October 18, 2011: According to an official from Commission of Commerce at Shanghai, Shanghai is planning to promote outsourcing of services as a backbone of the city’s economy. This announcement was made before the opening of Global IT Outsourcing Summit.
According to Sun Jiarong, director of trade of services department at the commission, Shanghai has a large pool of professionals which can be utilized to tap knowledge led services as other cities aim at services outsourcing as a platform to grow. The advantage Shanghai enjoys is that it has a large pool of professional when compared to other cities. Another factor in favor of Shanghai is that there are many global companies that have located their regional headquarters in Shanghai.
The outsourcing industry has grown into a trillion dollar business over the years. Outsourcing is the process of contracting out business processes which was previously carried out inside the company. Since it usually consists of sub-contracting business processes outside the country, it is also known by the name “offshoring”. The important reason why companies go for outsourcing is cost saving. Another reason why companies outsource is that it will help them in concentrating on core business.
According to the ministry of commerce the value of outsourced services in China amounted $1.9billion during the first eight months of 2011. This shows an increase of 17 per cent when compared to the same period during the last year. The statistics from ministry of commerce shows that there were 1800 outsourcing companies in china which employees around 330,000 people.
The total outsourced services in 2007 amounted to $ 2.09 billion which was a 118 per cent increase over 2005. According to ministry official the MNC’s are outsourcing work to china in order to reduce cost and to increase competitiveness, which provides china with new opportunities in the Outsourcing industry. In 2010 the government planned to develop cities such as Shanghai, Dailan, Xi’an and Chengdu as outsourcing base.
Shanghai was successful in developing the outsourcing of IT as an important driver in the services outsourcing strategy. The Information technology amounted to 67.9 percent of the total value of services outsourcing in Shanghai last year. The other areas which have potential of huge growth is Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO).