China’s reputation for security may have been marred by recent U.S. accusations of state-sponsored hacking but the nation is still a safe place as a tech subcontractor for foreign businesses, according to one of China’s largest IT outsourcing vendors.

“We take security as a ‘live or die’ thing,” said Jun Su, corporate executive vice president for Pactera Technology in an interview. “We are a public company. If we ever got exposed for leaking IP, we are dead.”

Keeping a company’s intellectual property secure in China has long been a challenge facing foreign businesses operating in a country known for piracy. But the concerns around security have heightened in recent months, as the U.S. has grown increasingly vocal about alleged Chinese cyber-espionage that has sought to steal sensitive data from the U.S. military and corporations.

Certain Chinese tech companies, most notably, Huawei Technologies and ZTE, two major providers of telecommunication gear, have been caught in the crossfire. Last October, a U.S. congressional committee accused the two companies of having links to the Chinese government, and advised that U.S. businesses looks elsewhere for their networking equipment purchases.

But the mounting security concerns also represent a potential threat to Pactera and other China-based technology outsourcing vendors, which take the bulk of their clients from overseas. In Pactera’s case, about 43 percent of its 2012 revenue came from U.S.-based customers, with another 23 percent from Europe and Japan-based clients.

Both the U.S. and Australian press have circulated stories about China’s alleged links to cyber-espionage, and the country’s reputation for security has never been its strong suit, Su said. But the accusations shouldn’t spill over into China’s outsourcing industry, where strict standards on security are maintained, he said. For example, China’s former premier Wen Jiabao made a visit to a company facility in 2011 as part of local government tour. But the premier was later barred from entering a lab because he lacked the security clearance.

“Security is the number one thing we definitely have to do,” he said. Pactera has never lost a client because of security problems, according to Su, and the company has offices across the world, including in the U.S. and Europe, to accommodate its customers. “We have to protect the IP,” he said.

Pactera formed out of the merger last year of two Chinese outsourcing vendors, HiSoft and VanceInfo, which have histories stretching back almost 20 years ago. Pactera declined to name its key clients, but before the merger HiSoft and VanceInfo were known to count Microsoft, IBM and General Electric as some of their customers.

“These Chinese outsourcing companies have been around for 10, 15 years or more,” said Tina Tang, an analyst with research firm Gartner. “They’ve been following the Western companies’ standards, so I don’t think security would be a problem.”

China’s outsourcing vendors, however, still lag behind their Indian counterparts in terms of scale. One of India’s largest vendors, Infosys, has over 150,000 employees, with an annual revenue at US$7.4 billion. Pactera, in comparison, has only over 23,000 workers, and an annual revenue at US$360 million. In addition, the country’s outsourcing vendors are facing China’s rising labor costs, along with a depreciating U.S. currency.

It’s why the Chinese companies such as Pactera want to wean themselves from low-cost outsourcing, and move toward developing their own more profitable enterprise services and products for customers. Currently, it receives about 70 percent of its revenue from outsourcing, with the rest coming from consulting and products.

“If we can become successful, I think we can definitely become a leading service provider in China,” Su said. “That will be the challenge for the next two or three years.”

Source:http://www.pcworld.com/article/2038703/china-still-safe-for-it-outsourcing-despite-us-security-concerns-says-vendor.html

China is gunning for India’s IT outsourcing crown, and it will be reliant on the sheer number of its IT talent and strong economic growth to overtake its fellow Asian giant.

That said, there are still lessons Chinese outsourcing providers can learn from their Indian counterparts and, ultimately, businesses will choose their outsourcing partners according to bottomline considerations, said Liu Chu Tzer, executive vice president of Chinese outsourcing company Pactera.

In a recent interview with ZDNet Asia, Liu said China is the “new India” in terms of the IT capabilities available in the country. That, plus the fact that many companies are looking to make inroads into China or have links with the Asian economic powerhouse, means the country is well-positioned to be the alternative destination to India for businesses looking to portion off their IT requirements, he explained.

He pointed out that out of every 6 graduates produced by China’s universities, one of them would be suited for the IT industry and even though every market has a pool of skilled IT workers, they cannot compete on the economies of scale that China boasts.

This argument also applies to competition from other Southeast Asian competitors such as the Philippines and Indo-China, particularly Vietnam. Liu said the Philippines, for example, can carve a niche for themselves by offering BPO (business process outsourcing) services such as operating call centers and data management-related functions.

However, it will not be able to offer thousand-man development teams to companies in the manner that Chinese outsourcing firms are able to, he pointed.

