Outline

The global economy gives a big push to the development of China’s offshore outsourcing industry. Indications show that the next big wave of offshore outsourcing will be Knowledge Process Outsourcing (KPO) and Contract Research Outsourcing (CRO). With a great many science and engineering talents, China has the potential to become a new outsourcing base. If China expects to achieve the great-leap-forward development and innovation in the offshore outsourcing industry according to its own national conditions, it is important to possess a lot of top technical talents who not only master the cutting-edge science and technology, but also have a good knowledge of the specifications and standards on business process in developed countries and receive relevant training and education on global economy. The existing education system fails to develop competent graduates for the offshore outsourcing industry. Consequently, it is necessary to carry out the international and practical education patterns, implement the training modes of reform and innovation instead of traditional ones under the planned economy, bring in teaching materials and capitals, create completely new teaching contents with the offshore outsourcing industry as the main focus, keep pace with market demands and provide a lot of qualified professional talents in order to promote a sustained, rapid and sound development of the national economy.

1. Current Status of China’s Offshore Outsourcing

Since the end of the 1980s, India starting with Information Technology Outsourcing (ITO) has gradually entered the U.S. and global outsourcing markets. Until now, India has become the premier base of outsourcing businesses from the multinational companies around the world. Since 2002, India has been witnessing an increase in value-added IT-BPO orders, besides which the proportion of IT-BPO industry in the outsourcing industry has been increasing year by year and shows the tendency to surpass that of ITO. By 2005, India had been in possession of eight IT-BPO enterprises with an output of over 100 million dollars and tens of thousands of employees, which marked a turning point in its outsourcing industry. The enterprises of this scale will be bound to endow India with the strength to compete with many multinational companies and the ability to ensure its credibility with customers. In this case, these enterprises have the potential to get larger service contracts, thus helping India’s IT-BPO industry achieve a smooth transition to higher-end outsourcing industry.

China’s outsourcing industry features an emphasis on technology instead of market, Japan instead of the Europe and America, and ITO instead of BPO, because of which the offshore outsourcing industry fails to reach a certain scale and the economic benefits achieved are not that significant. Since 80% of offshore outsourcing orders derive from Japan’s software outsourcing, China’s ITO is far from being the true ITO. However, it must be noted that the few enterprises targeting Europe and America have reached a decent size and made great profits. In view of the above analysis, China should follow its own way to develop the outsourcing industry.

Recent studies from the Duke University’s Offshore Research Network show that the traditional business process will become more specialized and commercialized by means of IT-BPO, KPO and CRO. Within a certain period of time in the future, the multinational companies and worldwide enterprises will place reliance on the management of information technology and innovation of service modes to improve their technology, increase their productivity and reduce the cost. In other words, they will further reinforce the specialization of the business process through IT-BPO, KPO and CRO to give a huge boost to the development of the outsourcing industry.

2. Trends of China’s Offshore Outsourcing in the Future

Over the past decade, the serious lack of science and engineering talents in developed countries has been unfavorable to the rapid development of these countries’ economies, especially of high-tech industries. The actual reason is the lack of human resources and interest in science & engineering careers. Many people from the USA and Japan worry that because of the internal administrative bureaucratic inefficiency, the talent shortage situation cannot be changed within a short period of time either through talent import or cultivation.

Since 1995, the number of US middle school students who expect to major in science and engineering at universities has been falling continuously. During the Clinton administration, the talent shortage problem was temporarily solved due to the increase in immigration quota for science and engineering talents. However, since the beginning of this century, the conservative immigration policy for the containment of terrorism has exacerbated this problem. Furthermore, multinational companies have started to shift from ITO and BPO to KPO and CRO in order to improve their independent innovation ability and retain their competitive edge.

The ITO and IT-BPO’s success in India and Ireland since the 1980s indicates that the global economy has successfully achieved the transformation from sharing of resources, market and labor force to sharing of information, knowledge and wisdom. The mode for international service trade has been under innovation and progress along with the fast development of computer technology, Internet, the application of wireless communication technology as well as the innovative development in the information and communication technology.

China is witnessing the establishment of more and more knowledge labor outsourcing enterprises which represent a new offshore outsourcing trend. Developed countries have found an entirely new global division pattern. In the Internet era, the renewal period of knowledge and information is greatly shortened, and technology and modes are under continuous innovation. We realize that innovation depends on the full utilization of worldwide knowledge labor resources. Undoubtedly, China enjoys the richest knowledge labor resources and highest cost performance in the world. Such knowledge labor outsourcing enterprises based in China as CompuPacific International and WuXi PharmaTech, as well as a large number of R&D centers built by multinational companies, like Microsoft China Research Institute , Emerson eResource (Xi‘an) Co., Ltd. and Infineon Technologies, etc. reflect the new offshore outsourcing trend.

