The service outsourcing industry in China is facing a grim reality-- The growth rate of service outsourcing industry in China has distinctly slowed down, especially the share of offshore outsourcing has constantly shrank since 2014. Global economic environment changes unpredictably, the technological reform is becoming intensive, the international outsourcing pattern is broken and reorganized, the mechanism and system of service outsourcing at domestic remains to be improved and so on, the macroeconomic environment of the development of service outsourcing industry and enterprise in China is increasingly complex and unpredictable. Danger is the next neighbor to security, the crisis maybe is the opportunity for China's outsourcing to surpass by taking a shortcut. The new round of national strategic adjustment of China--"One Belt And One Road", "People start their own businesses and make innovations", "Internet +" bring new opportunities for the new development of service outsourcing industry. Therefore, Devott believes that, during the period of the "Thirteenth Five-Year Plan", the core opportunity and key point of the development of service outsourcing industry in China can be summarized as ten words: "Offshore relies on the Silk Road, industry relies on innovation".
--Vice President of Devott Research Institute Sherry Sha
Since 2014, the growth rate of China's service outsourcing industry has distinctly slowed down. The latest data of the Ministry of Commerce shows that, from January to September of 2015, the amount of service outsourcing contracts signed by Chinese enterprises has been 85.45 billion USD, the implementation amount has been 61.5 billion USD, which increasing 16.4% and 12.8% respectively, it can be seen from the picture that, compared to the rapid growth of the former years, the growth rate has declined distinctly in recent two years, compared to 2011, it declined by 41.5%, 33.7% in 2014, and it declined by 51.4% and 52.9% in 2015. While the data is falling down, people start to think about the reasons of "Lacking of stamina" of the development of service outsourcing in China, and the future way.
Figure: Growth Situation of the Contract Amount and Implementation Amount of Service Outsourcing in China in the First Three Quarters from 2011 to 2015
From the "Favorite of the Era" strived to promote by the State Ministries and Commissions, as well as the local governments, to the "Thing out of data" which is quiet and silent, is the service outsourcing really the outdated "Concept"? Whether it has been "Replaced" by the integration of informatization and industrialization, as well as the Internet + or not? Devott believes that the main reasons of the falling down data of service outsourcing industry in China in recent two years are as follows:
Ⅰ. Downturn Influence of Global Economic Development Cycle Affects the Service Outsourcing Industry in China
Although it has been over 6 years of the international financial crisis, the world's economy is not calm yet, various potential risks are intertwined, the world's economy as a whole continues to slowly and weakly recovery with difficulty. According to the world's economic outlook report of the first half year of 2015 released by the International Monetary Fund, it is predicted that, in 2015 and 2016, the world's economic growth is reduced to 3.1% and 3.6% respectively, 0.2 percentage lower than that of July 2015. Related data also shows that it is expected to grow 1% of global service outsourcing market in 2015, lower than the growth rate of 4% of the previous years. Downturn of the global economic development cycle, the markets with demand for service outsourcing grow slowly, all these become the primary reasons of data fluctuation of numbers, scales and unit prices of China service outsourcing, especially the offshore outsourcing.
After the financial crisis, the global economic cycle and policy cycle gradually develop towards the same direction. In 2015, China economy is also facing unprecedented various pressures of downturn, "Approaching the worst", it has become the relatively most difficult year of economic operation of China. Citibank reduces the growth target of gross domestic product (GDP) of China in 2015 to 6.9%, only Citibank believes that the growth of the next year is slightly lower than that, China still has twice times of interest reduction with steady growth. The influences of the slowdown of domestic macroeconomic growth, growth of risks and dislocation also affect the service outsourcing industry.
Gao Sheng researches and points out that, with the appearance of some phenomena such as price slump of block trading products, slump of Chinese stock market, dollar's decline triggered by the growth slip of American salary, and the Federal Reserve of data dependence, global economic periodic cycle is becoming shorter and shorter, it is more and more difficult to predict and judge the economic development.
Ⅱ. The Emerging Service Modes Represented by the Cloud Service Devour the Share of Traditional Service Outsourcing Business
Devott researches and points out that the emerging technologies, which take the Internet/Mobile Internet, Cloud Computing, Big Data, Internet of things and artificial intelligence as core, are overturning the development process of all industries and economies with rapid speed. The Cloud Service becomes the mainstream of new payment and pricing mode of service outsourcing, the artificial intelligence is also glaring at the traditional service outsourcing market like a tiger does. Global service suppliers gradually give up large outsourcing, reduce IT purchase orders and use Cloud Service, directly compress the living space of traditional outsourcing service providers.
