Chinese offshoring gathers pace

Beverley Head
Monday, 10 October 2011 17:02

IT Industry - Strategy

Telstra and the Victorian Government have both signalled their willingness to take a punt on the emerging Chinese offshoring market. Last month VanceInfo Technologies which employs around 12,000 technology workers in China and 40 staff in Australia, announced it had been accepted onto Victoria's eServices panel. The company is already engaged on development projects for Telstra's cloud services.

For the last decade the international offshoring marketplace has been largely dominated by Indian giants such as Tata and Wipro, but according to IT analyst Gartner for the last five years the Chinese government has been pursuing a strategy to encourage the development of Chinese offshore service offerings. In a report authored by analyst Tina Tung and released in June, Gartner noted that there were now more than 12,000 China based service providers, with a total employee count of more than 2.3 million people - more than 70 per cent of whom had a bachelor's degree or higher.

VanceInfo Technologies, while listed on the New York Stock Exchange, and not State owned, clearly identifies as a Chinese organisation headquartered in Beijing and with 90 per cent of its 14,000 employees based in China. The company set up shop in Australia late last year and now employs 40 people locally with ambitions to grow that to 50 by the end of this year, and 150 next year.

According to Trey Zagante, the company's local sales and marketing director, the plan is to 'go up the value chain' in Australia hiring client facing consultants, business analysts and project managers who can act as the conduit between local clients and the 'engine room' of developers in China.

While he acknowledged lingering concerns among some companies about China's reputation with regard to security, privacy and intellectual property protection, Mr Zagante pointed to the company's track record with long term clients such as Microsoft and Citibank as evidence that these concerns could be overcome.

'With Microsoft we have been working with them for 14 years and they are obviously very prudent about IP rights and data security,' he said. VanceInfo meanwhile performs all the core testing of Citibank's core banking systems in China he said.

With regard to VanceInfo's Australian clients, of which only Telstra and the Victorian Government have so far been named, Mr Zagante said that 'we are not looking to take sensitive data offshore.'