3. Requirements of Talent Supply for China’s Offshore Outsourcing

Research on KPO and CRO indicates that these two kinds of outsourcing will include the development of new products; mechanical design and drawing; design and test of electronic products; research on intellectual property, stock, finance and insurance; HR management and information services; retrieval, analysis and management of relevant data; research on enterprises and markets; engineering and design services; webpage design; animation and simulation services; paralegal services; medical services; distance education and publication; medical and biological technologies; research and development; network management and decision support system. The difference between IT-BPO and KPO & CRO is that IT-BPO businesses (data entry, handling of loan process and processing on order) basically comply with rules and regulations while KPO and CRO businesses may partially create values.

None of IT-BPO, KPO and CRO industries can be independent of three key factors: 1) good foreign language communication skills and basic computer knowledge and application skills; 2) rich professional domain knowledge of the offshore outsourcing industry; 3) legal requirements, business norms, standards and habits on information privacy and intellectual property. As for ITO, the technical knowledge and application skills are required; as for IT-BPO, KPO and CRO, professional domain knowledge and skills are required; as for CRO, rich experience and science & technology knowledge are required. It is necessary to update the teaching materials on a regular basis according to the requirements of outsourcing markets to ensure the adaptation of cultivated talents to market variations and employment needs.

Although China‘s IT-BPO industry is still in its infancy, it is essential to support, encourage and promote IT-BPO enterprises‘ development towards the high-end business and accelerate the establishment of our own KPO and CRO industries while continuing to facilitate the development of IT-BPO industry. There is no doubt that the rise of KPO and CRO industries will provide a large number of job opportunities for the graduates.

However, how to stick to the great-leap-forward development and follow our own way is directly linked to the scientific, sustainable and balanced development of China’s economy. IT-BPO, KPO and CRO industries can not only create a prosperous economy, but can also attract international managerial talents with a good command of national business process specifications and standards, thus effectively improving China’s soft power. For these industries, the key to success is talents, so it is necessary to focus on reform and innovation, set up new international, practicality-oriented training bases, break through the traditional training mode under planned economy, keep pace with market demands and provide a lot of qualified professional talents for IT-BPO, KPO and CRO industries.

4. Qualified Talent Supply as an Obstacle for China’s Offshore Outsourcing 

The serious lack of qualified talents is the major obstacle for the rapid development of China’s offshore outsourcing industry, the basic condition confronting which is the mismatch between talent supply and the demand in enterprises. The following data may prove this point. In 2008, the number of students and trainees provided by China’s universities, colleges and training organizations arrived at as high as 45,000 while the number of qualified workers needed by China’s enterprises stood at 1,900 or so. However, only 1,000 people were proved qualified with 40% failing to meet the requirements of the enterprises.

Three types of talent can be deemed as “qualified” for the outsourcing industry. The first, and maybe the most important, are the leaders with rich experience in market development, operations management and business creation. Moreover, they have rich overseas experience, vast commercial resources, broad international vision and various skills and capacities for identifying and utilizing talents. Most of them are overseas returnees or foreign enterprise executives. Since China’s reform and opening up started only thirty years ago makes it impossible for China to reserve sufficient talents of this kind and most overseas returnees have lack of business and management experience, it is necessary to discover and introduce some outsourcing leaders.

The second type is the middle managers who act as the backbone of the enterprises. Many offshore outsourcing enterprises are now dedicated to cultivating this kind of talent. In the short term, the discovery and training of middle managers from manufacturing outsourcing enterprises can meet the fast expansion of demand, which should be solved by introducing talents with MBA or MOE degrees in the long term, however.

The third type is the programmers and business process technicians with offshore outsourcing capacity. They must have foreign language capacity, IT knowledge and skills, basic vocational traits, a certain knowledge of the process management specifications, besides which they should receive the so-called “Last Mile” training.

Due to the limitations of offshore outsourcing scale and business scope, the Chinese government and enterprises can only concentrate on basic talents, namely the third type. It is by the three standards of knowledge, capacity and vocational traits that such basic talents are measured. However, the divorce between education and social reality leads to talents’ failure to meet the requirements of the enterprises.

