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.'
Mr Zagante said that although China currently ranked second behind India as the most popular offshoring venue, China was able to access a larger skills pool more inexpensively than Indian companies which were seeing their 'cost base increasing.' He claimed that companies such as TCS and Wipro were increasingly setting up offices in China to supplement their talent pool.
Whatever the ambitions of the Chinese offshorers, Gartner analyst Rolf Jester believes they will face similar challenges to those the Indian companies faced a decade ago in terms of proving their bona fides and winning the confidence of clients. However he acknowledged that the challenges Chinese companies would face may not be as acute as Australian companies are at least now more comfortable with the concept of offshoring.
Even so; 'There is likely to be a certain amount of market resistance while people decide if it is safe to buy from the Chinese,' he said. Having Telstra and a State Government as foundation clients can't but help the Chinese case.
When announcing its success on the Victorian e-services panel last month Victor Li, the managing director of VanceInfo's Australian operations noted that; 'Inclusion on the Victorian Government eServices Panel marks the opening of a new chapter in VanceInfo's public-sector ICT service offerings, and opens the door for the Company to continue strategic expansion in the Australian ICT services market,' adding that; 'This recent certification by the Australian government demonstrates our commitment to earning the trust and business of local governments not only in Australia, but in each local market we serve.'
Mr Jester said that three or four years ago Chinese outsourcing companies were little more than 'wannabes' with 'great skills but no idea about marketing.' He said internationally they had pursued a strategy of working closely with ICT companies, effectively becoming the backroom software R&D arm of ICT companies, and also had been successful in Japan where a crippling skills shortage has forced companies to look offshore for technical talent, but that it was only lately that Chinese companies seemed to be marketing their services directly.
It may also not prove a sustainable strategy. Concerns have already been raised about the possibility of wages blowouts in China, as highly educated Chinese IT professionals seek wages at least approaching parity with their oversees peers.
Nevertheless internationalisation will be critical to Chinese IT services business according to Ms Tang's report which found that although China's IT services market was worth $US10.1 billion in 2010, third only to Australia and South Korea in the region, local (Chinese) demand for IT services was still limited, with many Chinese IT services companies forced to look overseas for growth opportunities.