than China's, India's main revenue source is the international market, making it the largest service outsourcing supplier in the world. India is now known as a world-leading outsourcing destination.

"In my exchanges with foreign companies, I discovered that they, particularly companies from America and Europe, did not know much about China's IT service ability, human resources and the cooperation among the Chinese IT enterprises," Liu said.

"This is because Chinese IT service companies have few exchanges with their foreign counterparts. Therefore, Chinese IT and software enterprises should be more involved in the activities of global enterprises and should strengthen their contacts with their foreign counterparts."

National strength

Not long ago, Liu was pleased to read a market research report published by Gartner, based on a survey of the world's largest outsourcing companies. It found that the top five choices for outsourcing were Ireland, Mexico, Brazil, the Philippines and China.

This indicates that China has earned the attention of the global IT service outsourcing community, Liu said.

He believes that the reason for the trend is that the price for human resources in the IT service sector is rising, and there is a high rate of talent outflow. These factors have forced many Western outsourcing companies to divert more of business to countries with development potential to avoid risks.

In this respect, China is regarded as a country with a rich talent pool and steady politics, and therefore an ideal outsourcing destination.

A July report from a professional information provider IDC found that by 2011, China will surpass India to be the most favored outsourcing destination. This is due to China's investment in infrastructure construction, improved Internet environment, and the enhanced English language and technological ability of the professionals.

Liu said that in the coming 10 to 20 years, China will become an important engine for the world economy. China will also become a world leading outsourcing destination.

The reasons include:

First, China's rapid economic development has helped improve education infrastructure, fostering international talent-level graduates.

Second, China is home to an enormous consumer market. The construction of information infrastructure will create a rapidly developing market.

Third, the development of China's manufacturing industry will produce more software development and BPO business. All equipment made in China will require software produced in China. China will develop into a software producer along with its manufacturing industry. The software producers will then become sales and maintenance suppliers.

Statistics show that China has more than 2,000 universities with nearly 16 million undergraduates, as well as more than 500,000 students studying abroad. During the past 10 years, the number of returning students has tripled. China also has 6 million IT employees, and about 750,000 are IT experts.

China is also a global manufacturing center. The development of the manufacturing industry will produce more software development and BPO business.

Liu believes the successful experience of the manufacturing industry in China will be helpful for its development of software industry and the IT service industry. China will be an office of the world in software development, product design and the maintenance and support of products, he said.

The transfer of the world's manufacturing industry to China was the first wave, he said. Under fiercer market competition, the rapid development of telecommunication and Internet technology, the service industry, research and development and office work will become new subjects for reducing costs.

It will be the basic strategy for enterprises to enhance competitiveness and avoid risks and become the second wave of next round of economic competition and economic globalization.

Market leader

Liu said Neusoft is ready for the coming wave.

During the past five years, China's software industry has changed quietly. Neusoft, the largest solution provider and offshore software outsourcing company in China, has achieved considerable progress, Liu said.

Its revenue in 2006 exceeded 3.15 billion yuan. Revenue from offshore software outsourcing surpassed $100 million.

In the 2007 global top 100 outsourcing companies published by IAOP, Neusoft has for the first time entered the top 25, the only Chinese company on the list.

To get ready for the opportunity brought by the historical global industrial transfer, Neusoft started to prepare for the rapid development of outsourcing business in 1998.

"I often tell my colleagues, what Neusoft is doing today will pay off in five years," Liu said.

In 1998, Neusoft invested in a software park in Dalian, a port city in Northeast China.

Two years later, the company started to build the Neusoft Institute of Information of the Northeastern University, Dalian's first notebook university, in which students are required to own mobile computing devices.

In 2006, Neusoft's Dalian park had more than 5,000 employees and more than 10,000 students.

At the same time, Neusoft set up two institutes in Nanhai and Chengdu in 2001 and 2002 respectively.

In October 2006, the Neusoft software park in Chengdu took shape.

The park will accommodate more than 7,000 international employees.

The company is now building a software development base in Nanjing, capital of Jiangsu Province.

The base will have more than 5,000 staff members.

Neusoft is also building another international software park in the high and new technology zone of Dalian.

The first phase of the project is scheduled to complete by the end of this year.

The park will have more than 10,000 employees.

"The scale of a company lies in its competency. In the next 5 to 10 years, Neusoft's IT service and information infrasturcture will further develop, confirming its position in the internationally more competitive market. All the investment will play an important role during its development," Liu said.

(China Daily 09/05/2007 page10)