On June 12, the market research agency released entitled "Forecast and Analysis of China's offshore software outsourcing market in 2008 to 2012". The report pointed out that in recent years, the size and maturity of China's offshore outsourcing services market showed a strong growth trend. In 2007 the market size of China's offshore software outsourcing reached 1.97 billion U.S. dollars, growing by 42.4 percent growth comparing with 2006. It is anticipated that the size of the market in 2012 will reach 8.95 billion U.S. dollars, with a five-year compound growth rate of 35.3 percent.
Year 2007 is a turning point for China's offshore software outsourcing market. The motivation of overseas customers to outsource is to reduce the cost of relocation to achieve more value-added value. A senior research analyst of China Software and Services Research Committee, Qian Yu said: "different from the early market, the offshore service providers now have a clearer business strategy planning and more specific target markets, while expanding their business and also strengthening cooperation. Therefore, we think that in the next few years, China's offshore services will give rise to more advanced service concept and a more diversified service model. "She also pointed out that, in order to further prosper China's offshore services market, China service providers need to adopt a clear positioning, strengthening competitive advantages, optimizing the allocation of resources, and other means to enhance service capabilities and improve customer adherence.
The report shows that Japan and South Korea market is still the main offshore software outsourcing market for China in 2007, accounting for 51.8 percent of the overall market and representing a 32.2 percent increase comparing with 2006. It is expected that the market growth of Japan and South Korea will slow down as Japan's offshore services business step into a stable development period between 2007 to 2012, with a expected compound growth rate of 27.2 percent.
In 2007, offshore outsourcing business with Europe and the United States showed a rapid growth, increasing about 60.6 percent comparing last year. It is estimated that the compound growth rate of Europe and the United States market will reach 44.7 percent for the next five years. In 2009, the EU and U.S. markets will replace Japan and South Korea as China's major offshore market. It also pointed out that more and more outsourcers shift their attention from India to China since 2007. Adequate supply of IT talents, optimization of the product environment, gradually matured service brand grant Chinese offshore software outsourcing enterprises a more favorable competitive position in terms of allocation of international resources, but it still needs time to wholly catch up with rivals such as India.
It is considered that the elevated level of attention from China's service providers on the target onshore customers and service capabilities effectively strengthen the grasp of the needs of overseas customers and enhance their capacity in the offshore advisory services and enhance customer satisfaction, which results in an ultimate realization of interaction between onshore and offshore resources and expanding to a deeper and broader area of services. In area of low-end outsourcing, when under the double pressure of dropping price and the continuing downward adjustment of the RMB exchange rate, domestic service providers are actively widening the area of services toward the high-end in the value chain in order to offset the consequent diluted profit.
Considering the macro background of U.S. economic slowdown, the report pointed out that domestic service providers of offshore services continue to remain optimistic about the development. The main reasons include: service providers majoring in the US customers are taking more active measures to expand the scope of services to meet the ever-increasing profit pressure; domestic service providers are targeting at customers with a clear outsourcing strategy and process as well as a reasonable expectation in order to avoid the project risks stemming from rapid expansion of business; they will continue to work on model innovation and reform in order to enhance their competitiveness thus furthering their relations of cooperation with outsourcing customers. Moreover, the Chinese offshore software outsourcing market will only prosper with closer cooperation between the government and service providers.
