Outsourcing to China Growing with China

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Outsourcing to China Growing with China

• Wu Qiang
• Vice President,
• Kingdee International Software Group

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Agenda

• China facts and positioning
• IT service market in China
• China for IT/BPO outsourcing destination
• Synergy and challenge of outsourcing to China

3
China Facts and Positioning
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China facts and positioning

• Worlds 2nd largest economy
• Worlds fastest growing economy
• GDP growth rate gt7
• Middle of worlds largest economic center
  (China-Japan-India)
• Worlds largest talent pool (Most Ph.D.
  candidates)
• 23 working age population
• Already leads in manufacturing and is
  transforming itself into a services-based economy
• 50 Billion-plus annual foreign investment
• Domestic infrastructure investment improvement

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China IT/BPO outsourcing

• Significant market for IT/BPO outsourcing
• Labor pool education system
• Infrastructure
• Cost-effectiveness
• Improving legal system IP /Data Security
• Large domestic market
• Foreign investment focus
• Coopetition with India
• Non-Latin market skills
• Chinese/Japanese/Korean etc.

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IT Service Market in China
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China IT services market maintaining a
high-growth momentum in the past five years
In 100 Million Yuan

Size and Growth of China IT Services Market
during 1999-2003(In 100 Million Yuan)
SourceCCID Feb. 2004
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Composition of China IT services market
SourceCCID Feb. 2004

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Forecast of future China IT services market
China Future IT Services and Outsourcing Market
Size and Growth Rate Forecast 2004-2008
In 100 Million Yuan
SourceCCID Feb. 2004
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Composition of China software exportation
SourceCCID Feb. 2004
Japan, U.S. and Hong Kong are the main
destinations for China software exports, which
account for 80.7 of the total software exports.
In 2002, the software export to Japan logged in a
revenue of USD120.162 dollars,accounting for
52.28 of the total software exports, while to
U.S., USD30.7799 million dollars,13.39 and to
Hong Kong, 34.5351 dollars,15.03.
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China IT outsourcing business is gradually
gaining an edge to compete with global players
842
673
544
429
415
347
323
260
193
165
124
60
33
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SourceCCID Feb. 2004
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China for IT/BPO outsourcing destination
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IT/BPO outsourcing market growth forecast
SourceGarnter, Mckinsey
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IT/BPO Outsourcing---Why China?

• High availability of skilled resources
• Including reverse brain drain
• Rapid and sustained economic growth
• Very large domestic market
• Political stability and strong government support
• Attractive after entry into WTO
• Enterprise globalization
• Infrastructure --leapfrogs
• Lower cost
• 20-40 cheaper than India
• Improving legal system
• Hong Kong---gateway for the uncertainty
• Non-Latin language skills/resources

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Key People, Process and Technology
Process
Customers Satisfaction
People
Technology
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People Growing number of tech talent
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Process CMM/ISO/COPC

• More software/service companies with certificate
  of CMM/ISO
• 8 for CMM5
• 14 for CMM4
• More with CMM3

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Technology

• Almost all
• Platform OS, Internet, wireless, embedded
• System application, industrial,
  consuming/game,
• Technical
• Traditional e.g. mainframe/Cobol,
• Modern e.g. Java, .net
• Many more

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Outsourcing practices by MNC

• More and more MNCs set up offshore development
  /service center in China
• IBM, Motorla, SAP, Microsoft, NEC, BEA
• Accenture , BearingPoint
• Many more
• More MNCs request IT/BPO service for the market
  and customers in China and Asian countries

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Synergy and challenge of outsourcing to China
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Synergy of outsourcing to China
Long term partnership and Strategic alliance
with Chinese ISV
Strong process and quality control Including IP
and security
Long term commitment
Leading technology ability industry know-how
People and process
Technology
Strong company background and reputation in the
market
Company
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Avoiding potential pitfalls

• Potential pitfalls
• IP protection
• Lack of experience in managing large-scale
  projects
• Quality
• Communication
• Cultural differences
• Capabilities and services levels

• How to avoid
• Ample evaluation prior to selection
• Long term investment
• Minimizing risks
• Vision and leadership in management
• Setting performance goals
• Managing relationship

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Project model Sample (2 Tiers)
China
Oversea
Vendor
Customer Partner

Client
Partner

Project Management

• Partner representative
• Engagement Director-
• Project Mgt
• Schedule
• SLA
• Deliverables
• Quality
• Budget
• Scope Mgt
• General facilitation of
• communication
• Manage contract with Kingdee

Project Management
Request Management/Help Desk-Level 2,
/Performance Reporting, Manage Control
Function Design
Documentation
DetailedDesign
Coding
Integration Test
Testing
Helpdesk-Level 3
Implement
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Key Take-away

• China
• Outsourcing to China brings more business chances
  in China market
• Ideal destination for IT/BPO outsourcing
• People, process and technology are key
• Right strategy and methodology to avoid potential
  pitfalls
• Outsourcing to China, growing with China

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Thanks!

• Wuqiang_at_kingdee.com