From common sense, Qingdao should be satisfied with its successful transition from a light tourism city to a heavy industrial city as a result of opening up policy for 30 years. However, shortly after the "Two Sessions" in Qingdao, news came out that this city which has always been good at creating models will start a new development by transition. Different from the transition began in 2002 which focused on city architecture and major transformation in the manufacturing sector, this time outsourcing services-based economy is the direction.
New thinking of Qingdao
As we all know, services outsourcing industry is a new industry based on modern network technology and high-level talents, and it is an important part of modern high-end services. It features as great account on information technology, high added value, low consumption of resources, less environmental pollution, high ability to absorb employment, high level of internationalization and so on.
According to recent development, along with the global development and popularity of IT technology and networks, the development of international services industry has increasingly been information-based, modernized, and globalized, so services outsourcing is becoming a new business model for international services trade. And observing the current condition, Qingdao has just showed its primary trend while global market is just starting to expand.
According to Deng Li, the newly-elected associate director of Qingdao Foreign Trade and Economic Bureau, although Qingdao attaches great importance to development of services outsourcing industry after opening up, it lags behind Suzhou, Wuxi which are not the same level city and Jinan within the province, not to say comparing with provincial cities like Shenzhen, Hangzhou, Xian, Nanjing, Dalian which are increasingly focusing on the development of modern service industries in the process of developing modern services industry. Those cities have a deeper understanding, and they act earlier and gain greater effectiveness.
At the end of this year, city leaders of Qingdao gathered to discuss plans to catch up with other cities and the way to develop.
Some officers said: "it is indeed urgent. This unprecedented meeting could be called a milestone for Qingdao's services outsourcing industry. Because in this meeting, a development plan for Qingdao services outsourcing industry was raised up and supposed to last for seven years. Although this plan has not been formally promulgated, in the 'two sessions' period, the new thinking of Qingdao became the hot topic of discussion. And some sensitive enterprises and institutions have already started consulting and brewing how to participate." Undoubtedly, it is the general trend and common aspiration of the people that Qingdao determines to develop services outsourcing industry.
Globalization percussion
A lot of information tells us that on services outsourcing is developing rapidly in the global market and there is still huge space. Currently services outsourcing has taken place in a wide range of industries such as information technology, human resources, finance, insurance, logistics, and medical services. Multinational companies in the United States, Western Europe, Japan and other countries also substantially contribute to promote the global outsourcing services market.
According to data from IDC, information technology outsourcing (ITO) will grow at an average compound growth rate of nearly 6 percent, and the size of the marketwill reach 580 billion US dollars in 2010; business process outsourcing (BPO) market will increase at a compound average annual growth rate of 10.9%, and the size of the market will reach 710 billion US dollars in 2010. At the same time, China's domestic enterprises will also put limited resources in their core business, and outsource the non-core business process.
According to the forecast of BearingPoint, China's outsourcing market will increase at a compound annual growth rate of 19 percent and the size of the market will reach 20.8 billion US dollars in 2010. Currently only about 3 percent of global IT services outsourcing are undertaken offshore, and only about 1% of business process outsourcing are undertaken offshore. It shows great potential of offshore outsourcing market.
Under this circumstance, the state has decided to highlight services outsourcing as a way to expand services trade and modern service industries. 2007 Government Work Report explicitly stated: "vigorously undertake international service outsourcing, accelerate the pace of developing services sector." In 2007 the State Council's several points for quickening the development of the service sector pointed out that we must undertake international service outsourcing, as the focus of expanding services trade. The 11th Five-Year Plan outlines a clear and important instruction that China is to build services outsourcing bases in order to undertake international services business in good order. The Ministry of Commerce launched a project called "Qianbaishi" for the development of services outsourcing industry, and relevant ministries have also issued supportive policies.
