White Paper on China’s Software & Information Service Outsourcing Industry in 2008

(Brief Edition)

M INISTRY OF INFORMATION I NDUSTRY SOFTWARE AND I NTEGRATED CIRCUIT PROMOTION CENTER CHINA SOFTWARE INDUSTRY ASSOCIATION CHINA SOURCING ALLIANCE JUNE, 2008

White Paper on China’s Software & Information Service Outsourcing Industry in 2008

Contents
Forward Chapter 1 Summary of China’s Software and Information Service Outsourcing Industry

1.1 Concepts of Software and Information Service Outsourcing 1.2 Current Situation of China’s Software and Information Service Outsourcing Industry 1.3 Developing Direction of China’s Software and Information Service Outsourcing Industry

Chapter 2 Market

Current Situation and Trend of China’s Software and Information Service Outsourcing

2.1 Current Situation and Trend of Offshore Outsourcing Market 2.2 Current Situation and Trend of Onshore Outsourcing Market 2.3 International Competition for China’s Software and Information Service Outsourcing M arket

Chapter 3 Enterprises

Current Situation and Trend of China’s Software and Information Service Outsourcing

3.1 General Situation of China’s Software and Information Service Outsourcing Enterprises 3.2 Current Capability of China’s Software and Information Service Outsourcing E nterprises 3.3 Developing Trend of China’s Software and Information Service Outsourcing E nterprises

Chapter 4

Current Situation of Talent Pools of China’s Software and Information Service

Outsourcing 4.1 Current Situation of China’s Human Resources in Software and Information Service O utsourcing Industry 4.2 Current Situation of Talent Competitiveness of China’s Software and Information Service Outsourcing 4.3 Environment of Talent System Construction of China’s Software and Information Service O utsourcing 4.4 Market Demand for China’s Software and Information Service Outsourcing Talents

Chapter 5

Current Situation of Industrial Bases of China’s Software and Information Service

Outsourcing 5.1 Current Situation of National Software Export Bases 5.2 Current Situation of National Software Industry Bases 5.3 Current Situation of China’s Service Outsourcing Base Cities

Chapter 6

Policy System of China’s Software and Information Service Outsourcing I ndustry

6.1 Industrial Environment Inscape and Major Influential Factors in P olicies

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

6.2 Current Situation of Policy System Construction of China’s Software and Information Service Outsourcing Industry

Chapter 7

Intellectual Property Rights (IPR) Protection in China’s Software and Information

Service Outsourcing 7.1 IPR rotection and the Establishment of Laws and Regulations of China’s Software and Information Service Outsourcing 7.2 Information Security Measures in Software and Information Service Outsourcing

Chapter 8

Public Service Platform of China’s Software and Information Service Outsourcing

8.1 Overall Introduction to Public Service Platform of China’s Software and Information Service O utsourcing 8.2 Current Situation of Public Service Platform of China’s Software and Information Service O utsourcing 8.3 Prospect of Public Service Platform of China’s Software and Information Service O utsourcing

Chapter 9

National Public Brand Establishment of China’s Software and Information Service

Outsourcing 9.1 Definition of National Public Brand of China’s Software and Information Service Outsourcing 9.2 Progress of Promoting National Public Brand of China’s Software and Information Service O utsourcing 9.3 National Public Brand Building and Promotion Measures

Chapter 10

ChinaSourcing Alliance

10.1 Survey to ChinaSourcing Alliance 10.2 Achievements of ChinaSourcing Alliance

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

To facilitate the understanding and knowledge of the current situation and development environment of China’s software and information service outsourcing industry, directed by the Ministry of Industry and Information Technology of P.R. China, Ministry of Information Industry Software and Integrated Circuit Promotion Center (CSIP) compiled the White Paper on China’s Software and Information Service Outsourcing Industry in 2008 as reference for relevant departments and organizations.

1. Concepts of Software and Information Service Outsourcing

S

oftware and information service outsourcing is a service pattern based on information technology. It means that in order to focus the limited resources on core competence, the enterprises outsource the work to external service providers by mean of information technology, which was done originally by the enterprises, so that enterprises can achieve the goals of cost reduction, efficiency improvement, marketing flexibility and core competence optimization. Software and information service outsourcing can be classified geographically as offshore outsourcing and onshore outsourcing. In terms of the characteristics of operations, the activities of a company can be divided into the strategic level, functional level and operational level. Correspondingly, software and information service outsourcing can be divided into three levels according to the actual market demands in terms of the value chain – strategic outsourcing, functional outsourcing and operational outsourcing. In terms of business, software and information service outsourcing can be divided into ITO (Information Technology Outsourcing) directly related to IT function and BPO (Business Process Outsourcing) indirectly related to IT function.

2. Current Situation of China’s Software and Information Service Outsourcing Market

In

2007, the market scale of China’s software and information service outsourcing industry was US$15.2 billion, with US$ 9.04 billion for ITO and US$ 6.16 billion for BPO.

