Subversion & Rebuild: Service Outsourcing Enterprises in China are Upgrading
Source: Outsourcing Magazine View: 252 Date: 2015-07-01

Under the background of “New Normal”, new technologies, new formats and new business models are appearing in service outsourcing area; service outsourcing industry has greatly changed. The driving function from innovation has become bigger and bigger; personalization and diversification have become the main streams in service outsourcing industry. And intelligent and professional service has become new feature of industrial organization.

Reporter from magazine of “Service Outsourcing” reports that on the topic seminar of “The Transformation and Innovative Practices of Service Outsourcing Enterprises” and “International Enterprises Marching of Software & Information Service in 2015” recently attended, the transformation & upgrading from service outsourcing enterprises has become one of core topics.

Mingbo Zhong, president of a council of BASS believes that under “New Normal”, China’s service outsourcing has appeared three main characteristics. The first one is demographic dividend disappearing. Cheap labor has been ended and core competitive ability of service outsourcing enterprises must be changed. The second one is that demand of market is changing all the way. Customers’ demands have changed from industrial IT to personalize IT and become more and more diversified. The third one is that with innovation of business models driven by technology, the whole society of China has entered into a Pan IT society everywhere has demand.

Lianfeng Wu, AVP of IDC in China who pays long-term attention on development of China’s service outsourcing industry concludes 7 main directions in China’s service outsourcing enterprises when transform and upgrade. They are transforming to hot industries, to industrial solutions, to products and platform, to embedded hardware, to business and management consulting, to cloud services and to internet companies of 2C.

However as main force of transformation and upgrading in China’s service outsourcing industry, China’s service outsourcing leading enterprises are sharing their experiences of transformation and upgrading in technology area and business models in recent years.

Pactera: a science & technology service providers to provide integrated services of consulting, solution and outsourcing.

"In my opinion, transformation is very important and it will bring big opportunity” Meiwei Cheng, CEO of Pactera introduced, when he attended at CCPIT of International Enterprises in Software & Information Service in 2015 in 10th Jun, 2015.

Although Mr.Cheng held the post of CEO of Pactera just at the beginning of this year, he has abundant management experiences for many years, such as CEO of Ford China Co., Ltd, CEO of Siemens China Co., Ltd and etc.

Mr. Cheng said that in recent 5 years, Pactera has been going to the direction of transformation to meet new demands from traditional industries to digital business.

As a pioneer on the transformation road, Pactera has explored a way suit to our development, and has accomplished to expand to high value chain in some industries such as finance, commerce, telecommunication, aviation and etc. It has firstly finished the target of transformation in similar enterprises in China. Currently, main customers of Pactera cover many fortune 500 enterprises and middle & big China’s enterprises.

Pactera was set up in 1995, listed in NASDAQ in USA in 2012 and then integrated with Wensi Software that listed in the New York Stock Exchange in 2012, and at last became individualism purchased by the BlackStone Group in 2013. Up to now, employees in this company have increased to 24000 people and the company has become the biggest IT service outsourcing enterprise in China. Currently, Pactera has set up delivery centers in USA, EU, Australia, Japan, Singapore, Malaysia and China and provide one-step services for customers including enterprises’ application services, business intelligence, application development & maintenance, mobile solutions, cloud computing, infrastructure management, software development and globalization, and business process outsourcing, meet demands of customers for seamless delivery and technology support in global, meanwhile support business development strategy of customers.

Intelligent finance area is an industry deeply developed by Pactera. As advocate of intelligent finance in China, Pactera constantly improve its strength via a series of cross-over development such as whole strategy transformation, innovation driving upgrading and etc.

Now, Pactera has universal covered online and offline of bank industry in IT solution and service areas; businesses cover many parts of bank industry such as operation management, marketing, risk management and customer services, which including many areas of BI, CRM, core bank, e-bank, call center, financial test, internet finance, international settlement, payment platform, risk management, financial consulting. Some independent R & D solutions and modularize solutions inject financial industry surging power of continuous development, like fresh blood.

Financial group of Pactera has been made of more than 5000 professional people, which supporting more than hundreds of business banks and widely serving bank enterprise customers in global and China. The professional group improves core competitive abilities of many bank customers and industrial leading position, and co-build new era of intelligent finance with them. Besides that, as IT service enterprises located in China, Pactera has also gained more and more international approvals.

"The GSPR in 2014” published by Zinnov that is international famous globalize and market consulting company in July of 2014 indicated that in engineering service area, Pactera the leading consulting and science & technology service provider in global has become the third technology R & D service provider in global.

Beyondsoft: mergers and acquisitions can help transformation & upgrading

"If not have trouble, transformation will be not accomplished” Qiang Ma, CEO & COO of Beyondsoft indicates when he faces the topic of service outsourcing enterprises transformation and upgrading.

