2005-11-07

Xi'an's New IT Strategy

Xi'an has adopted a new IT strategy by setting its sights on the business process outsourcing (BPO) market. This shift in focus will differentiate itself from other leading Chinese information technology cities in China.

Other major IT cities like Beijing, Shanghai and Dalian have already caught the wave of IT outsourcing which is sweeping the country's software parks.

Huang Shengshen, vice-mayor of Xi'an, capital of Shaanxi Province, said in a recent interview that his city had placed the development of the software industry at the core of its strategy to tap into the global economy and that his city would invest heavily in this area, in particular in BPO. This is where companies outsource functions such as human resources, finance and administration to a BPO specialist in order that it can focus on its core competencies.

While many cities compete for talented professionals, Huang added that this may not be such a big problem for Xi'an, because it has the third largest number of universities in China with over 800,000 students making it a rich educational resource. Xi'an is also one of the ten national software industry bases and one of the four software export bases in the country.

Jing Junhai, Director of the Xi'an High-tech Industries Development Zone, where the software park is located, said his park will adopt a differentiation strategy in order to distinguish itself from Beijing, Shanghai and Dalian.

"While these cities focus on software offshore outsourcing with orders from overseas markets, Xi'an will also focus on providing BPO, which requires less advanced technology but more specific training such as languages, accounting and basic computer skills. They may initially focus on domestic industries, such as the banking and insurance sectors."

Jing said Chinese banks and insurers, in an attempt to improve their efficiency and data security, are considering building data backup and recovery centers outside their Beijing and Shanghai headquarters, making Xi'an a potentially ideal location.

"We must create an environment for the development of a prosperous software and BPO industry in Xi'an, even if that requires municipal government funds to subsidize new business set-ups," said the vice-mayor.

Jing said that there is a current industrial shift from eastern coastal areas to western parts of China and attributes this to rising costs.

Beijing, Shanghai and Dalian are the country's top software export and outsourcing cities, but the rising land and living costs have started to worry some software firms in these regions.

So, many companies in charge of IT services focus their attraction on Xi'an.

Jing said his zone will control costs in Xi'an, especially the cost of office leases and land.

This year, the city set up an industrial fund for the development of the software industry totaling 100 million yuan (US$12.3 million) per year for market development, training of professionals, and innovations.

Jing revealed that the city is considering further support in other areas such as financial help, taxation, education, and development.

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