Investigation Agency released the latest report of " Forecast and Analysis about China's offshore software outsourcing market in 2008-2012," pointed out that in recent years, the size and maturity of offshore outsourcing services market maintains strong growth momentum. In 2007, China's offshore software outsourcing market reached 1.97 billion U.S. dollars, 42.4 percent growth than that in 2006 (RMB income is based on the average exchange rate of RMB Yuan against the U.S. dollar in 2007). Investigation Agency predicts that by 2012, the market will reach 8.95 billion U.S. dollars; five-year compound annual growth rate will be 35.3 percent.
In 2007, overseas customers quietly changed the purpose of the contract. The original purpose of reducing costs for contract were transferred to achieving more value-added value, and the latter has strategic significance to enhance their core competitiveness and business flexibility. "Different from the early stage of market development, now the offshore service providers have a clearer business strategy planning and more specific target markets, and have more rationality in expanding their business and strengthen cooperation relations. We believe that in the next few years, more advanced service concepts, more complex and diversified service models will be derived for China¡¯s offshore services, thereby further consolidate and strengthen China¡¯s competitiveness in the global offshore service market. To enable the development of offshore services market be more healthy and prosperity, China's service providers need to accurately pinpoint their own location, organize and strengthen the competitive advantages, optimize the allocation of resources, thus speed up market access, enhance service capabilities, improve customer viscous, " Yu Qian, senior analyst of China's software (600536 market, stock) Service and Research said.
In 2007, Japan and South Korea are still China's main offshore software outsourcing markets, accounting for 51.8 percent of the overall market size, with 32.2 percent steady growth rate compared with 2006. Over the past decade, Japan and South Korea has made outstanding contributions to the development of Chinese offshore software outsourcing market, but as Japan's offshore services business are getting into a stable development period, the survey forecast that between 2007 and 2012, the growth rate from Japan and South Korea's business market will slow down, and the compound annual growth rate will be 27.2 percent.
In 2007, the operations from American and European continue to grow rapidly, up to 60.6 percent. Positive factors, such as the adequate supply of IT talent, the constant optimization of industrial environment, gradually mature international offshore brands, etc., are helping China in a better competitive position in the international allocation of resources. It still needs a lot of time for China's outsourcing companies to catch up with India's, but we found that in 2007, more and more attention of issuing units are turning from India to China. Not only the offshore software outsourcing market has achieved a rapid scale expansion, but the project level has also been rising rapidly. In the next five years, European and the United States¡¯ market will reach 44.7 percent compound annual growth rate and it is expected in 2009, they will replace Japan and Korean as the main market for China's offshore software outsourcing.
The rapid elevation of Chinese service providers to focus more on the onshore market development and service capabilities to target customers effectively strengthen the grasp of the needs of overseas customers, enhance the in-advisory services, increase customer satisfaction and ultimately realize the pulling for onshore and offshore resources, to expand into deeper, broader service areas. Under the dual pressure of low-end prices of outsourcing projects and high rate of RMB exchange, in order to offset the resulting diluted profits, domestic service providers are actively widen the areas of services, towards high-end of the value chain, and build and maintain strategic cooperative partnership with customers through more value-added services.
Despite the development of the U.S. economy is slow down, domestic service providers remain optimistic about the development of offshore services market, main reasons are listed as the following:
1) Service providers who target to U.S. customers are taking more active measures to expand the scope of services to meet the ever-increasing pressure on profits.
2) To avoid the project risks of the rapid business expansion, domestic service providers will target business expansion to companies which have outsourcing strategy, clear outsourcing process and reasonable expectation of outsourcing.
3) In order to enhance competitiveness and establish a closer partnership with the Western countries, domestic service providers will continue to innovate and reform service models.
Investigations think that China's offshore software outsourcing market will be prosper through closer cooperation between the Government and service providers. We look forward to building a good business environment for the development by the central and local governments, and fully tap the enormous potential of China's offshore software outsourcing business, by joining with enterprises to develop and adopt practical measures.
