2009-09-21

The Research & Development Center Xi'an Builds the "Silk Road" for Outsourcing

Central and western areas have to bear the logistic cost for the trade in goods due to geographic differences comparing to costal areas, however, it is no longer a problem for the trade in services. Such is the case of service outsourcing.

The usage of the CAT5E UTP LAN Cable with an average transmission at 100M and the Internet port has greatly cut the logistics cost, making the cities in coastal areas and central and western areas start at the same line for development of services outsourcing.

According to the report of IDC which is a world famous company dedicated in market research, Xi'an is one of the top ten cities for service outsourcing in China. Xi'an can provide enterprises and organizations with the services that help them reduce the cost, improve the efficiency and enhance the competitive performance.

Low Rate of Brain Drain in Xi'an

The greatest costs and advantages for the development of service outsourcing lie in the people, thus, all the outsourcing bases and enterprises consideration for talents is inevitably put in the position of first importance.

Xi'an has historical and natural advantages for talents supply.

As the important higher education and research center in China, Xi'an has more than 100 colleges, 7 of which are listed in "211 Project", about 800,000 enrolled students. The college graduates reaches more than 200,000 each year, over 40,000 of whom are majoring in Computer Science and Technology and nearly 10,000 are English majors. "That is our advantage", the vice mayor of Xi'an Han Sen said to the reporter.

Compared with the well developed cities, such as Beijing, Shanghai, Dalian, Xi'an enjoys the lowest salary level and operation cost. Xi'an also has its advantages comparing with Chongqing and Chengdu that lie in western area of China. According to the State's report about the average salary of employees in information transmission, computer services and software industries, the resource cost of Xi'an just accounts for 70% of Beijing, 12% of Shanghai and 80% of Guangzhou.

The Marketing Director of Xi'an Huatek, Charles Cheng said that the cost advantage is one of aspects they concerned for establishing research and development center in Xi'an.

The employee of Huatek, Zhangting is a native of Xi'an, she never has the idea of changing her job since she worked there, "it is probably because the people in northwestern area like me tend to be steady in our work and life", she explained. It is reported that software professionals in Xi'an behave more stably in the work than those who are in coastal area; the turnover of staff is 8.6% in Xi'an while it reaches 15% or even higher in the cities of coastal area in the east.

It is said by the officer of Xi'an Software Park that there are almost 800 enterprises dedicated in software and service outsourcing in Xi'an, nearly one third of which are foreign-capital enterprises and most of them set their research and development center in Xi'an.

The president of Xi'an SPSS, Shi Jingyun told to the reporter that now Xi'an is the only research and development center of SPSS in China, while the branches in Shanghai and Beijing are focusing on marketing. SPSS has its headquarters in Chicago and enjoys nearly 40 years' history in research and development of statistical software.

Shi Jingyun comes from Gaoxiong, Taiwan province; she had been worked in America for many years and hasn't been to her hometown for 31 years. "We came to China in 2003 for talents. We found that the problem of brain drain haven't been settled after we employed the staff from many countries, such as Romania, Russia, Hungary, Czech Republic, Korea, Japan, America and etc. Then, we start to change our strategy, that is, rather than bringing in talents throughout the world, we settle down the branches worldwide", she recalled.

After research and investigation in many countries in Southeast Asia, SPSS finally decide to establish its research and development department in Xi'an for reason of talents there. The staffs are young, full of passion, serious and trustworthy; furthermore, they are stable and devoted which let SPSS have a relatively low rate of brain drain. It also turns to be the most important factor for a company like SPSS that in urgent need for maintaining the stability of company staff.

Other foreign-capital enterprises like Infineon and GrapeCity, except for SPSS, also select Xi'an as their research and development center.

Service Outsourcing: Diverse Categories

Various companies engaged in service outsourcing are developing and expanding their business activities in different places of the same time in Xi'an, an ancient yet modern city.

Scene 1: The earliest company starts BPO in Xi'an - CompuPacific International Inc.

