Business process outsourcing in China

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The business process outsourcing industry in China including IT and other outsourcing services for onshore and export markets surpassed 1 trillion yuan (about $145 billion) in 2016 according to the Ministry of Commerce (MOC). [1]

Contents

History

The outsourcing industry grew rapidly in the 2000s in China by beginning from an "embryonic" scale. [2] IDC, an IT industry consultancy, estimated in 2006 that while outsourcing of IT services was growing at 30% annually, the market size was only $586 million at the end of 2005. [2] Most IT services then were offered to domestic companies with offshore clients concentrated in Japan. [2]

By 2016, outsourcing was still growing fast at about 20% annually, driven by "cloud computing, big data, Internet of things and mobile Internet" according to Xinhua. [1]

IT services

IT related services accounted for about half of the US$87 billion in total service outsourcing provided to export markets in 2015. [3]

The largest IT outsourcing companies based in China include ChinaSoft and Pactera. One of the largest China-focused outsourcing companies but based in the US is VXI Global. ChinaSoft is backed by Huawei. Pactera was formed in 2012 by the merger of two industry leaders, VanceInfo and HiSoft. [4] [5] VXI Global was acquired in 2016 by the Carlyle Group, a marquee private equity firm, for around US$1 billion. The deal was seen by Dow Jones as "making a big bet that the future of the outsourcing industry, long associated with India, will be in China." [6]

Painting

Art production is outsourced to China either to mass-produce thousands of paintings or execute original works based on instructions from foreign artists. [7] A center for art outsourcing is Dafen Village in Shenzhen, well known for production of imitations of masterworks, but also home to artists who are commissioned to execute original works. [8] At the high end of the art world, outsourcing to China is practice by Kehinde Wiley, an American portrait painter, who opened a studio in Beijing in 2006. Under Wiley's 4 to 10 helpers do the brushstrokes for his paintings. [9]

Cost has been a motivation for outsourcing to China with an art blogger suggesting in 2007 that it allowed those with limited budgets to go from buy posters to oil paintings. [10] Initially, Kehinde Wiley also opened his Beijing studio due to cost sensitivity but by 2012, Wiley told New York magazine that savings costs was no longer the reason for relying on Beijing based-helpers. [9]

Global competitiveness

China has the world's second largest outsourcing industry, taking up 33% of global market share, according to a news release from the Ministry of Commerce of the People's Republic of China in March 2017. [1] The Business Processing Industry Association of India in March 2017 had concurring figures, assessing that China had second largest outsourcing industry, behind India and ahead of the Philippines. [11]

Related Research Articles

Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and assets from one firm to another. The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says has "made its presence felt since the time of the Second World War", often involves the contracting out of a business process, operational, and/or non-core functions, such as manufacturing, facility management, call center/call center support.

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca-Cola that outsourced large segments of its supply chain.

<span class="mw-page-title-main">Economy of India</span>

The economy of India has transitioned from a mixed planned economy to a mixed middle-income developing social market economy with notable public sector in strategic sectors. It is the world's fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP). According to the International Monetary Fund (IMF), on a per capita income basis, India ranked 139th by GDP (nominal) and 127th by GDP (PPP). From independence in 1947 until 1991, successive governments followed Soviet model and promoted protectionist economic policies, with extensive Sovietization, state intervention, demand-side economics, natural resources, bureaucrat driven enterprises and economic regulation. This is characterised as dirigism, in the form of the Licence Raj. The end of the Cold War and an acute balance of payments crisis in 1991 led to the adoption of a broad economic liberalisation in India and indicative planning. Since the start of the 21st century, annual average GDP growth has been 6% to 7%. The economy of the Indian subcontinent was the largest in the world for most of recorded history up until the onset of colonialism in early 19th century. India accounts for 7.2% of the global economy in 2022 in PPP terms, and around 3.4% in nominal terms in 2022.

<span class="mw-page-title-main">Kehinde Wiley</span> American artist (born 1977)

Kehinde Wiley is an American portrait painter based in New York City, who is known for his highly naturalistic paintings of Black people, frequently referencing the work of Old Master paintings. He was commissioned in 2017 to paint a portrait of former President Barack Obama for the Smithsonian National Portrait Gallery, which has portraits of all previous American presidents. The Columbus Museum of Art, which hosted an exhibition of his work in 2007, describes his work as follows: "Wiley has gained recent acclaim for his heroic portraits which address the image and status of young African-American men in contemporary culture."

Knowledge process outsourcing (KPO) describes the outsourcing of core information-related business activities which are competitively important or form an integral part of a company's value chain. KPO requires advanced analytical and technical skills as well as a high degree of specialist expertise.

<span class="mw-page-title-main">Business process outsourcing in the Philippines</span> Overview of the process of outsourcing of various business processes

One of the most dynamic and fastest growing sectors in the Philippines is the information technology–business process outsourcing (IT-BPO) industry. The industry is composed of eight sub-sectors, namely, knowledge process outsourcing and back offices, animation, call centers, software development, game development, engineering design, and medical transcription. The IT-BPO industry plays a major role in the country's growth and development.

The pharmaceutical industry in India was valued at an estimated US$42 billion in 2021 and is estimated to reach $130 billion by 2030. India is the world's largest provider of generic medicines by volume, with a 20% share of total global pharmaceutical exports. It is also the largest vaccine supplier in the world by volume, accounting for more than 60% of all vaccines manufactured in the world. Indian pharmaceutical products are exported to various regulated markets including the US, UK, European Union and Canada.

Business process outsourcing to India refers to the business process outsourcing services in the outsourcing industry in India, catering mainly to Western operations of multinational corporations (MNCs).

