Chi Yu plans to bring a delegation of software companies from Jiangsu province to Silicon Valley in San Jose, Calif., where many world-renowned high-tech companies are clustered. As head of Jiangsu’s Economic and Information Technology Commission, Software and Information Service Division, Chi hopes the trip can help him recruit senior technicians to join Chinese IT companies.
For the past three years, Chi has been trying to upgrade the software industry in Jiangsu province. The software industry started in the early 1980s on the east coast, mainly working on outsourced projects from multinational companies such as IBM and Sony. At the beginning, these jobs were quite rudimentary, mostly involving coding for small software or very marginal projects. That consumed a lot of labor but generated very little profit.
Today, Chinese IT companies are no longer satisfied with the tedious and labor-intensive coding work but are bidding for core, sophisticated projects from multinational companies.
“We need high-level talent to work on these projects, but it is hard to find such talent in the domestic market. We plan to bring domestic software companies to Silicon Valley and set up offices there, so it is easier to recruit people without asking them to move to China,” Chi says.
The outsourced jobs from big companies cover many fields, including call centers, IT solutions and information storage.
Gao Songtao, vice-president of the software and information service association, says offshore outsourcing from multinational companies has been growing by 50 percent a year.
“Previously, only companies are involved in this business, but now governments and financial institutes are willing to outsource their IT development and maintenance work to IT companies, as they are more professional.”
Statistics from China’s Ministry of Industry and Information Technology indicate that IT companies now receive 19.2 percent of their businesses from the manufacturing industry, 18.9 percent from financial institutes, and 16.4 percent from local governments.
Guo Jianbing, from the ministry, says companies involved in offshore outsourcing business reached 8,200, and they employ about 1.05 million people in China. Guo says as labor costs increase, IT companies that used to rely on outsourced business from multinational firms should switch their focus from simple data processing to advanced areas such as cloud computing.
He Jifeng, from the Chinese Academy of Sciences, says Chinese companies should find a different route, rather than competing against their Western counterparts in the same area. “For instance, we are not able to develop desktop and operating systems as well as the multinational companies, but we can tap other areas such as smartphone applications and smart home appliances.”
“The automatic cleaning robot is a good example: it fits the needs of families and doesn’t require cutting-edge technologies,” He says. “Coding for marginal projects outsourced from multinational companies is very painstaking and has low margins. The right direction is to leave the office and cooperate with the manufacturing industry.”
He adds that companies used to focus on partnerships with other IT companies, but that only ends up in competition and distrust. “Now we should focus on vertical partnerships and make alliances between upstream and downstream companies.”