5. Problems with Higher Education System

Currently, China’s higher education still maintains the traditional training mode of the planned economy, i.e. “basing sales on production”. Curriculum structure fails to keep pace with the market’s development and changes, ignoring the demand of emerging industries for knowledge management and personnel structure. In recent years, along with the industrialization of education, college graduates are facing unprecedented employment pressure.

The serious lack of faculties in the higher education system is another reason why colleges and universities can not keep up with the rapid paces of market economic development and structural reforms.. It is not uncommon for most of university teachers to only focus on their daily teaching without having any experience in commercial activities or overseas businesses. Consequently, it is impossible for them to understand and grasp the rapid changes in the domestic market and the global economy. The conservative behavior will lead to the separation of teaching and research from social activities and thus simply can not bring out the talents required by the newest outsourcing mode.

The scarcity of resources and neglect of practice make many schools gradually deviate from their focus of work. For example, some new disciplines (software technology, information management and network technology) are offered repeatedly without special features while technology is developing rapidly and knowledge is changing unpredictably, which results in college graduates’ failing to adapt to the market needs with their knowledge structures and abilities. Besides, the unrealistic political theories and ideological education greatly deviate from social realities. Consequently, the cultivation of vocational traits cannot be independent of demonstration from persons with rich experience, discipline or constant practice and correction of professional habits.

Based on the reasons mentioned above, the higher education institutions under the existing system fail to provide qualified talents with global vision and excellent soft skills for IT-BPO, KPO and CRO industries.

6. Suggested Solutions for China’s Offshore Outsourcing

The English speaking ability of Chinese is not as good as Indians, neither is China’s business environment. However, the mathematical skills, logical thinking, analysis，reasoning and working ability of Chinese may be better than Indians. Besides, the better hardware equipment in the returned overseas students’ enterprises and various scientific research institutions, research project management experience and professional quality of employees ensure that they will quickly meet the business requirements of IT-BPO, KPO and CRO after training. Therefore, compared with India, China has more advantages in high-end IT-BPO and KPO industries.

To provide professional talents for the brand new outsourcing industry born from the Internet technology, the education mode must first be geared towards international export-oriented features, with the adoption of foreign language teaching materials and foreign language teaching methods. Teachers of specialized courses must have more than two years’ work experience in the first-line position of software, network, information and business management enterprises. Since overseas returnees have long-term work and living experience abroad and they know more about the business concepts, living habits, working norms and cultural values, they should be the main source of teachers.

Teaching of outsourcing industry is a very practical subject. Keeping the close combination of theory and practice is the key for successful teaching. Teaching institutions should set up internship production bases and at least one fourth of a whole school year should be allocated to internship teaching, besides which students should be encouraged to take part-time jobs. They should also communicate frequently with overseas outsourcing markets and business activities, invite outsourcing clients to make business and academic reports and update knowledge at any time. Meanwhile, they ought to carry out academic researches on IT-BPO, KPO and CRO to improve teaching according to the new problems occurring in the developments of these industries.

(1) Colleges for the cultivation of outsourcing talents should be established in outsourcing model cities, in each of which the government should invest or attract private investors or venture capital providers to invest in the establishment of a college with quick market responding mechanism by relying on the existing universities, famous training institutions or universities abroad (to ensure the qualification). Efforts should be made to develop master and doctor programs about outsourcing industry for junior college students or college students according to local differentiation strategies on outsourcing industry and future development trend with the aim to meet the requirements of local offshore outsourcing enterprises.

(2) Outsourcing colleges should work closely with the development of the domestic market and provide qualified talents for offshoring, nearshoring and onshoring enterprises to satisfy the talent requirements of domestic companies as well as multinational companies in China. The recruitment number can be adjusted in accordance with the market demand.

(3) Outsourcing colleges should create language environments to ensure students’ foreign language practical abilities. They should provide order training for enterprises, establish alliance with them, set up specialized courses for them and ensure the employment of the students after training by creating letters of intent for employment contracts. Besides, they should also establish boards of directors participated by enterprises to ensure scientific and democratic management. They should actively demand the enterprises to participate in determining the directions of college management and development and raise funds to support college construction and development.

(4) Outsourcing colleges should operate jointly with large-scale outsourcing training institutions in foreign countries, such as America and India, and use their teaching materials and methods. They can recruit retired foreign professionals to provide language and cultural education, so as to create favorable language environments. Besides, they can also encourage those studying abroad to return and participate in the teaching material compilation and teaching.