Same as Pactera, Beyondsoft was set up in 1995 and is a leading provider to provide comprehensive IT consulting, service and industrial solutions. It has set up more than 30 branches and delivery centers in six countries of three continents in global, has delivery ability in global and flexible & diversified delivery methods.

"Transformation is painful” Qiang Ma believes, “But scale increasing modes and population increasing modes in traditional way can’t be continuous in current China’s environment. Therefore traditional service outsourcing business must be optimized” .

Therefore, since 2014, Beyond began to throw some businesses those maybe low profits or may not consistent with development direction of company, in order to centralize spirits to transform and upgrade to new area. 

Qiang Ma said that in recent years, Beyondsoft will try their hard to transform and upgrade in three main aspects:

The first one is to optimize traditional service outsourcing area including customer service and service providers, in order to keep traditional businesses.

The second one is to micro innovation. In recent years, Beyondsoft has actively played creation and sense of mission of employees in some new technologies such as innovation of cloud computing and big data, and even hatch some new projects those put outside of company.

The third one is mergers and acquisitions. Beyondsoft introduces new technologies and new service models into this company from outside via mergers and acquisitions.

Beyondsoft always is master in mergers and acquisitions, taking two cases in the last year as examples. After purchased Shanghai Hongzhi Information and Science & Technology Co., Ltd., Beyondsoft has constructed perfect financial service system and has made brand of “Beyondsoft Finance”. And the activity of purchasing TPG from USA also provides Beyondsoft a new area. TPG mainly promotes market customers expanding business that mainly serves Toyota and Lexus in USA, provides business framework design, users’ experience strategy design and website operation & maintenance & management for customers. It meanwhile provides new emerging businesses such as business big data exploration and analysis.

It is worth to say that Beyondsoft published notice to reach agreement of purchasing 100& equity with shareholders of PiraeusDataLLC in USA in 27th May, 2015. They also have signed “Equity Mergers Contract”. PDL is a company that provides high-end service; the businesses can be divided into management & consulting, business intelligence, digital marketing analysis, and digital service. Beyondsoft can more efficiently enter into high-end service market via purchasing PDL.

The benefit for Beyondsoft gained from transformation and upgrading has become more and more obviously. Qiang Ma said that when Beyondsoft listed in 2011, its business volume was only 600-700 million RMB; and up to last year it has reached 1.5 billion RMB, the employees are maintaining 7000-8000 people.

Concluding the experiences of transformation for Beyondsoft, Qiang Ma believes that Beyondsoft has stable steps of transformation. The first step is to transform from traditional service outsourcing enterprise to industrial solution provider. The second step is to transform to vertical industry from big and comprehensive industries to small & perfect industries, and to have monopoly position in some area.

Chinasoft International: to construct O2O for IT service

Chinasoft International is big and comprehensive software and information service enterprise in China that can provide services from consulting, solution, technology to “end to end” software & information services for IT talent training. Currently, the services provided by Chinasoft International covers many industries including government, manufacturing flow, financial bank, insurance & securities, mobile application, telecommunication, high-tech, public career and energy.

The inner measurement of JointForce that is strategically innovative cloud service free platform provided by Chinasoft Internationa formally opened in 3rd Jun of 2014. That is the beginning of exploring new delivery models of JF for Chinasoft International via improving efficiency, two-way improving income of company and employee, which symbolizes the transformation of Chinasoft International to internet Platform Company.

At the seminar of “Transformation and Innovative Practices of Service Outsourcing Enterprises” in 5th Jun of this year, Qixin Zhou, the director of operation for Chinasoft International Free Platform mainly interpreted the situation of JointForce.

Mr. Zhou indicated that to promote JointForce is in order to solve three big problems in current outsourcing process.

The first one is mismatch of human resources. IT enterprises or traditional enterprises those need construct IT system, in the early period of project need reserve huge amount of employees in advance; however it will be a big problem for them to settle those employees when project in relative period.

The second one is problem of efficiency. With more and more individualize demands, customized businesses are increasing that produces many repeated labor. For software outsourcing enterprises, if can’t reutilize code or technology plans, their will increase cost and have smaller profit.

The third one is problem of standard. Although many software development enterprises have passed management system certification, less of them operate according to standardized guidance and then affect the quality of projects.

Mr. Zhou believes that all those points above will bring some bad results such as not enough project delivery investment and population quality declination. Therefore project quality will be declined that forms a layout of total loss for customers, companies and employees. Then the final target of Chinasoft International free platform is to construct an ecosystem to build a layout of total win for customers, companies and employees.