The employees are entering the name, address and other information into computer. The working site looks like a Net Bar as well as assembly line, but the equipment they are working with is computer instead of heavy machine, which make it different from the situation of manufacturing.

This is one of the representatives of companies dedicated in BPO in Xi'an.

Scene 2: Xi'an Huatek Technologies Co, Ltd.

Some employees are discussing together while others are thinking quietly at the computer in the office. The software outsourcing-oriented American company is spacious and bright, and each staff has their own table for working separately. The photos of the employees are posted on the wall; impression or feelings to Huatek by customer are written down on glass wall; toys and potted landscape are laid on the table at random.

The company starts its business on IC industry and covers a wide range of scope for software outsourcing, for example, semiconductor test software, pharmaceutical software, and logistic software. Recently they built their business with oilfield and they are working on the development of drill pipe management system for oilfield.

The president told the reporter that it has something to do with their almost 20 years' experience in software, "It's hard to implement engineering methodology to software development, and quality depends on people not computer." Huatek is always proud of its culture and training system for staff.

Scene 3: Call Center Alliance

The Call Center Alliance locates in High-tech Development Zone of Xi'an. Telephone service for middle and small enterprises here demonstrated as the same as the call-center in the movie "Slumdog Millionaire", busy yet orderly.

Their work is close to our life. One staff here had ever answered a call from Shenzhen, asking order from MacDonald.

The satisfaction survey for Toyota and BMW in China is conducted via the call service by one company here instead of manufacturer via telephone.

For supporting the development of those small-scale enterprises, Shaanxi Telecom will provide them with survey advisory of mobile user as well as places for their business at their early stage of development.

Scene 4: Comic and Animation Industry Platform in Beilin District

Relying on the professional personnel graduated from Xi'an Academy of Fine Arts and other universities, nine comic and animation enterprises have settled in the Comic and Animation industry platform of Beilin District. They have their own original creation of comic and animation; meanwhile, they provide dubbing, special effects, editing or model design for the cartoon films produced by Japan or other countries.

In addition to the traditional comic and animation, some enterprises have expanded its business into engine service for mobile phone.

With the development for over 20 years, an officer from Xi'an Municipal Bureau of Foreign Trade & Economic Cooperation summarizes the characteristic of outsourcing enterprises in Xi'an as diversity.

The earliest Japanese-invested enterprise in Xi'an: "GrapeCity".

GrapeCity sounds like a fruit enterprise, whose full name is GrapeCity Xi'an Technologies Co. LTD. It specializes in software development on education industry. It has been here for 21 years since the presence in China in 1988.

Iwasa (岩佐一久), as the founder of GrapeCity, has been 80 years old. He is the honorary chairman at present. Iwasa (岩佐一久) is a veteran of the World War II. Marrying Sasaki form Japan, he joined the Japanese nationality. They have 10 children and adopted 12 orphans in the war. Those children joined the company later and they are taking charge of management for GrapeCity now.

As an official manager of GrapeCity said, "the reason why GrapeCity locates in Xi'an owes to the historic origin from Tang Dynasty – Japanese is admiring ancient capital of Tang Dynasty, which urges many Japanese-invested enterprises to invest in Xi'an. This is also one of the essential reasons that Japanese-invested enterprises account for a larger proportion in the foreign capital in Xi'an."

"There are plenty of talents in Xi'an, and people here are simple and honest, which is close to the customs and morals of Sandei" this official manager said.

The development of GrapeCity in 20 years reflects the development of outsourcing in China.

In 1988, there was still no Internet in China. At that time GrapeCity was named "Future Electronic" yet. After developing software, the company copied the software to a palm floppy disk, and then took it back to the headquarters in Japan by air.

At present, with the development and expansion of outsourcing in the world, GrapeCity, just like the grape seed, expands its business around the world , such as Shanghai, Hong Kong, Vietnam, Seattle USA, New Delhi India, Bangalore, Austria, Mongolia. Xi'an is still the R&D center and maintains a stable scale of over 200 staff.

