1.Existing conditions

Appraisal

With the popularization of IT technology and networks around the world, in recent years, the international service industry has taken an informatization, modernization, and globalization approach. Service outsourcing is a new form of international service and trade that is booming and has made an appearance in Qingdao. The city’s service outsourcing began with software R&D and gradually spread to information technology and business processes. Its major features are:

The software and information service level is rising, and is a good basis for service outsourcing industry development.

Service outsourcing depends on networking and IT technology support and the rapid software and information service development in Qingdao provides a solid foundation for service outsourcing industry growth. Under the country's 10th Five-year Plan, Qingdao's software and information service industry is expanding and its level is improving in a rapid way. Revenues from the software and information service industry, in 2006, totaled 20.7 billion yuan, with 436 enterprises and nearly 20,000 employees in the sector. Software revenues amounted to 9.02 billion yuan and export revenues, to $190 million. More than 30 of its software enterprises had ISO 9001 international quality management system certification and seven had CMM1 certification, while six had CMM3 certification, and two, CMM2 certification. In addition, 19 enterprises had computer information systems integration qualification at various levels, one in class I, two in class II, nine in class III, and seven in class IV.

The information technology outsourcing (ITO) sector has taken shape with fairly rapid development, main consisting of software outsourcing. Qingdao has entered the software outsourcing market in South Korea, Japan, and some western countries, mainly in embedded software development, animation, network technology, systems integration, and integrated circuit design. Offshore software outsourcing, in 2006, was worth $16 million, a year-on-year growth of above 50 percent. There were nearly 20 software-outsourcing companies, such as Haier Software, FBSE, and Softbrain, and about 1,500 employees, involved. The Japanese market was the main focus, accounting for 80 percent of the business.

Business process outsourcing (BPO) is a new area with great potential, driven by information technology outsourcing (ITO), and is off to a good start. BPO is currently separated into several categories, such as manufacturing R&D, design outsourcing (e.g. Haier,Hisense,and Mesnac), data processing (Resource Pro), creative animation (Mirrorink), and multinationals and offshore business (Alcatel-Lucent, Ericsson, and Korea Air Call Center).

There is a software industrial park that serves as a base for service outsourcing development, with a "One base + four parks" pattern consisting of Shinan Software Park, Laoshan Software Park, Haier Information Industrial Park, and Hisense Software Industrial Park. They have 300,000 square meters of facilities and 398 software and software-related companies, including a number of prominent foreign software companies, such as T.R.E., Fujitsu, and Caterpillar. The software industrial park is a major information-technology outsourcing base, with a convergence effect that lays a firm foundation for outsourcing development in Qingdao.

And, a service outsourcing training system has come into existence for a talent-intensive industry that requires a large amount of high-quality talent. The rapid growth in the software industry and information technology outsourcing business in Qingdao has pushed the development of service outsourcing, with software workers at its core. The local Ocean University of China and Qingdao University are the mainstay in this, supplemented by the software industrial park and various companies, so the training system has begun to take shape. A software field study and training base that combines higher education with field training has been established in Qingdao's software park and the number of training agencies is growing. So far, more than 6,000 personnel in software are being trained in Qingdao each year.

Comparative advantages

Qingdao has all the basic conditions needed for developing the service outsourcing industry, such as a stable political and economic environment, excellent communications and traffic infrastructure, enough human resources, low human resource costs, and low building and land costs. It also has the following advantages when compared to other Chinese cities: first, an environmental and geo-strategic advantage, with its rapid economic and social development, prosperous economy, and strong competitiveness. It is also known at home and abroad as a tourist city, brand city, port city, and Olympic city, and as an excellent, suitable place to live. Qingdao is right next door to Japan, the third largest outsourcing country in the world and there are many international air routes to connecting it to western countries. Its geo-strategic strengths are in the outsourcing business with Japan, So Korea, the US, and Europe. Second, it has cost and industrial advantages, especially when compared with, say, Beijing, Shanghai, or Shenzhen, with competitive service costs, including building and land rents and human resources. It has a number of dominant industries in electronics, information services, and marine science and many companies easily equipped to change themselves from manufacturers into service providers. Many foreign-funded enterprises and regional headquarters are backed by multinationals and its economic cooperation with Europe, the US, Japan, So Korea, Hong Kong, and Taiwan is good. Its economic and international level and industrial advantages provide a strong foundation for service outsourcing development. Third, is that Qingdao's geology is stable, with a low earthquake or tsunami probability, which makes it an ideal place to store and maintain data backup files. It is a major entry-exit place for large international submarine optical fiber cables and can offer direct routing for countries connected by the submarine optical fiber cable. Its wideband service and access ability is high and its information network infrastructure is complete, with an optical fiber network covers the whole city and total mileage of 200,000 km, putting it in an advanced position in infrastructure and technological level.

Development goals

2010:

(1) Overall: try to build our "Qingdao service" into a well-known brand in China and abroad through rapid development and expand the service outsourcing industry to become a Tier 1 city in the service outsourcing business.

(2) Specific:

40 billion yuan worth of service outsourcing business, with $800 million in offshore service and 150 offshore service companies, more than 30 of them with an annual offshore service outsourcing turnover of 45 million each; more than 100,000 employees altogether, with at least five companies employing over 1,000 each, and at least 10 well-known Chinese and foreign service outsourcing companies, along with 3-5 state-level demonstration bases.

