Surgical hope for chronially obese

By Zhou Weirong

Nursing helpers taking care of patients in Shanghai's hospitals do not belong to the hospitals, and clerks working at bank counters do not belong to the banks.

Instead, they are on the payrolls of third-party companies, servicing the banks and hospitals on a contract basis.

They make up a new category of tertiary industries, generally known as service outsourcing.

This is a sector that will hopefully spearhead a much anticipated boom in the service industry of Shanghai, according to the blueprint for the city's economy over the next five years.

Outsourcing will be emphasized as a priority for the rapid growth of the service industry, said Zhou Bo, director of the Shanghai Foreign Trade and Economic Relations Commission, at a seminar last week.

As usual, the Pudong New Area will be the pilot base, leading the city's shift into service outsourcing. The outcome of the pilot programme will be eagerly studied throughout the country, since abundant human resources and good infrastructure could make it a major centre for service outsourcing in the world.

Hong Dade, general manager of the China Outsourcing Centre of Accenture Greater China, put China's outsourcing market value at US$150-300 billion in the next three to five years.

Among city economies in China, Shanghai outshines others in human resources, especially executives and those with experience in serving foreign companies.

"Shanghai has great potential in offering high-end outsourcing services," he said.

Since early last year, Shanghai has been focusing on more value-added and knowledge-intensive services stereotyped as "modern services," with IT outsourcing as a prominent example.

By 2004 figures, Shanghai raked in US$476 million in revenues from offshore software development, up 80 per cent from a year ago, far outpacing the national average, said Hu Hongliang, general manager of Shanghai Pudong Software Park Co Ltd. Numbers for 2005 are not yet available.

The market potential is alluring, but only a handful of market players are strong enough to capitalize on the potential bonanza.

Among the 1,600 software companies in Shanghai, only five hire more than 1,000 people.

In contrast, India has dozens of major software companies each hiring more than 10,000 workers.

Wang Deming, general manager of Shanghai Venus Software Co Ltd, said poor economies of scale made large orders hard to come by.
Plans are in the cards for the city government to put their weight behind a few large outsourcing service providers with the intention of ratcheting up their level of competence.

These chosen companies might be offered the chance of listing at home, with joint venture Shanghai Jiaotong Hyron Software Co Ltd and privately owned Worksoft Creative Technology Ltd the most likely candidates.

Bao Shuping, general manager of Shanghai Jiaotong Hyron Software, said the benefits of a public listing will be two-fold: more funds for more ambitious size of operation and improved corporate image.
Global expansion is another hurdle facing Bao and the rest of the IT outsourcing community.

To date, Japan accounts for two-thirds of the overseas market for all IT service providers in China.

But outsourcing services to European and US markets, the world's largest outsourcing destinations, make up only 20 per cent of China's total.

Language and cultural differences are mainly to blame for that discrepancy, Bao said.

As companies from the two markets have mapped out plans to outsource in China, however, there will be ample opportunities in the future.