Accounting for 15.0% of the whole industrial market scale, the offshore market scale of China’s software and information service outsourcing has reached US$ 2.28 billion. With a market scale of US$ 12.92 billion, this occupies 85.0% of the whole industrial market scale. It’s estimated that by the year of 2010, the offshore market scale will reach 5.6 billion US$, accounting for 20.0% of the whole industrial market scale; and the onshore market scale will reach US$ 22.4 billion, accounting for 80.0% of the whole industrial market scale.

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

CAGR:34.9%

US$ 2.28 billion 15.0% 85.0% US$ 12.92 billion
Offshore(Demand of Foreign Markets)Income Onshore(Demand of Domestic Markets)Income

US$ 5.6 billion 20.0% 80.0% US$ 22.4 billion
Offshore(Demand of Foreign Markets)Income Onshore(Demand of Domestic Markets)Income

2007- Proportion of Demand of Domestic and Foreign Markets for 2010- Proportion of Demand of Domestic and Foreign Markets for China’s China’s Software and Information Service Outsourcing Industry Software and Information Service Outsourcing Industry (Forecasted)

3. Current Situation of China’s Software and Information Service Outsourcing Enterprises

T

he total number of China’s software and information service outsourcing enterprises has reached 3000 till present and a number of key enterprises with strength, characteristic and brand name have emerged. The scale of these enterprises is expended gradually; the total assets and revenue are increasing rapidly and the number of enterprises with their annual revenue over 100 million RMB has been increased year by year. With the enhanced strength in software and information service outsourcing enterprises, the abundant experience in big-contract projects, the improvement of project management, the expanding capacity in overseas market, more and more enterprises have passed CMM, CMMI and other certificates and have the ability to undertake large-scaled offshore outsourcing projects.

4. Current Situation of Talent System Construction of China’s Software and Information Service Outsourcing

C

hina is rich in human resources and talent pool. There are 300,000 people engaged in software and information service outsourcing, which provides powerful human resources support for the development of software and information service outsourcing.

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

Relevant departments gear up talent training to optimize talent structure. In 2006, under the direction of the former Ministry of Information Industry, relevant units organized and implemented a series of talent training programs like National Information Technology Education Project (NITE), involving cooperating with the Ministry of Economy, Trade and Industry of Japan to cultivate Japan-oriented senior management talent for China’s software and information service outsourcing enterprises. Meanwhile, speed up the construction of Training Bases for National Software and Information Service Outsourcing Talent. Till present, the training bases in Dalian (Japan-oriented) and Yantai (South Korea-oriented) have been established to probe into the patterns and ideas of cultivating high-level software and information service outsourcing talent on a large scale.

5. Current Situation of Industrial Bases of China’s Software and Information Service Outsourcing

T

ill April 2008, eleven cities, including Beijing, Shanghai, Dalian, Jinan, Xi’an, Nanjing, Changsha, Chengdu, Hangzhou, Guangzhou and Zhuhai, had been approved to be National Software Industrial Bases; six cities, including Shanghai, Dalian, Shenzhen, Tianjin, Xi’an and Beijing, had been designated as National Software Export Bases; fourteen cities, including Dalian, Xi’an, Chengdu, Shenzhen, Shanghai, Beijing, Hangzhou, Tianjin, Nanjing, Wuhan, Jinan, Hefei, Changsha and Guangzhou, had been designated as China Service Outsourcing Base Cities; Suzhou Industrial Park had been named as China Outsourcing Demonstration Base while Wuxi Taihu Lake Protected Areas, Nanchang National Hi-tech Industrial Development Zone and Daqing Service Outsourcing Park had been designated as China Outsourcing Demonstration Zones. To meet the construction of traffic, communications and other infrastructures in the National Software Industrial Base, the National Software Export Base, the Service Outsourcing Base Cities, demonstration base and demonstration zone, the state and the governments at all levels have devoted a large amount of manpower, material and financial resources to further establish and perfect the services in all bases and demonstration zones, thus a series of software and information service outsourcing industrial bases with beautiful surroundings, well-equipped facilities and perfect services have come into being.

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

6. Current Situation of Policy System Construction of China’s Software and Information Service Outsourcing Industry

T

he Chinese government attaches great importance to the development of software and information service outsourcing industry, and has successively issued Policies on Encouraging the Development of Software Industry and Integrated Circuit Industry (No. 18, 2000, by the State Council), Action Outlines of Vitalizing the Software Industry 2002-2005 (No. 47, 2002, by the State Council), Opinions on Accelerating the Development of Service Industry by the State Council (No.7 Document, 2007.), to build a favorable policy environment for the development of the industry.

7. Intellectual Property Rights (IPR) Protection in China’s Software and Information Service Outsourcing

T

he Chinese government attaches great importance to IPR protection in this field. Abiding by the rules of international IPR protection and improving its own protection level, China has made great progress in both IPR legal system establish and administration practices in this aspect, which has established a system for the positive circle of intellectual property creation and application. In respect to software IPR protection, the former Ministry of Information Industry and the National Copyright Administration and other ministries promoted the trading and using of software with copyrights. As a result, the central and local governments have all completed the popularization of trading and using software with copyrights. Since 2006, governmental bodies have promoted the installation of software with copyrights in enterprises and the use of software with copyrights for the operating systems. All theses efforts contributed to a drastic reduction of piracy in the software market, improved people’s awareness of the value of software, standardized the market order, enhanced China’s international image and improved the development of China’s software and information services industry. To protect business secrets of outsourcers, and to protect the intellectual property of outsourcers and vendors, China’s software and information service outsourcing enterprises began to carry out effective security measures, by setting up security isolation zone for offices, equipment and networks, to actively prevent the occurrence of information disclosure.

