Japanese outsource boom to lift China
China was set to follow in the footsteps of India in becoming the next outsourcing haven for Japanese software developers, according to Hong Kong listing candidate Sinocom Software Group.
'China has a geographic and cultural advantage over India for Japan's outsourcing market,' Sinocom chairman and chief executive Wang Zhiqiang said.
'With favourable government policies and low costs, China will soon have one of the world's highest software export volumes.'
The Beijing-based outsourcing company, which plans to raise HK$100 million through an initial public offering early next month, provides software to information technology firms such as NEC Soft, Hitachi and Sun Microsystems.
Ministry of Information Industry studies show that China's software exports reached US$3.6 billion in 2002, up 380 per cent from $750 million in the previous year. It ranks No?4 among software exporters, behind India, Ireland and Israel.
The nascent growth of China's outsourcing industry is backed by growing business and investment from overseas. Sinocom, for example, has seen more than 90 per cent of its contracts sourced from Japan, while clients NEC and NEC Soft invested in the firm in 1997 and 1998, respectively.
'We only focus on what we do well - which is software outsourcing,' Mr Wang said. 'We chose to cut all non-core operations, even [when] there were still sales orders.'
Sinocom closed its non-core software outsourcing businesses in 1999 to 2000 and expanded its outsourcing workforce. The company has 800 employees and plans to hire 200 more this year.
Sinocom saw sales reach 110 million yuan last year, up from the 83 million yuan taken the previous year .
The share sale, sponsored by Daiwa Securities, has passed a stock exchange hearing, according to a source close to the company. The company plans to use the net proceeds for business development, software upgrades and the expansion of sales channels.
