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Converting crisis into opportunity

By Diao Ying and Wang Xing (China Daily)
Updated: 2009-01-12 07:56

Staff working at a call center in a service outsourcing base in Chongqing municipality. [China Daily]

Some of the domestic outsourcing companies may have almost got knocked down in the aftermath of the global economic meltdown, but they can't be knocked out, for sure. If anything, they are now gearing themselves to fight back the ill-effects of the recessionary tendencies by constantly reinventing and upgrading themselves.

"You are doomed if you buy life-rings when a tsunami attacks you, but if you sell life-rings, you could cooperate well with others," said Liu Jiren, chairman of Neusoft Corporation, the largest outsourcing company in the country. "We have never experienced spring, and the challenges we are faced with now, cannot be more difficult than 10 years, or 20 years ago," said Liu.

Optimistic in long term

Fang Fahe, vice president of Neusoft, said: "In the short term, there will be a negative impact as vendors would cut costs, but in the long term, we are still optimistic since enterprises will pay more attention to cutting costs as the overall situation gets murkier."

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Fang believes that in the middle to longer term, there will still be plenty of opportunities for outsourcing enterprises.

According to a recent report from consulting firm Gartner, more companies would turn to outsourcing as they perceive it to be a faster, better, and cheaper business option in times of financial crisis.

"It is not that enterprises will stop spending money. They would only change the way they spend money. They want to save money," said Zhang Yaqin, senior vice president, Microsoft, the largest vendor in the outsourcing industry in China. Zhang said if a company's solution plan or services could meet such demands, its growth could still be vigorous.

He said Microsoft would increase, rather than cut, outsourcing to China. "We expect our business to grow in double digits this year," said Zhang.

Microsoft would also increase its cooperation with Chinese outsourcing companies both in terms of technology and development. The company has spent over $100 million between July 2007 and June 2008, for its outsourcing business in China, with over 60 percent of the businesses being in software development and automatic testing sector.

The outsourcing lure in China has been helped by the blossoming domestic market and also because many multinationals prefer that option while setting up operations.

For Chinese outsourcing providers, this also means an opportunity.

"Many multinationals have planned to do so for a long time. They want to diversify the risks of outsourcing only to India, and get closer to the market because most of them have already had operations here," said Peng Qiang, vice president of iSoftStone Information Service Corporation, another major outsourcing company.

Chen Lifeng, CEO of VanceInfo Technologies Inc, the first domestic outsourcing company listed in Nasdaq, said the financial crisis has also made many Fortune 500 enterprises get closer with their Chinese partners. Chen said he has got many invitations from multinationals recently to talk about business strategies in 2009, including big names like 3M, Cisco, and IBM.

"They invite us to talk about strategic cooperation. They hope they could transplant more business to China, and they put a high expectation on outsourcing manufacturers," said Chen.

Unlike before, when multinationals only outsourced some lower end and unimportant business to Chinese companies, now, more enterprises have started to invite the Chinese outsourcing companies from the beginning, according to Chen.

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