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

8. Public Service Platform of China’s Software and Information Service Outsourcing

W

ith the purpose of congregating resources from industrial bases of software and information service outsourcing and providing services for enterprises including common technology, talents training, intellectual property and national brand popularization, relevant cabinet-level ministries make joint efforts to support the establishment of industrial public service platform. The platform is comprised of four sub-platforms: common technology support platform, IP platform, talents training platform, national public brand construction platform and market promotion platform. By establishing service platform for outsourcing common technology (providing project intermediate services as well), CSIP has established the classified database of global outsourcing market information, the classified database of the outsourcer enterprises, and the database of the credit of Chinese outsourcing enterprises. With respect to the construction of IP service platform, a working group of software and information service outsourcing IP research was established to provide consulting services for enterprises and relevant institutions. The construction of talent training service platform has been initiated to cultivate and train high-end integrated talents in outsourcing, under the guidance of Industry and Information Ministry, relevant departments have started NITE project---National IT Talents Education. Meanwhile the platform cooperates with CICC(Japanese International Information Cooperation Center of Consortium Legal Person) train senior managers and bridge-making talents in outsourcing to Japan. And the platform to effectively accelerates the construction of national IT outsourcing talents practical training bases. At the same time, national public brand ChinaSourcing has been promoted. Based on ChinaSourcing Alliance, CSIP held Software Fair ChinaSourcing Summit 2008 in Beijing, Nanjing and Jinan, and exerted certain influence nationwide. Through continuous efforts being made to construct the platforms described above, Chinese government is dedicated to build national software and information service outsourcing platform with excellent infrastructure for the purpose of providing public services with high quality for national outsourcing enterprises and relevant institutions so as to push the industry forward in a good and rapidness manner.

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

Industrial data

Investment consulting

Government
Decision-making support

Outsourcer
Reliable trade

informationization department

National Software & Information Service Outsourcing Industrial upgrading Public Platform Qualified cooperative relationship

Regional
Industry incubation

Service provider

Uplift competitiveness

industrial parks
Service optimization Talents & Policies

Differentiated development

Educational Institution
Internationalization, Service oriented development

Investment attraction

Talent structure Research Institution Generic technology support

Regional policies

High-level education talents, policies, commercial resources Market research

General talent strategy

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

9. National Public Brand Establishment of China’s Software and Information Service Outsourcing

N

ational brand “ChinaSourcing” which represents the whole image of China’s software and information service outsourcing industry has four aspects of meanings. Firstly, it means that China’s software and information service outsourcing industry as a whole can provide qualified service to international Clients. Secondly, ChinaSourcing represents an alliance of excellent enterprises in the industry. It’s a symbol of enterprises with high credibility, outstanding capabilities and orderly management. Thirdly, ChinaSourcing is an authoritative and official web portal and window to publicize China’s outsourcing industry. Fourthly, ChinaSourcing represents the image of national software and information service outsourcing platform. China has established relevant organizations for the Promotion of ChinaSourcing brand, and actively organized enterprises to take part in influential forums, expos and theme seminars, also forcefully supported domestic enterprises to take part in international communication and promotion activities with the topic of software and information service outsourcing, which increasingly promotes the value of the brand and keeps the industry developing on a healthy and smooth way.

10. ChinaSourcing Alliance

S

ince China starts late in software and information service outsourcing, compared with developed countries and regions, the brand is not quite well-known in the world, and its channel to international markets still needs to be expanded. To integrate resources, facilitate the cooperation between enterprises and industrial alliance, and establish a unified national brand and industrial image, the former Ministry of Information Industry, partnering with CSIP and other departments, initiated ChinaSourcing Alliance on June 15th. Under the principle of equality, mutual benefit, advantage complementary, resource sharing and win-win cooperation, with enterprises as the main body, domestic enterprises and institutions committed to the development of the outsourcing industry will be united to integrate the industrial development resources, to optimize the industrial development environment, to assist the government to realize industrial self-discipline, to enhance the capabilities of the members, to promote the education and employment in outsourcing industry, to speed up the growth of outsourcing industry, and to raise its internationalization level and influence aiming for a bigger and stronger software and information service outsourcing industry in China.

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White Paper on China’s Software & Information Service Outsourcing Industry in 2008

The alliance has optimized its organization system, promoted the national brand and communication and exchanges between foreign outsourcers and domestic vendors, promoted the membership and membership service system, played the role as bridge and provided support for the legislation of effective industrial policies of the government, cooperated with other organizations to promote the development of enterprises, conducted industry research to lay foundation to the development of the industry and published alliance journal to convey updated information.

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