"Xi'an has been the hotspot of investment for Japanese-invested enterprise." the officer from Xi'an Municipal Bureau of Foreign Trade & Economic Cooperation said.

In the first half year of 2009, the export of software and outsourcing service amounts to 95.28 million dollars, an increase of 40.36 percent over the previous year, and the output value is 16 billion. Last year, the value of software and outsourcing service in Xi'an has summed up to 27.7 billion, and the contribution rate for GDP is up to 12.6 percent.

Han Sen, the vice mayor of Xi'an said that Xi'an pays great attention to the development of outsourcing industry, not least it has a far-reaching influence on GDP, but also we realized its contribution to graduate employment and talent attraction. After all, there are over 200,000 college graduates in Xi'an every year, and they face unfavorable employment situation. "Currently, the number of employees in software and service outsourcing industry has reached 76,000, about 12,000 jobs for the college graduates can be added annually." said Han Sen.

"Software industry is promising and eco-friendly. It serves as a Green Engine in economic development." Han Sen said. In the process of industrial transfer, the selection of industry for the central and western areas in China is broadening and the ability to select has been enhanced. "Because the western areas are also considering what industrial structure can be adopted to support the development, we not only adopt the development model of the eastern areas, but also reflect on it."

In recent years, Xi'an paid much attention to attracting the local and overseas software and service outsourcing enterprises. Currently, there are three major service-outsourcing development zones in Xi'an: High-tech zone, Software Park, and Software New Town. Among which, the Software New Town is a new area around 4 square kilometers that is purposefully developed for the outsourcing industry.

The official of Xi'an Foreign Trade and Economic Cooperation Bureau said that the financial support from the government of inner cities is not as strong as that of overseas cities. Government subsidy is very important for small and medium-sized enterprises and it is highly valued. Some enterprises ever invested here but they moved away afterwards for it.

In addition, this official also said that, compared with cities in the eastern area of China, the international flight is comparatively fewer: "Although logistics does not play an important role in service outsourcing, communication is still highly valued. Therefore, creating an international business atmosphere is the direction for our current endeavors."

BOSS TOWN for Outsourcing Service

German Corporation---Infineon Technologies
"The company has been established for more than 6 years since first set-up in Xi'an in 2003. The main business focuses on integrated circuit design and providing the leading-edge design of integrated circuit for clients from abroad. Currently, there is more than 200 staff with amount of export more than 13 million US dollars per year.

We are experiencing key development currently, and the scope with 200 staff is the critical point of software outsourcing enterprises. In this case, the cost of non-business staff accounts for 10%-15%. In fact, expanding business or maintaining stable development depends on projects, but we still have development schedule. However, with consideration of economic crisis, we should be more cautious, and the final decision depends on economic recovery in the following half year."

General Manager-Zhang Ping from Telenav Corporation

"It only has been more than one year since the subsidiary was set up in Xi'an in May and June last year after Telenav with headquarters in America investigated in China in March and April in the same year.

Telenav supplies software business to Europe, America, South America and Central America, which focuses on mobile phone.

We own 14 projects this year and all of them are advancing side by side. Dozens of staff are required to accomplish large amount of tasks per month, which is a sort of normal development trend.

We can not conduct software outsourcing by adopting the way of manufacturing outsourcing, on the contrary, we should supply resolution to contractor. As far as the national policy is concerned, we have to attain a balance to gain more benefit as the businessman. Thus, if the national policy is flexible and numerous, we should attach more importance to project development rather than policy research. In the future, we hope that the policy should be more stable, and the software park could provide service, policy and support for us. In this case, enterprises in the software park will be more professional, and concentrate on the business itself."

SAMING Technology Corporation

"We pursue the sort of innovation and show our gratitude to all subscribers. As the company with absolute intellectual property, we provide original products with ingenious technique, for instance, one key recovery is developed by SAMING Technology. We mainly provide supporting service in embedded type field and have built partnership with general headquarters from Microsoft and Intel.

