country analysis chinav2
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China
An Emerging Global Outsourcing
Conventional long form: People's Republic of China Conventional
short form: China
Country Overview
Fact: • Capital: Beijing
• Independence: 1 October 1949
• Population: 1,355,692,576 (July 2014 est.)
• Languages: Standard Chinese or Mandarin
• National Symbol: Dragon
• National Anthem Name: "Yiyongjun Jinxingqu" (The March of the Volunteers)
International Relation: • Time: GMT +8:00
• Fiscal Year: calendar year
• Currency: Chinese Yuan
• GDP - Gross domestic product: 9.24 trillion USD (2013) World Bank
• GDP Per Capita: 6,807.43 USD (2013) World Bank
• Inflation Rate (Consumer Prices): 2.6% (2013 est.)
• Exports: $2.21 trillion (2013 est.)
• Exports - Commodities: Electrical and other machinery, including data processing equipment, apparel, radio telephone handsets, textiles, integrated circuits
• Exports - Partners: Hong Kong 17.4%, US 16.7%, Japan 6.8%, South Korea 4.1% (2013 est.)
• Exchange Rates: Renminbi yuan (RMB) per US dollar -6.2 (2013 est.)
• Imports: $1.95 trillion (2013 est.)
• Imports - Commodities: Electrical and other machinery, oil and mineral fuels; nuclear reactor, boiler, and machinery components; optical and medical equipment, metal ores, motor vehicles; soybeans
• Imports - Partners: South Korea 9.4%, Japan 8.3%, Taiwan 8%, United States 7.8%, Australia 5%, Germany 4.8% (2013 est.)
• Government: Communist state, Socialist state, Single-party state
Country Overview
Available infrastructure for ITO, KPO, or BPO
Most Successful Types of ITO, KPO, or BPO
Big Data Market Split by Industry
• Internet: 14.9%
• Government: 14.9%
• Telecommunications: 10.6%
• Finance: 10.6%
• Medical: 8.5%
• Manufacturing: 8.5%
• Energy: 8.5%
• Retail: 6.4%
• Logistics: 4.3%
• Education: 4.3%
• Transportations: 4.3%
• Others: 4.3%
•Product R&D, Industrial Design and Engineering Design
•Design and development of cartoon animation and online games
•Analysis and data mining •Intellectual property right research •Pharmaceutical and
Biotechnological R&D and testing
KPO: 28.4%
•Software Development •IT software training •Software product support •Application implementation •Integrated circuit design •Software testing •IT advising •Hardware Support
ITO: 56.1 %
•Human Resources •Customer Management •Finance & Accounting •Procurement
BPO: 15.5%
Status of ITO, KPO, or BPO industry
Competitive strengths as a ITO, KPO, or BPO venue Pharmaceutical R&D: China has become a major destination for
pharmaceutical R&D transfer given to its cost and talent advantages. China
boasts relatively low-cost professionals, processes a competitive edge in areas
where scientific research infrastructures are already well
developed, and enjoys relatively lower R&D costs and technologies that are
continually upgraded.
Cloud Ecosystem: Cloud ecosystem is a term used to
describe the complex system of interdependent components
that work together to enable cloud services. Enterprises
tend to increasing capitalize on the cloud ecosystem to gain competitive advantage and
capture value via coordinated activities.
SSCs: MNCs –Multinational Companies
set up of SSC-Shared Service Centers to support front-office operations as well as
back-office operations.
Leading Players
INSIGME
NEUSOFT
HI SOFT
CHINASOFT INTENATIONAL
DHC
ISOFTSTONE
VANCEINFO
BEYONDSOFT
UFIDA
ACHIEVO
Risks
Different Business Culture
Decision making process can take up to 6 months
Takes money, time, and patience to build relationship
High Cost High income tax and social security costs
Difficult and costly customer service due to geographic diversity
Limited Talent Pool
Language skills need to be improved
Insufficient IT-ready talent pool
High cost to relocate senior management/ >20% attrition rate
Business Development
Different business focus and mentality
Deal size normally small
Intellectual Property
Protection (IPR) and Information
Security
No real IPR protection or information security in industry
Process to recover from any IPR violations strenuous
Government Intervention
Fiscal Measures •-Government subsidized HR training •-Tax breaks for technologically advanced enterprises
Talent Training •-Opportunities for university student internships in service outsourcing •-Award credit for job-oriented training
Promotion of Global Presence •-Chinese services sponsored or participated in overseas conference and fairs
Chinese service providers upgrading ISO certifications •-8,321 certifications including 3,688 international certifications
Major Risk Factors
In 2012, China’s total outsourcing value was
USD 46.6 billion, which was an
increase of 43.8% over the previous year (ITO 56.1%/ BPO 15.5%/ KPO
28.4%)
Previous Trends
ITO market close to 50% annual growth in 2012 •Biggest share in outsourcing industry •Cloud Computing, Big Data and e-Commerce big
KPO grew over 100% between 2010-2012 •Pharmaceuticals and IT industry clients the biggest contributors
BPO has high prospective growth, but currently the
smallest
Projections
High growth rate until 2015
2015-2020 growth rate will slow, but continue to steadily increase for all of ITO, BPO,
KPO
Projections for Growth
OUTSOURCE ITO • ITO market immature BUT IT software testing and training has been
a focus in recent years • Majority of service providers main offering is ITO • Fast growth in model cities and ITO accounts for over 50% of total
outsourcing value in China • Government has invested in new technology • Big Data and cloud technologies are emerging
– Can create competitive advantage • e-Commerce has seen fast growth • ITO is becoming customer centric and innovative solutions have
been growing • Main concern of IPR protection is a main concern in China, who has
focused on ISO certifications
Recommendations
1. Glenn, Keeny, and Luis Reategui. "Information Technology Ousourcing in Merging Market." (n.d.): n. pag. June 2002. Web.
2. Central Intelligence Agency. Central Intelligence Agency, n.d. Web. 11 Feb. 2015.
3. Entry Strategy for China ITO – BPO – KPO Market. (n.d.). Retrieved February 21, 2015, from http://survey.nasscom.in/sites/default/files/researchreports/softcopy/KPMG_Entry Strategy for China ITO-BPO- KPO Market.pdf
4. Knowledge Process Outsourcing (KPO) on the Chinese mainland: A new opportunity for Hong Kong services | HKTDC. (n.d.). Retrieved February 22, 2015, from http://economists-pick-research.hktdc.com/business- news/article/Research-Articles/Knowledge-Process-Outsourcing-KPO-on-the-Chinese-mainland-a-new- opportunity-for-Hong-Kong-services/rp/en/1/1X000000/1X09UKIU.htm
5. http://www.forbes.com/2010/10/07/china-india-outsourcing-markets-information-technology-kpmg.html
References:
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