www.heavensgatel2.fora.pl ¡¸ Topic review - Consolidation Moves in China's Outsourcing

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By Kathrin Hille in Dalian
Chinese outsourcing service provider iSoftStone plans to double its staff numbers through acquisitions over the next year, in a sign of the Chinese industry's ambition to compete for business globally.
"We have 7,000 employees now, but we plan to have at least double that number a year from now," Liu Tianwen,outsourcing software development, chief executive, told the Financial Times.
Mr Liu said the company would choose acquisition targets based on their potential to give the company access to new clients.
His comments signal that the sector is nearing the level of consolidation analysts say is needed to challenge rivals in India, which lead by a wide margin in the global outsourcing business.
McKinsey,Data convention outsourcing, the consultancy, said in a report earlier this year that Chinese outsourcers had the potential to grow into serious competitors to their Indian peers, but added that the industry in China was still too fragmented.
Mr Liu said the industry was about to change. "Our top 10 players are all pretty much the same size," he said. "There has to be consolidation."
China had more than 3,300 companies providing outsourcing services to multinationals last year, but the total contract volume was just $4.7bn, less than 10 per cent of global outsourcing revenues.
In March iSoftStone acquired two smaller rivals in southern China, Sidaronghe and MCDL-Frontline. The move brought iSoftStone new business from Huawei, the fast-growing telecom equipment maker.
Neusoft, China's largest software maker, which is also among the country's top five outsourcing service providers,Data convention, is similarly ambitious.
Last month it acquired the mobile phone software development and testing business of Sesca, the Finland-based outsourcing firm, to give it a better base to target potential customers in Europe.
Last year iSoftStone had $89m in revenues. Neusoft had $543m, but less than $200m of that came from the outsourcing business. Other leading Chinese outsourcing providers include VanceInfo, Chinasoft and hiSoft.
Neusoft and iSoftStone both say they have been picking up new business rapidly since the onset of the financial crisis. The iSoftStone chief executive said multinationals were trying to balance their risks and costs by outsourcing to China as well as India.
"Citi, Fidelity,Financial outsourcing, UBS, Honeywell,quality assurance companies, Boeing and BT are now all here," he said.
iSoftStone, which counts Huawei, Microsoft and IBM as its three largest customers, has been particularly successful in gaining new business from Japanese and South Korean firms, adding Mizuho Bank, Sony and Sharp as customers over the past two years.
"Chinese companies have an advantage over Indian ones in serving them because we are closer geographically and culturally," Mr Liu said.
Another key factor helping Chinese outsourcing providers is the fact that China is the global manufacturing base for most electronics products.
"The software intensity in such gadgets is increasing, and that helps us gain new business," said Liu Jiren, chief executive of Neusoft, in a separate interview.