At Pactera Technology International Ltd, a Beijing-based IT services provider that was recently formed from the merger of two rivals, new US employees are told about the spartan origins of the company's expansion.

"I remember my hiring manager telling me about the humble beginnings here in Seattle from a small apartment, and the only furniture at the time was a mattress," said Jiantao Pan, chief technology officer of the North America business for Pactera, which started out as VanceInfo Technologies Inc.

"It's a story that goes from mattress to magic," he told China Daily. "We now have over 500 employees and total head count is 24,000 in 35 cities."

Pactera is the result of the merger completed on Nov 6 between Vance-Info and HiSoft Technology International Ltd. The two Chinese companies were listed on US exchanges - Pactera's American depositary shares trade on Nasdaq under the symbol PACT -and provided IT outsourcing and consulting services in China, Japan and other Asian countries, and in the United States and Europe.

By the time Pan joined VanceInfo in 2008, the firm's Seattle operation had grown to 10 people occupying a two-room office. There was no sales staff and the sole employee responsible for client accounts had to travel frequently between the West Coast and China.

Fast expansion after 2010 pushed the number of US employees to 120 in a matter of months.

As a vendor to companies around the world, including Fortune 500 members, Pactera has found that competing in the US market requires "co-location", or uniting multiple operations under one roof, and the ability to scale up or down for a project depending on the client's needs.

Of the firm's 500 employees in Seattle, 80 percent are local people. Half of this group are US citizens or permanent residents, and the rest are from Canada, Mexico, India, Russia and China (through work-visa transfers).

Co-location not only enhances the work force's diversity, it also buffers the company from uncertainty caused by increasing onshore labor costs in China for IT services, Pan said.

VanceInfo, founded in 1995, became the first Chinese company in the software development outsourcing industry to list on Nasdaq, in 2007.

Pactera's clients are in financial services, technology, telecommunications, travel and transportation, manufacturing, and retail and distribution. Besides its Beijing headquarters and Seattle office, locations include Chinese mainland cities, Hong Kong, Taipei, Tokyo, Kuala Lumpur, Singapore, London and Melbourne.

For the past six years, a team of 80 to 100 Pactera employees in Beijing has provided testing for a world-renowned software company whenever it releases a new product, said Pan. He declined to identify the company by name.

"We have no official number on how many IT service companies are cooperating with this client, but this client is a company with an open culture - if you have something valuable to offer, they will take it."

Rising labor costs at home are beginning to erode the outsized advantage enjoyed by Chinese providers of IT outsourcing, though the industry remains strong. Integrating functions, introducing new services and improving efficiency through technology have helped Pactera remain competitive, Pan said.

New services based on cloud computing have become de rigueur across the IT services industry, he said. Providers no longer need to maintain as many servers and other forms of infrastructure, making them leaner and more nimble.

The Ministry of Science and Technology has issued a plan that calls for Chinese IT companies to adopt key technologies by 2015 including cloud-based equipment, supporting platforms and core software. It also encourages the involvement of more China-based companies in the cloud part of the services sector.

chenjia@chinadailyusa.com