2015:

(1) Overall: a service outsourcing system that is mature, with top businesses and "Qingdao ervice" a well-known brand in China and abroad and Qingdao a world-famous service outsourcing center.

(2) Specific:

at least 120 billion yuan in service outsourcing business, $4 billion of that in offshore service outsourcing, with 800 offshore service outsourcing companies andm at least 150 with annual offshore service outsourcing turnover of $10 million each; more than 300,000 employees, with at least 150 companies employing 1,000 each; and more than 50 well-known Chinese and foreign service outsourcing companies.

Developmental priorities

The aim is to prioritize the Japan and ROK markets and be more active in exploring the European and US markets to increase the scale of service outsourcing and raise the business level, with emphasis on contracting the outsourcing the software, R&D, design, logistics, financing, and medical care business using existing advantages. We also want to introduce well-known service outsourcing companies from China and abroad, cultivate major local service outsourcing companies so that they can be leading players and introduce professional Chinese and foreign training agencies to improve our education and training systems. The following are the major items:

1. The first item is embedded software and applications software R&D and test outsourcing, using Qingdao's advantages in domestic communication and intelligent control equipment with emphasis on contracting outsourcing business in embedded software, integrated circuit development, and design and testing; and to cash in on Qingdao's industrial advantages in transportation, commercial retailing, rubber, financing, taxation, and logistics and be more aggressive in contracting the outsourcing business for parts, system software, and application software development.

2. The second is animation and film and TV outsourcing, keeping a close eye on animation, film and TV development to make full use of Qingdao's animation, film and TV possibilities, while contracting out outsourcing for the design, processing, Sinecization, and production of network games, digital animation and film and TV media products.

3. An international data backup center will be established by making full use of Qingdao’s geological conditions to attract companies and institutions from Japan, Europe and the US to set up backup databases here.

4. Finance, insurance, accounting data processing outsourcing can be done by making full use of Qingdao’s financial and insurance sector advantages, its large number of workers, and relatively low labor costs, and by being more aggressive in contracting the outsourcing business in finance and insurance abroad, such as banking, insurance, funds, investment, brokerage, and the data processing business in finance management, account management, customer service, and information.

5. Logistic outsourcing can be done by making full use of Qingdao's land, sea, and air transport advantages, and its ports and warehouses, logistics services, and many international logistics companies, and by integrating resources for a third-party logistics site and contracting out the logistics outsourcing-related management for domestic and overseas customers, logistics information systems, and resource integration with the information site.

6. R&D and design outsourcing can be accomplished by using Qingdao's scientific and technological advantages in electronics, home appliances, shipbuilding, communications, medicines, rubber chemicals, and marine science and technology and contracting out outsourcing related to R&D, design, testing, and product solutions.

7. In medical service outsourcing we can make full use of Qingdao's fairly strong advantages in institutions, personnel, technology, and relatively low costs, combined with medicine industry development and more aggressive contracting of the outsourcing business with foreign medical companies in clinical testing, technology consultation, and medical materials processing.

8. In the area of human resources management outsourcing we can contract out the outsourcing business in employee management, training, and dispatching from domestic and foreign companies.

9. For a customer services call center we can make full use of Qingdao's large number of talented, English- and Korean-speaking people and attract more large European, American, and ROK companies by providing a customer service call center.

Layout

Qingdao will have a "One belt, three towns, five parks" patter that follows a "Converged development, clearly positioned, competitive, gradually developed" concept in developing software and service outsourcing.

One belt

This refers to a 40-square-kiometer strip of land, from the Shinan and Laoshan software parks to Aoshanwei, in Jimo, with a seaside highway as the axis, for a concentrated industrial development zone inn software and service outsourcing, and integrated software and outsourcing industries with scientific research and education for a truly modern service industry.

Three towns

These refer to a comprehensive "town", with service outsourcing at its core and living, leisure, entertainment, and education facilities combined under a "Cultivating talented people and developing the core industry" concept to intertwine the training of talented people with the core industrial zone and hold onto the talented personnel. This will form a cycle where talented personnel will help industrial growth and industrial growth will in turn improve urbanization. Over the next five to eight years, Qingdao will plan and build the "three towns" following a "Government support, international cooperation, market-based" model with international standards. The first will be the Qingdao Laoshan Service Outsourcing Town, with a 4.4-square-kilometer area, focused on software, ITO, and BPO; the second is the Qingdao Aoshanwei Service Outsourcing Town, with a 10-sq-km piece of land, focusing on service outsourcing training, ITO, and BPO; the third is the Qingdao Film, TV and Animation Town, with on 5-sq-km of ground, focused on service outsourcing for the film, TV and media industries.

Five parks

There will be five service-outsourcing industrial parks for core industrial zone: the first is Shinan Software Park, focused on software and ITO; the second, Haier Information Industrial Park, focused on embedded software for electronics and domestic appliances; the third, Hisense Software Industrial Park, focused on embedded software outsourcing for electronics, appliances, and intelligent traffic equipment; the fourth, Business Process Outsourcing Park in the industrial belt, focused on BPO; and the fifth, Modern Logistics Information Park in the industrial belt, focused on logistics outsourcing based on information platforms.