Secondly, SPs are focusing on large scale development and innovation framework. Continuous expansion due to solid market demand and government support in recent years has prompted China-based IT services providers to actively engage in merger and acquisition activities, as they seek to achieve even greater scale. While in the midst of transformation to offer high-end services, China-based outsourcing firms need to plan continuous investment in innovative R&D. It is important to construct long-term innovation mechanisms that stem from customer requirements and are fueled by R&D, knowledge, and innovation that provide greater value to the clients.

Thirdly, more flexible and efficient HR strategies have been adopted. In a fiercely competitive environment, highly skilled professionals are important for service providers. Facing the rising pressure of domestic labor costs, SPs have redesigned and implemented some career development plans.

On the one hand, vendors who tend to establish more ODCs (Offshore delivery centers) in the lesser developed areas in China at a lower cost benefit from attractive subsidy policies and a moderate rate of staff turnover. On the other hand, with a high demand for talent integration induced by M&A or internal organization adjustments, vendors need to build new promotion channels dedicated to talent consulting, parallel to existing HR channels for technical engineers.

Fourthly, privatization plans are the next transformation. With the United States placing increasing pressures on vendors to be more competitive and better regulatory oversight, several China vendors listed in overseas markets plan to privatize. By privatizing, vendors can avoid exposure to the capital market and choose flexible innovation strategies for moving up the value chain from low-end to high-end services. But if privatization fails, originators will have to bear high fees. In addition to this, other China vendors might try to acquire US-listed vendors in the process of privatization, in order to take advantage of a lower share price, thus increasing the complexity of privatizing.

"The complex international political and economic environment bring lots of challenges to the growth of China's service outsourcing enterprises. The highly rising domestic labor costs, currency fluctuations significantly, as well as the capital market performance pressure have become the bottlenecks of SPs' further development," says Shanshan Li, Senior Analyst of Services Research, IDC China.

"Therefore, Chinese outsourcing services providers need to take business transformation urgently, which would require them to possess deeper domain knowledge, reasonable talent strategies and stronger grasp of cutting-edge technologies in their efforts to meet customer requirements. 2013 will be a year of 'leapfrog' service offerings."