On-demand outsourcing is a trend in outsourcing wherein major internal operations processes of a company are being shifted to a provider that is paid for by the number of transactions involved. The business transferring the services pays for the quality, special skills and the competence of the service provider's employees. There has been an expansion of the outsourcing concept to include on-demand outsourcing. This refers to the process undertaken by business managers to adopt an outsourcing policy that ensures that the specific business and supplies including technical manpower are accessed as the need arises. It focuses a business strategy to improve its goods and services and to drive a business towards quality improvement.

Neusoft Corporation is a Chinese multinational provider of software engineering services, Information Technology services, product engineering services, IT education and medical equipment headquartered in Shenyang, China.

Global sourcing is the practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material, extreme international competition, new technology and other economic factors like tax breaks and low trade tariffs. A large number of Information Technology projects and Services, including IS Applications and mobile phone apps and database services are outsourced globally to countries like India and Pakistan for more economical pricing.

Romania has been successful in developing dynamic telecommunications, aerospace, and weapons sectors. Industry and construction accounted for 32% of gross domestic product (GDP) in 2018, a comparatively large share even without taking into account related services. The sector employed 26.4% of the workforce. With the manufacture of over 600,000 vehicles in 2018, Romania was Europe's sixth largest producer of automobiles. Dacia is producing more than 1,000,000 cars a year.

<span class="mw-page-title-main">Dalian Software Park</span> Industrial zone in China

Dalian Software Park, also called DLSP, is an industrial zone, created in 1998 in the western suburbs of Dalian City, Liaoning Province, China, where many of the world's large and medium-sized IT-related companies have set up shop to do software development and information services. It is part of Dalian Hi-tech Zone in the broader sense. While American and European companies typically have gone to Bangalore and other cities in India because of the English language capability, Japanese companies have gone to Dalian and other cities in China due to the Japanese language capability.

Software Testing Outsourcing is software testing carried out by an independent company or a group of people not directly involved in the process of software development.

The information technology industry in India comprises information technology services and business process outsourcing. The share of the IT-BPM sector in the GDP of India is 7.4% in FY 2022. The IT and BPM industries' revenue is estimated at US$ 245 billion in FY 2023. The domestic revenue of the IT industry is estimated at $51 billion, and export revenue is estimated at $194 billion in FY 2023. The IT–BPM sector overall employs 5.4 million people as of March 2023. In December 2022, Union Minister of State for Electronics and IT Rajeev Chandrasekhar, in a written reply to a question in Rajya Sabha informed that IT units registered with state-run Software Technology Parks of India (STPI) and Special Economic Zones have exported software worth Rs 11.59 lakh crore in 2021-22.

The Mumbai Consensus is a term used to refer to India's particular model of economic development, with a "people-centric" approach for managing its economy which may be taken up by other developing nations in time. Indian model of economic growth, which relies on its domestic market more than exports, boosted domestic consumption rather than investment, pursued service-oriented industries rather than low-skilled manufacturing industries, and has greatly differed from the typical Asian strategy of exporting labor-intensive, low-priced manufactured goods to the West. This model of economic development remains distinct from the Beijing Consensus with an export-led growth economy, and the Washington Consensus focused instead on encouraging the spread of democracy and free trade.

<span class="mw-page-title-main">Foreign trade of India</span> Details of the trade planning and execution by India

Foreign trade in India includes all imports and exports to and from India. At the level of Central Government it is administered by the Ministry of Commerce and Industry. Foreign trade accounted for 48.8% of India's GDP in 2018.

Pactera Technology International Ltd., (文思海辉技术有限公司) is an IT consulting and outsourcing company with corporate headquarters in Beijing, China, and regional headquarters in North America, Europe, and Asia Pacific. The service areas of the company are in technology, telecom, finance, insurance, energy, travel, manufacturing, retail and logistics.

Kellton Tech Solutions Ltd. (KTSL) is an Indian information technology and outsourcing company headquartered in Hyderabad, India with offices in United States and Europe.The company reported net revenues of Rs. 7.39 billion with more than 1800 employees.

Outsourcing in Ukraine is a widely used service in Ukraine. Most often, outsourcing services are provided in the Information Technology (IT) sphere, but they are also popular in the areas of logistics, marketing services, recruiting, accounting, processing and systematization of information, medical services, administration, and others.

References

  1. 1 2 3 "China companies' service outsourcing contracts record high". english.gov.cn.
  2. 1 2 3 "Outsourcing in China". Computerworld. November 6, 2006.
  3. ↑ "China's service outsourcing grows in 2015". China Daily. January 20, 2016.
  4. ↑ "ChinaSoft first half revenue up 21pc on IT outsourcing growth". South China Morning Post. August 23, 2016.
  5. ↑ "Blackstone Shops Chinese Tech Outsourcing Firm Pactera to Potential Buyers". Wall Street Journal. February 1, 2016.
  6. ↑ Kane Wu; Rick Carew. "Carlyle Group Nears Deal to Buy 70% of China Outsourcing Firm VXI Global". Dow Jones.
  7. ↑ "Creatives Outsource Oil Painting Inspirations to Chinese Artist Village". Vice. February 23, 2016.
  8. ↑ "Why Not Outsource All Your Art Ideas to China". Crave. March 22, 2016.
  9. 1 2 "Outsource to China". New York. April 22, 2012.
  10. ↑ "Save Money on Art: Outsource to China". Henry Domke. Archived from the original on 2021-06-27. Retrieved 2018-02-13.
  11. ↑ "BPO industry challenged: Outsourcing giant India losing to China, small countries". Hindustan Times. March 8, 2017.
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