Mr. Zhou symbolized JointForce as Taobao. Chinasoft International constructs internet platform for engineering outsourcing trade; there are sellers (engineering outsourcers) and buyers (providers) on the platform. Chinasoft International can get commission from their trades.

JointForce puts demands of enterprises on platform; IT service providers can accept projects via platform and implements project offline and online report project progress.

In the inner measurement of JointForce, Chinasoft international firstly put some of their projects on this platform to develop and gained good results. According to its inner measurement, last year because all employees and all projects from government business line put on this platform, the average implementation value increased 39%, gross profit margin increased 8% that contributed 8% more pure interest rate. The income of employees also increased 12%.

Qixin Zhou said that as the third-party platform, the biggest value of JointForce is to construct the connection between demanded enterprises and IT service providers via the mode of O2O, reducing trade cost, providing service efficiency, and building credit record for two sides.

According to introduction, from public measurement to now, the software development population registered on JointForce has increased from 7000 to 30,000; among them 15000 people are not employees of Chinasoft International. Chinasoft International plans to have 1000 registration enterprises only in the first half of the year; and also plans to reach the aim that there are 100 representitive enterprises successfully continuous outsourcing and formally used for commerce.

Neusoft: To provide value for customers

"The core competitive abilities of service outsourcing have greatly changed from rounding demands of customers as the core in the past to create value for customers.”Dr. Ximin Chen, Vice CEO & COO of Neusoft believes that service outsourcing enterprises in the past only need identify to improve quality of service and can undertake business via CMMI and other management system certifications; however now it is difficult for them to do.

Neusoft was set up in 1991, and now it has 20,000 employees and sets up 8 regional headquarters, 10 software R & D bases, 16 software development and technology supporting centers in China; constructs marketing and service network in more than 60 cities; also has branch companies in USA, Japan, Europe, Middle East and South America.

As the first one listed software company, Neusoft is also the first one of software companies in China to pass certifications of CMM5 and CMMI, and is one of companies those have most successful cases in transformation and upgrading.

"As service outsourcing enterprises, we must change to meet changing demands and catch up with revolution step of the era.”Ximin Chen said.

On seminar “Transformation and Innovative Practices of Service Outsourcing Enterprises” hosted in 5th Jun, Mr. Chen elaborated in details three main measures when Neusoft faces age revolution.

First of all is to continuously deepen new area and keep current business. In a word, that is continuously undertaking original service outsourcing business areas, meanwhile considering our core competitive abilities in professional area whether can be improved or not. Last year, Neusoft professionally set up a consulting company that intended to deeply influence customers. Besides that, Neusoft has solved the problem of only providing simple outsourcing services for many years, and provides industrial solutions.

Currently, industrial solutions provided by Neusoft covers many areas such as telecommunication, energy, finance, government, manufacturing, commercial circulation, medical health, education and culture, transportation, mobile internet, media industry and environment protection, and etc.

The second one is to change business model. Mr. Chen said that although traditional models of selling humans, working hours and projects brought enough cash flow, it is difficult to continuously keep high level of IT construction demands for most customers. Businesses will be lesser and lesser. We must consider livelihood issues each year that is to finish a project will loss a project.

"How to timely change a series of business models via long-term relationship of cooperation and confidence with your customers?” Ximin Chen believes the cloud service must be the first one in it. Besides that, Neusoft and customers are discussing coordinated operations or mode of entrusted operations.

Currently, Neusoft has two main application support platforms: SaCa series platform and UniEAP.

SaCa cloud application platform (Secure Social ActiveConnected Cloud with Awareness) means to support an universal high efficient and safe application from terminal to cloud that provides a series of child products to meet demands from mobile internet, social network, cloud computing, big data, situational awareness under models of B2B2C/G2B2C, to solve common problems of social applications in vertical areas, rapid development and delivery of mobile applications, timely characteristically active services based on users’ behaviors, development & management of agile cloud application.

UniEAP (Unified EnterpriseApplication Platform) is a business basic platform of Neusoft facing with software product line via multilevel & structural basic construction, component and relative development tools, which provides whole solutions for supporting business development, efficiently solves three complicated problems of complication and multi-change from users’ demands, difficult integration of application systems and low efficiency of software R & D in current software industry.

The third one is innovation. Ximin Chen indicates that “internet +” currently hot discussed by us must be a new business model to subvert and rebuild original one with customers’ value as center. As service outsourcing enterprises, we must connect our inherent advanced resources to integrate and rebuild industry.

At the same time, Mr. Chen also believes that it is a big challenge for enterprises to transform. That mainly shows: not enough efficient talent; how to keep balance of payments under strengthening investment of R & D; management and inspiration for groups in companies; change of thinking; enterprises how to define the position of “B” from B2B to B2B2C; how to build innovative mechanism of enterprises.

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