Leading software firms targeting overseas market
By Chang Tianle (China Business Weekly)
Updated: 2004-06-11 13:55

Outsourcing has been a hot topic among Chinese software companies for years, especially the small and medium-sized vendors.

When talking about how China has lagged behind India, where 90 per cent of the world's software is made for overseas markets, some people say, "Blame it on the size of Chinese vendors. They are too small to handle really big projects."

Now, however, the landscape is beginning to change, as some of China's largest software firms -- including UFSoft and Digital China -- are targetting overseas markets.

Shanghai-listed UFSoft, China's largest provider of financial and management solutions and enterprise resource planning (ERP) software,plans to become one of world's top 50 software companies by 2010.

Wang Wenjing, founder and president of UFSoft, said outsourcing is the company's key strategy -- with ERP and e-government solutions -- as it tries to achieve its goal.

UFSoft in July established UFSoft Engineering Co Ltd to expand its share of the outsourcing market.

"UFSoft group's revenues are expected to grow 30 per cent this year. For UFSoft Engineering, we expect a several-fold growth," Shao Kai, UFSoft Engineering's president and chief executive officer (CEO), told China Business Weekly.

Shao made the remarks last week on the sidelines of the Asian Technology Roundtable Exhibition (ATRE). The event was held in Shanghai.

UFSoft Engineering, which employs 200 programmers, plans to increase its investment in its Shanghai Software Development Centre.

The firm also plans to establish centres in Dalian, Xi'an and other cities.

Wang said China's large talent pool is key to the development of the nation's software industry.

Approximately 2.8 million students will graduate from universities in China this year. As a result, China will replace the United States as the nation with the most university graduates.

Quality is every bit as important as quantity, Alex Vieux, CEO of DASAR, the organizer of ATRE, told China Business Weekly.

Zhao Yongpu, deputy secretary-general of the Software Offshore Business Union of Shanghai (SOBUS), said there is always a shortage of talented people capable of organizing and handling large projects.

SOBUS is a non-profit organization under the local trade authority. It promotes offshore software business in Shanghai.

SOBUS has 70 member vendors, who account for half of Shanghai's software exporters.

The city's software exports last year reached US$265 million, up 51.4 per cent over the previous year.

"We are in a fast-growing market, but we don't have enough talented people to meet demand," Zhao said.

The world's software outsourcing market was valued at US$50 trillion last year. It is expected to reach US$200 trillion in 2010.

A study by US-based market research firm IDC indicated China was the fourth choice for firms outsourcing their software projects.

India, Canada and Ireland were the top three preferred locations.

After years of trying to expand overseas, some firms have established their credibility in overseas clients, who are willing to transfer projects involving core technologies.

"But most of the companies outsourcing in Shanghai are small and don't have the capacity to handle such projects," Zhao said.

"Participation by big companies, such as UFSoft, may improve the situation. With their expertise at home, they are able to work on big projects like Indian vendors do," he added.

Earlier this year, Hong Kong-listed Digital China, the country's largest information product distributor, signed a contract with a branch of General Electric Co (GE) and a Japanese company to establish a joint venture with US$3 million in registered capital.

China Digital has a 55-per-cent stake in the venture, which plans to offer software outsourcing and system integration services.

"Only big firms, such as Digital China, can partner with big global firms like GE and receive outsourcing business from them," Zhao said.

As a result, he said, big players entering the market will enhance China's competitiveness in the global market.

UFSoft's goal is clear.

"We want to be China's best outsourcing software company within eight years," Shao said.

UFSoft Engineering has established more than 12 partnerships in the United States, and has opened a branch in Japan.

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