Flag of China
Key facts about the country
Population: 1.3 billion
Language: Mandarin is the language of business
Capital: Beijing
Key development locations: Beijing, Dalian, Shanghai are the main ones, but Shenyang, Xian, Guanzhou, Chengdu and Chongqing are also important
Positive experiences of outsourcing in classical offshore destinations have made companies more willing to try newer destinations like China.
Although China is a newer outsourced software development destination it has the potential to rival India in terms of scale. According to analysts at Light Reading, prior to the financial crisis, China’s outsourcing development sector was growing 40% year on year. By 2012 the country’s software outsourcing market is predicted to exceed US$9 billion.
Great Wall in China
Application software development, system tests, software localisation and tailored embedded software development are expected to be the areas that see the biggest growth.
Like India, China’s rapid domestic IT growth is a key differentiator. 80% of the revenues from China’s software outsourcers comes from this domestic market – a figure which is much higher than that of other major offshore development locations. Continuing growth of the domestic IT market should lead, in a few years time, to much greater levels of expertise among Chinese developers, making China increasingly competitive as an offshore destination over the next decade.
Software development companies in China have access to an enormous pool of labour. The country currently has over 2 million IT professionals in the workforce and more than 10,000 more graduating each year from colleges and universities. However, unlike India or some European Union destinations these graduates are not all particularly proficient in English. This will change in the next few years, though, as more and more colleges now require all students to take an English course.
The time zones that Chinese development centres are in can prove to be a challenge for Western European companies. Fortunately the largest Chinese outsourcers post project managers abroad, primarily to North America to ensure smooth development timelines.
Shanghai
China’s base costs remain low and so it can easily rival other destinations on price. In fact some studies show it to be cheaper than Indian and European destinations.
Currently, it also boasts low staff churn rates and a work ethic of great company loyalty.
China’s relative newness as an outsourcer does mean that its industry is not mature and some customers have mentioned teething troubles in terms of senior management skills and working cultures.
China’s enforcement of IP rights lags behind its enactment of IP laws and Intelectual Property remains the main concern of executives when outsourcing to the country. In 2009 China remains on the International Intellectual Property Alliance Priority Watch List. However risks can be largely alleviated if companies follow some basic guidelines to manage the development environment, educate and manage staff and pursue breaches and illegal users.