It is for this reason that the competition on the domestic and international service outsourcing market will become even fiercer in the future. From an international perspective, India, Ireland, Eastern Europe, Brazil, Mexico and other countries and regions are taking services outsourcing as a strategy to enhance national competitiveness. From domestic perspective, the eastern, central, and western regions highlight developing services outsourcing as they regard services outsourcing as an opportunity of a new round of opening to the outside. For example, Shanghai has claimed to put forward the " Chinese services outsourcing giant " strategic plan, Dalian has proposed to build China's IT outsourcing center, Xi'an has proposed to create China's services outsourcing city, Chengdu has proposed to build China's Bangalore. Other cities like Suzhou, Nanjing, Wuxi have also adopted measures to promote the services outsourcing industry.
Rational planning and take off
Over the past few years someone has gone to the Software Park in the southern city. Taking it from the point of the view of Qingdao only, it is easy for this park to appeal to the imagination by the closeness to the mountain and sea as well as the University of Qingdao. But to tell the truth, we will clearly see the gap between here and other places once going out to see the outside world. Take Dalian, the city not far away for example, the development experience of Dalian worth learning and drawing for Qingdao.
Entering the Dalian Software Park site, you can find yourself marvel at what they have done. The most astonishing fact is that the software park has been invested 5.5 billion Yuan with an expansion of 110 million square meters and nearly 300 enterprises since its establishment in 1998 through joint efforts of government and the people.
From an overall perspective, the sales revenue of Dalian software industry has skyrocketed from only 200 million yuan in 1998 to 145 billion yuan in 2006, of which 450 million US dollars are from exports. The total number of enterprises has risen from less than 100 to 510 in 2006, including more than 30 top 500 multinational corporations. Particularly noteworthy is that 30 world's top 500 international companies such as IBM, HP, DELL, Accenture, NEC, GE, SAP set branches in Dalian in 2002. At present, half of the world's top 10 leading ITO and BPO service providers has been carried out in the outsourcing business in Dalian.
During the eight years, Dalian has grown from a little-known city in software industry to be one of the attractive and suitable cities at home and abroad for development of software and information services. Dalian has been conferred upon "National Software Industry Base", "National Software Export Base", " Model City for Software Industry Internationalization", " International Software Talent Training Base ", "National Model City for Software Copyright Protection," and "National Animation Industry Base", "National Revitalization of Animation-industry Base"and etc.
Lu Qinghe, the Deputy Director of Qingdao Foreign Economic Bureau shares the same view. From a professional point of view, he has done investigations in many cities in addition to Shenzhen and Xi'an, he desires the high-tech zones in Jinan and its Qilu Software Park. In his point of view, although Qingdao starts its software industry later than Shenzhen, Dalian and other cities, it is not the crux of the problem. The development strategy is not strong, the manpower shortage, small-scale enterprises, few large multinationals, all have become constraints for Qingdao software industry, especially for the services outsourcing industry.
Lu Qinghe said: "Now it is getting better. The plan which is formulated using a globalized thinking indicates that there will be a big development for Qingdao. So the new municipal committee and government think." Just like what the Mayor Xiageng has said:" Qingdao has a good geographical advantage in the country. With the support of the state's industrial policy, Qingdao should be in the forefront in this regard. Furthermore, this is an industry with high added value and no pollution. It is easy to attract high-end talent, thus suitable for Qingdao."
So, what does the forthcoming plan really mean? Deng Li pointed it out in an exclusive interview: "the top priority of Qingdao to develop services outsourcing industry is to select the right industry development focus of recent period, medium period and long period considering the realities of Qingdao. The first imperative is the focus of recent period, which is to make breakthrough for industrial development. Qingdao can start from three great industries: electronic appliance manufacturing industry, port logistics industry and marine scientific research industry. There are highlights of three industries that can take on the city's development services outsourcing industry breakthrough: firstly embedded software outsourcing; secondly, the logistics outsourcing; thirdly, marine scientific research and development outsourcing."
Although the ambitious plan has not been officially announced, people have every reason to expect the name of "Qingdao services" will soon become a brand of this city at home and abroad.
