Outsourcing firms ride the high-tech wave

Innovation and technology strides to provide greater growth opportunities

Gone are the days when the outsourcing industry was labeled as labor-intensive or even low end. Chinese companies in this sector have been enhancing their technological and innovative capabilities, buoyed further by the country's shift to high-quality development.

Outsourcing is a business practice where a company hires another company to perform certain tasks.

"The outsourcing model is completely different from what we were doing two decades ago," said Zhang Dongwei, senior vice-president and chief marketing officer of Pactera Technology International Ltd, a Beijing-based global digital and IT services provider.

"However, the public's general understanding of the industry was still the same as twenty years ago. They think outsourcing companies are just like a headhunter, who hires and transfers employees to the clients," she said.

"It is time for us to redefine the industry," she said. "In fact, transferring employees to client firms is nowadays only a tiny fraction of our businesses. What we are doing more is to customize system development for our customers, as we are an information technology service provider."

The truth is that the industry, like the service outsourcing sector, has been gradually evolving from labor oriented to technology oriented, Zhang said.

Catalyzing Pactera's progress came due to the Chinese government's continued determination to boost the services outsourcing industry. The Ministry of Commerce will roll out more guidelines aimed to transform and upgrade the sector and drive its high-quality growth, Qian Keming, vice-minister of commerce, said at a recent conference.

In a recent announcement, the Ministry of Commerce said it will speed up the transformation and upgrading of the service outsourcing industry, and help the players to develop into companies with leading technology, high added value, high quality and efficiency.

The move can help expand the influence and international competitiveness of the "China Service "brand, the ministry said. It is in line with the current trend of the global service outsourcing industry, which features digitalization, intelligence, high-end and integrated development, it said.

Globally, the market value of digital transformation is expected to exceed $431.71 billion by 2021, according to a report prepared by Zion Market Research.

In China, almost all industries, ranging from agriculture and finance to transportation and manufacturing, need digital transformation to improve the quality of growth, Zhang said. It translates into big market potential for competitive Chinese IT service providers, she said.

"IT services have been growing over the past two years, but the sharp increase in demand for the sector is yet to come," Zhang said. "The gradual maturity of IT service providers will greatly speed up the digitalization of different industries."

Pactera has been devoted to offering tailored services to industries like financial services and telecommunications. Pactera had the largest market share for banking IT solutions in China for the past two years. It occupied 4.9 percent of the market in 2018, according to a report prepared by United States market intelligence firm IDC.

During the 23rd China International Software Expo, Pactera exhibited its intelligent applications targeting global enterprises. Its products and solutions make full use of innovative technologies such as cloud computing, big data, the internet of things, and artificial intelligence.

High-quality development, in Zhang's view, focuses on digital transformation and centers on customer value. It is driven by innovation and relies on organizational change, she said.

"With a leading edge in technology and deep expertise in the industry, Pactera will adhere to high-quality development, embrace innovation, and offer professional IT services and solutions to customers," Zhang said.

Xing Houyuan, director of the China Service Outsourcing Research Center, said the rapidly developing service outsourcing industry can empower the traditional service sector.

"The fast development of information technology has penetrated into a lot of fields. For example, in the financial services sector, there has been a large number of new technologies that rely on artificial intelligence. So the service outsourcing has boosted the development of many service industries," Xing said, citing the double-digit growth in contracts during the first six months of this year.

Between January and June, the service outsourcing industry in the Chinese mainland delivered stable growth, data from the Ministry of Commerce showed. The value of service outsourcing contracts signed by Chinese enterprises amounted to 709.98 billion yuan ($103.23 billion) in the six-month period, up 29.3 percent year-on-year.

There were 1,800 newly established service outsourcing companies in the first six months, and they helped to create 225,000 new jobs in the sector. By the end of June, a total of 10.91 million people were working in the sector, of whom 7.04 million have a college degree or above.

The industry's structure has continuously improved, the ministry said. The growth of fulfilled contract value in testing, e-commerce platforms and other productive service outsourcing exceeded 40 percent year-on-year.