With the reduction of business of global service suppliers represented by IBM, which are defeated by the competition of emerging cloud service suppliers such as Google, Amazon, China's service outsourcing industries in the downstream of IBM in the industrial chain are inevitably affected. Although global cloud service providers also have become the new outsourcers, and it gets growth of parts of Chinese enterprises transforming to Cloud Service, from the perspective of integral data of industry, the reduction is inevitable.
Ⅲ. The Head-on Competition of World's New and Old Rivals Is Increasingly Fiercer
Factors such as rising costs, appreciation of RMB bring great challenges to the promotion of global competitiveness of China's service outsourcing industry. In the competition of global offshore markets, the new and old rivals from the emerging outsourcing destination countries such as India, the United States, Philippines continue to devour the global share of China industry. While India relies on the close connection with American market to consolidate the traditional market share, based on the solid industrial foundation and technical experience accumulation, it strives to transform, explore innovative business mode, service mode as well as new ways of industrial upgradation and development. Relying on the geographical advantages, the price reduction strategy of the European and American local service suppliers in recent two years makes them win more orders, meanwhile, they go faster and more advanced on the road of transformation and development. And the Southeast Asian countries such as Philippines, Malaysia, Thailand, even Pakistan of South Asia, Palestine of the Middle East (Yes, there is no clerical error, Palestine) also rely on their advantage of low cost to make onslaught on the share of traditional service outsourcing market. The growing Latin American countries, such as Guatemala, also become the important regions for international buyers to choose suppliers, due to the similar advantages of culture, history, tradition, commercial customs with international buyers, language and time difference advantage, as well as cost advantage. In the fierce situation of international competition, the weakening of international competitiveness of Chinese service outsourcing enterprises is also one of the important reasons hiding behind the data.
Ⅳ. New Type of Service Outsourcing Enterprise and Data Are not Included in the Statistical System of Service Outsourcing Industry in China
While the traditional service outsourcing data is rapidly declining, the Cloud Services are in rapid growth. With the promotion of emerging technologies such as "Internet +", the boundary and scope of service outsourcing are continually expanding, and the cross-border integration becomes one of the core features of industrial transformation and development. Many nontraditional Internet enterprises provide outsourcing services for customers through innovative business mode such as Cloud Services, for example, Google, Amazon, Ali, Lenovo and so on; at the same time, there are a lot of traditional long-established service outsourcing enterprises, in the process of integrating industrial chain and transformation and upgradation, gradually leaving the circle of outsourcing, such as Chengdu Santai Electronic Industrial Co., Ltd. turning to fight in the circle of e-commerce, Neusoft evolving to the Internet enterprise and so on. The definition, features and classification of service outsourcing industry show great changes. And currently the statistical standard of service outsourcing industry in China is not capable to adapt to the new changes of industry, many emerging service forms of business and commercial modes are not included in the statistical system, and also becoming a direct reason of the falling macroeconomic data.
Global economic environment changes unpredictably, the technological reform is becoming intensive, the international outsourcing pattern is broken and reorganized, the mechanism and system of service outsourcing at domestic remains to be improved, the macroeconomic environment of the development of service outsourcing industry and enterprise in China is increasingly complex and unpredictable, with many challenges. In the meantime, the industries also constantly make introspection, unduly rely on government subsidies and lead to the lack of focusing on core competencies, the international personnel of the management severely lack, the marketing on the target market has always been exaggerated but not put into practice, the national industrial institutions lack independent spirit and research, severely lack of international consultation, and other industrial fatal flaws.
But, perhaps currently it is the opportunity for China's outsourcing to surpass by taking a shortcut. A new round of national strategic adjustment of China brings new opportunities for the new development of service outsourcing industry. Since President Xi Jinping proposed the strategic ideas of building the "New Silk Road Economic Belt" and "21st-Century Maritime Silk Road", the "One Belt And One Way" has become the important national strategy for China to implement a new round of all-directional opening-up, build new model of cooperative relationship with related countries and regions as well as organizations. "One Belt And One Road" includes multiple aspects of cooperation such as transportation infrastructure, trade finance, information and communication, energy and ecology, the service outsourcing industry which spans multiple sections and multiple fields will benefit a lot. In 2014, the contract amount and implementation amount of service outsourcing of the countries along "One Belt And One Road" undertaken by China has been 12.5 billion USD and 9.84 billion USD respectively, which increasing 25.2% and 36.3% year-on-year respectively. As the cooperation between China and the countries along "One Belt And One Road" constantly goes deeper, "One Belt And One Road" will become the important acting point of improving the market share of offshore service outsourcing of China, and it will promote the construction of the new pattern of international service outsourcing industry.