Similarly for Vietnam, it can appeal to companies looking for nearshoring options given that it has strengths in software coding and development, the executive said.

“But in terms of economies of quality, will they have enough to go around [for big-scale IT projects]?” Liu questioned.

Adapting to market forces
Asked if Pactera is facing similar global market challenges that its Indian counterparts like Infosys are facing, such as the tightening of visas for Indian IT professionals brought into the United States to work, Liu said these are part and parcel of the outsourcing business.

“Outsourcing is here to stay…and take away the political statements, companies will still make decisions based on their bottomlines.”

- Liu Chu Tzer, executive vice president, Pactera
He noted that such rules, should they come into effect, will affect everyone and not just specific Indian outsourcing companies or Chinese ones.

For example, the ongoing overhaul of U.S. immigration law will close loopholes that allow outsourcing companies, Indian and American, to pay guest workers in the U.S. at rates often below wages for equivalently-skilled Americans. Indian outsourcing companies will be hard hit though, given that they use more than one-third of the 65,000 high-skill visas, or H-1B, allowed under U.S. regulations, according to an earlier report.

“Outsourcing is here to stay…and take away the political statements, companies will still make decisions based on their bottomlines,” Liu stated.

Pactera was formed on August 10, 2012, in a merger of equals between two Chinese IT companies hiSoft Technology and VanceInfo Technologies. Headquartered in China, it has offices in Singapore, Malaysia, Japan, Australia, Europe and the U.S.

In terms of its business performance in 2012, the Nasdaq-listed company reported net revenues of US$359 million in February this year. Greater China accounted for 48 percent of the full-year revenues, while the United States contributed 21 percent, and Japan, Asia South and Europe generated 16.7 percent, 12.6 percent and 1.7 percent, respectively.

Source:http://www.zdnet.com/cn/china-it-outsourcing-to-be-next-india-7000014821/

When Kevin Mandia, a retired military cybercrime investigator, decided to expose China as a primary threat to U.S. computer networks, he didn’t have to consult with American diplomats in Beijing or declassify tactics to safely reveal government secrets.

He pulled together a 76-page report based on seven years of his company’s work and produced the most detailed public account yet of how, he says, the Chinese government has been rummaging through the networks of major U.S. companies.

It wasn’t news to Mandia’s commercial competitors, or the federal government, that systematic attacks could be traced back to a nondescript office building outside Shanghai that he believes was run by the Chinese army. What was remarkable was that the extraordinary details — code names of hackers, one’s affection for Harry Potter and how they stole sensitive trade secrets and passwords — came from a private security company without the official backing of the U.S. military or intelligence agencies that are responsible for protecting the nation from a cyberattack.

The report, embraced by stakeholders in both government and industry, represented a notable alignment of interests in Washington: The Obama administration has pressed for new evidence of Chinese hacking that it can leverage in diplomatic talks — without revealing secrets about its own hacking investigations — and Mandiant makes headlines with its sensational revelations.

The report also shows the balance of power in America’s cyberwar has shifted into the hands of the $30 billion-a-year computer security industry.

“We probably kicked the hornet’s nest,” Mandia, 42, said in an interview at the Alexandria, Va., headquarters of Mandiant. But “tolerance is just dwindling. People are tired of the status quo of being hacked with impunity, where there’s no risk or repercussion.”

China has disputed Mandiant’s allegations.

Mandiant, which took in some $100 million in business last year — up 60 percent from the year before — is part of a lucrative and exploding market that goes beyond antivirus software and firewalls. These “digital forensics” outfits can tell a business whether its systems have been breached and — if the company pays extra — who attacked it.

Mandiant’s staff is stocked with retired intelligence and law enforcement agents who specialize in computer forensics and promise their clients confidentiality and control over the investigation. In turn, they get unfettered access to the crime scene and resources to fix the problem (Mandiant won’t say exactly how much it charges, but it’s estimated to average around $400 an hour).

The growing reliance on contractors like Mandiant has been compared to that enjoyed by the military and State Department contractor formerly known as Blackwater, which provided physical security to diplomats and other VIPs during the Iraq war. Officials inside and outside government say that’s not a bad thing; contractors can often act more quickly than the government and without as much red tape. There are also serious privacy concerns: Most U.S. citizens don’t want the government to access their bank accounts, for example, even if China is attacking their bank.

Source:http://www.washingtonpost.com/national/china-hacking-reveals-outsourcing-to-private-us-firms-in-international-cyberwar/2013/02/21/dc025790-7bfc-11e2-b147-36af0e207220_story.html