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The Maturing Chinese Offshore IT Services Industry: It Takes 10 Years to Sharpen a Sword

Erran Carmel, Guodong (Gordon) Gao, Ning Zhang

Abstract


American and European IT managers are increasingly considering whether to outsource IT services to China-based companies. While these Western IT managers are familiar with the large Indian companies that provide offshore IT services, they are not familiar with their Chinese counterparts. This article provides an analysis of the Chinese offshore IT services industry, with a focus on the large, dominant players. We examined the Top 39 firms in detail, categorizing them into three types-Multinational Ventures, Legacy, and New Generation. Each of these types is described and illustrated by examples of firms.

The subtitle of this article is an old Chinese saying derived from the ancient sword masters who took a long time to hone their skills and temper their weapons in preparation for a major battle. We believe this saying aptly describes the evolution of the Chinese offshoring industry. To date, the growth of the industry has been slow and deliberate, in preparation for making a major impact on the market for offshore IT services. In terms of maturity, the industry is currently at Stage 1 (Initial Growth), although Stage 2 (Shake-out/Consolidation) may not be far off.

We describe the implications of our analysis for potential customers of Chinese offshore providers. In choosing a Chinese provider, business will need to make trade-offs determined by the attributes of the three types of provider.


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ISSN 1540-1960