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Dalian becoming a key outsourcing hub

By Zhang Xin (China Daily)
Updated: 2009-07-13 08:09

Ten years ago, Dalian lagged behind cities such as Xi'an and Shanghai that had begun developing a software industry infrastructure.

Today, Dalian is being called "the Chinese Bangalore," an up-and-coming rival to the software and information services hub in India.

One competitive edge boasted by the city's Dalian Software Park in Liaoning province is its Japanese language capabilities, which is attracting more Japanese outsourcing business.

Located in the city's southwestern suburb, Dalian Software Park is home to 450 businesses.

Nearly half (47 percent) of those enterprises are foreign companies, including dozens representing corporations as familiar as IBM, Hewlett-Packard (HP), Accenture, Panasonic and Sony.

"We're really working in a multinational environment," Teresa Li, who works in the HP Global Service Center at Dalian Software Park, told China Business Weekly.

"My colleagues are from around the world. They have different colors of skin and speak different languages. But since most of us are bilingual or even trilingual, we always manage to find a common language," Li said.

The industrial park is poised to attract more world-class companies in coming years.

Dalian already tops the rankings in China for global outsourcing capabilities and ranks fifth worldwide as an outsourcing city, according to the Global Delivery Index published in 2007 by the International Data Group.

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Dalian's rank

According to the Index, Dalian ranks fifth internationally behind Bangalore in India, Manila in the Philippines, and New Delhi and Mumbai in India.

A Dalian Software Park insider who asked that her name not be published told China Business Weekly that the tendency in comparing outsourcing locations has been to consider one a potential threat to the other.

But that is not the case, she said.

"Using my company as an example, we have service centers in Dalian, as well as in other parts of the world like Bangalore and Manila," the source said.

"These locations do not overlap; they interact. They form our global service system as a whole. This multi-location strategic structure is widely adopted by leading international companies in the world to avoid dependence on one location," she said.

The source cited Dalian's experience and language skills in dealing with Japanese and Korean outsourcing operations.

Dalian now handles 80 percent of Japan's outsourcing business, according to statistical reports, she said.

Dalian also is unique among similar Chinese cities in the software industry business because of its business operations model.

Instead of operating strictly as a state-owned business, Dalian Software Park operates as a government-facilitated, privately run enterprise, the source said.

Dalian Mayor Xia Deren said the park grew rapidly in the last 10 years because of strong, consistent government support.

Capability

Dalian still lags behind Beijing and China in software research and development (R&D) capabilities, one park tenant said.

"Dalian is good at its industrialization of the outsourcing business in an international environment and has excellent delivery capabilities," Ejay Huang, a programming engineer at Panasonic, said.

"But as a research person, I still long for the opportunity to work in Beijing. It has a sound knowledge system and could provide more space for a long-term development," Huang said.

Huang added that Dalian's outsourcing business still is mostly focused on Japan, while its share of the global outsourcing industry is much smaller.

"And its project-by-project business model is loose and unstable compared with India's capacity to absorb and transact business," Huang said.

Still, Dalian is well on its way to a stronger competitive position, others said.

"In the near future, the best opportunity for development n China lies in technology and services outsourcing," Xia, Dalian's mayor, said.

"We will make good use of our solid foundation and geographic advantage in our efforts to make Dalian the leading city of the global outsourcing industry," Xia said.

A sign posted at Dalian Software Park, where construction of new buildings is under way, reflects the mayor's vision.

"One world, one office," the sign reads.