In the work report of 2015 of China, Premier Li Keqiang confirms multiple work policies such as "People start their own businesses and make innovations", "Internet +", the "Innovation" is the key word around these policies. Take the innovation to drive employment, take the entrepreneurship to promote innovation, to create new engines of economic growth in China. Promote the combination of emerging technologies such as mobile Internet, Cloud Computing, Big Data, Internet of things with the traditional industry, to create a new industrial mode based on technology. For the service outsourcing industry, on one hand, bring fresh activists and innovative engine into the service outsourcing industry, on the other hand, exploit new industrial space and development ideas.
On January 16, 2015, the State Council officially issued "The Opinion of the State Council on Promoting the Service Outsourcing Industry to Accelerate Development" (No. 67 Document of 2014 Issues by the State Council), which marks the development of service outsourcing industry officially rises to the national-level strategy. The service outsourcing industry will still be one of the important acting points of ensuring growth, promoting adjustment, impelling the upgradation of industrial structure during the period of the "Thirteenth Five-Year Plan" in China. Taking a wide view of the international situation and domestic opportunity of the service outsourcing industry in China, Devott believes that, in the next five years (During the period of the "Thirteenth Five-Year Plan"), the core opportunity and key points of the development of service outsourcing industry in China can be summarized as ten words "Offshore Relies on the Silk Road, Industry Relies on Innovation".
First of all, Grasp the International Market Opportunity of "One Belt And One Road", Reorganize International Service Outsourcing Strategy
Although facing the fierce international competition, China relies on the unique advantages such as rich human resource reserve, steady political and economic environment, and the geo-culture of Japan, its position in the global traditional service outsourcing market is not expected to change dramatically. Therefore, the emerging markets become the important opportunity and breakthrough point of offshore service outsourcing industry in China for its further development. The proposal of "One Belt And One Road" constructs basic framework for the future development of offshore outsourcing industry in China, based on national strategy and how to refine strategies and support in the field of service outsourcing, all these should become the important direction which service outsourcing industry in China shall grasp during the period of the "Thirteenth Five-Year Plan". In 2015, Devott joins hands with international institutions such as IAOP, SIG, Nasscom, BRASSCOM, IBPAP, ASTRA, EOA to set up "Global Outsourcing & Service Alliance" (GOSA), to be committed to promoting the cooperation, communication and collaborative development of each country along the New Silk Road Economic Belt with enterprises, to lead the whole industry of service outsourcing in China to together explore offshore new pattern,
Second, Encourage Innovation, Cultivate Innovative Service Outsourcing Enterprises with New Technologies
Under the industrial background of positive and negative influences of global economic environment to domestic service outsourcing, the biggest industrial opportunity of service outsourcing in China lies in the innovation. And the service outsourcing industry is with high technical content, long industrial chain, wide coverage, low entry threshold, which is one of the most suitable industries for college students to start business. Therefore, matching up with the development tide of national strategies such as "People start their own businesses and make innovations", "Internet +", positively encouraging the entrepreneurship and innovation in the field of service outsourcing, all these are the primary strategies promoting the development of service outsourcing industry in China during the "Thirteenth Five-Year Plan". Concretely include: on the level of capital, establishing industrial angel investment guidance fund; on the level of policy, making more favorable guidance and incentive policies; introduction of social resources, encouraging the development of the third-tier entrepreneurial and innovative incubation platform aimed at the field of service outsourcing; and enhancing the support force for the service outsourcing entrepreneurship of the students in colleges and universities and so on.
Third, Redefine Service Outsourcing, Re-understand the Essence of Industry
It is unable to adapt to the new development of industry based on the existing definition of service outsourcing and statistical standards, it is urgent to redefine service outsourcing industry in order to strengthen the data research of service outsourcing industry, better promote the development of industry, establish the confidence of industrial development, specify the direction of industrial development. Therefore, Devott suggests to proceed from practice, closely keep up with the newest change and trend of industrial development, further deepen and match up with the international standards, combine the global definition, the industrial characteristics of China with the development of emerging technology, reconfirm the brand new definition and standards of classification of service outsourcing industry of China. Re-cognize the service supplier based on the new standards, provide basis for the outsourcers to accurately seek service supplier. At the same time, build international trading platform based on the new standards, promote online transactions, especially research different trading ways according to the local customs and practices of relevant countries along "One Belt And One Road" and characteristics of enterprise. In order to further promote the enactment of new rules of service outsourcing industry and orderly development in China.
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