32) IT services outsourcing the next big thing

China's IT providers of outsourcing service may make a profit of about eighteen billion US dollars by the end of 2010 while the figure could raise to fifty-six billion US dollars by the year of 2015, reported a White Paper from Electronic Data Systems (EDS) released yesterday.

The second biggest IT service supplier globally also signed a strategic collaboration contract to promote the industry of China's IT outsourcing yesterday. Derek Sharp, the VP of sales as well as business development of EDS Asia, noted "China is currently in a historic moment to turn into a major outsourcing provider."

Chinese government has been stimulating its outsourcing industry these years. The software outsourcing firms in China gained $one point four billion in 2006, up over 40% compared with last year. Although the underlying outsourcing revenue is likely to reach four hundred and sixty-five billion US dollars in 2006 and six hundred billion US dollars by 2010, just 9% of the market has been covered, according to Richard Zhang, director of Mckinsey & Company in Shanghai, a leading international consultancy that helped EDS prepare the report.

China has unique strenths including abundant talent pool, the most advanced infrastructure in the world and minimum costs, according to the White Paper, entitled "Building a World-Class IT Services Outsourcing Industry in China", EDS and the ministry will cooperate on policy and regulatory issues, as well as create market growth opportunities, according to the agreement,. Both parties will work together to undertake conferences and high-profile summits to improve China's image to the foreigners.

The government planned to take many measures such as credit support and tax rebates, to promote its services outsourcing industry, a senior official from the Ministry of Commerce said. Shan Qingjiang, deputy director of the ministry's department of trade in services, said "The commerce ministry will cooperate with related government departments such as the Ministry of Finance and the State Administration of Taxation to launch more favorable policies for the services outsourcing industry,"

As a powerhouse of manufacturing industry, China has been endeavoring to accelerate its outsourcing industry these years. The revenue of China's offshore outsourcing increased over 40% in 2006 to $1.4 billion, only accounting for 2% of the international market. The government will further embolden transnational corporations to operate outsourcing programs in China, according to Shan. They are also encouraged to establish joint ventures with Chinese partners.

Last year, the Ministry of Commerce launched a pilot project to set up eleven bases for services outsourcing. These bases includes Beijing, Dalian and Shanghai, which are supposed to create 1,000 large-scale international services outsourcing corporations and draw the attention of 100 transnational companies to outsource to the country. In recent years, outsourcing firms all over the world have been expanding aggressively in China. For instance, in this February Tata Consultancy Services, one of India's most powerful IT organizations set up a new outsourcing joint venture in Beijing with Microsoft and three Chinese counterparts. It plans to aggrandize its staff in China tenfold to five thousand by 2010, making it one of the biggest players in the country.