Besides, we provide supporting service for the world top-10 brands including Dell, Lenovo, Acer and so on. SAMING Technology is the one of companies owning control and discourse power in Xi'an High-tech Industry Zone.

The export markets are mainly in Europe, America, Japan and India by which products of SAMING Technology will be directly adopted. The complete outsourcing, thus, intellectual property is owned by other companies, can not attract SAMING Technology. Software sourcing is seemingly a kind of service, but it reflects a sort of culture, thought and ideology in fact. Integrated circuit is the sort of core intellectual property, and we will overcome all kinds of difficulties in the process of internationalization."

Shi Jingyun, President of SPSS

"Strictly speaking, SPSS is an in-sourcing corporation, not outsourcing.

We invest a lot on each member in the interests of their bight future rather than considering them as a tool for SPSS. Outsourcing only focuses on money, not employee's further development. Human resources are a large cost and the biggest assets for a software enterprise. The reason why we are not outsourcing but in-sourcing is that in-sourcing is more like a warm and big family than outsourcing.

We ever tried to cooperate with many outsourcing enterprises, as a result, we failed as all of them didn't match the standard and demand against ours. An operating mode of a pure outsourcing corporation is to quickly get a project and then another when this one is finished. It is contrary for SPSS, we need to prepare a lot for our products, including necessary product training before starting work and whether to learn other technical skills after this work, etc.

We thought over to introduce outsourcing in SPSS. There is an operating mode in outsourcing. Usually, when you have not decided which company your project will outsource to, most of the outsourcing corporations send the best of the corporations to get this project. Once they win, the inexperienced engineers are responsible for development and implementation and the best start to get another project. I'm afraid of such operating mode, so I decide to have a try in in-sourcing in SPSS. Until now, the number of employees of SPSS has increased from more than 10 to over 200.

We did not know whether it would be successful to start work in Xi'an in 2003, however, the second success always follows the first. If the Research and Development department runs well in one place, the technical support will be naturally provided and then the after-sale service will be established next, all these run step by step. Therefore, it will be impossible for SPSS to establish only one Research and Development department in Xi'an, until now, a technical support has already been established here.

As for the products and businesses of SPSS, which can be outsourced and which need to be developed by ourselves? Each enterprise has its own fast-developed and new products, such profitable and old products can be outsourced since there is no innovation, just to keep its stability; for the new products, they must be developed by the corporation itself. Compared with the steady and process-oriented operating mode of outsourcing, the new product of in-sourcing needs to be tested first to get the feedback from market and then it can be released.

We can see that most large corporations engaged in both outsourcing and in-sourcing. A majority of people would like to turn to in-sourcing after doing outsourcing for a long time; they hope to focus on their own businesses.

India only focused on outsourcing before, but after a period of time, it starts in-sourcing when growing to a certain degree because India knows that only developing own products can keep the talents. Many corporations, famous for service out-sourcing, have a special department to develop its own products. It is a natural development trend that corporations will establish special departments to develop own products with the fast development of Chinese service outsourcing.

However, some outsourcing enterprises switch their focus from getting projects to transferring projects when they are strong enough, which is the highest stage for service outsourcing enterprise. Basically, there are three stages for the development of outsourcing enterprises. The first is to make every effort to negotiate and get the opportunity on the projects when lack of money, so the characteristic of pure outsourcing is obviously reflected then; in the next stage, the enterprise will try to avoid the problem of brain drain, develop its product and start in-sourcing; The third stage is the highest stage, thus, the enterprise has set up a series of mechanism to make profits with no consideration for brain drain."

The news is translated by Huatek. Please refer to the following path for the original version:

Source:http://www.xaonline.gov.cn/wznr.jsp?urltype=news.NewsContentUrl&wbnewsid
=5870&wbtreeid=39

[Back]