(5) Outsourcing colleges should establish non-profit outsourcing production internship bases to create practical working environments for the students and encourage them to work during their four years’ study, besides which they should be trained to develop project management, team building, and communication skills.

(6) Outsourcing colleges should actively carry out researches on IT-BPO, KPO and CRO industries. Different from the traditional manufacturing industry, outsourcing belongs to high-tech service industry of which the service quality is determined by the three factors of process, technology and human resource. Mastering process and technology is the most active and important factor, which is also the most difficult to manage. Therefore, in the outsourcing industry, the enterprise management level determines the productivity and represents the core competitiveness in the international outsourcing market. The business object of BPO is the rapidly changing information. The mass information is invisible and impossible to be detected or compared with eyes or other means, which makes the quality control very difficult. Outsourcing businesses are mainly in the form of projects involved with many industries such as finance, insurance, hospital, government, school, law and manufacturing. The operation procedure outsourcing follows is the standard process management. Normally, it is quick to undertake, implement and complete BPO businesses which are based on the Internet. Communication with foreign clients happens frequently, so the cultural and habitual differences are the biggest challenge in ensuring service quality. Thousands of people in China work on businesses won from developed countries day after day and so China’s outsourcing industry can come across unprecedented difficulties and challenges. Studying and exploring are urgently needed to find laws, summarize experience and thereby promote the development of outsourcing industry in China.

7. On-going Innovation of Offshore Outsourcing Talent Nurturing Modes 

People of insight in China’s business world and China’s government really worry about the slow progress in the reform of higher education system. To satisfy the needs emerging in the rapid development of China’s outsourcing industry, they emancipate their minds and take active actions to strengthen the cooperation between enterprises and colleges, restructure curriculums, put emphasis on practice and cultivate students’ application ability with great innovation determination and confidence. Based on the brand new subjects of service science, management and engineering (SSME), the outsourcing industry requires a distinctive compound knowledge system as well as relatively high application ability and strict vocational traits with employees. Therefore, a new road for developing outsourcing talents with Chinese characteristics should be built. Some cities such as Dalian, Hangzhou, Xian and Suzhou have been engaged in this new educational revolution.

The Neusoft Institute of Information in Dalian commits itself to “Software Engineering” education reform and is the pioneer in higher education system innovation in China. Since 2000, it has been actively pursuing interaction between education and the IT industry. Dependent on Neusoft’s experience in IT industry and its profound understanding of the industry’s requirements for talents, it integrates with the global partner resource of Neusoft and makes talent cultivation plan together with enterprises, so as to cultivate truly-needed talents for the IT industry and transfer qualified graduates to enterprises. The institution has close working relationship with numerous international IT enterprises such as Intel, SAP, SUN, HP and Toshiba in developing courseware and project databases in both Chinese and foreign languages as well as establishing a shared platform of teaching resources. It includes enterprises’ projects into its teaching materials and make talent caltivation meet enterprises’ requirements by linking teaching with the IT industry. Meanwhile, the college has established an interactive mechanism for the employment of teachers. It invites teachers with working experience in enterprises and teaching ability from IT enterprises such as Neusoft, Sisco and SAP to build a team of teachers with “double titles” (teacher and engineer) and “double positions” (teaching position and development position).

Founded on Dec. 28, 2008, Hangzhou Institution of Service Engineering (HISE) is targeted at developing practice-oriented talents (instead of scientific research talents) for the modern service industry in China. Starting from the outsourcing industry, the institute cooperates with not only international enterprises (IBM, Microsoft, Renesas Technology, etc.) but also well-known local enterprises (SeioSoft, etc.) on the reform and innovation of talent nurturing scheme, curriculum and training contents in accordance with talent requirements. The institution puts emphasis on cultivating students’ foreign language abilities (listening, speaking, reading and writing) so as to satisfy enterprises’ demand for communication and exchange in daily operation of offshore outsourcing businesses. It also provides strict training to help students develop vocational traits and creates a simulation enterprise environment for them to gain experience on real posts. The teaching of knowledge is firmly practice-oriented, and the participation of the part-time teachers from enterprises in both teaching work and practice is also insisted. There is a “three-three” system for the constitution of teachers, namely a third of the teachers are overseas returnees and foreign teachers, a third part-time teachers from enterprises and a third high-level professional teachers. This ensures the realization of an international and practice-oriented talent nurturing mode.

On Mar. 30, 2009, in order to solve the talent supply problem in the software outsourcing industry, Xi’an Municipal Government decided that the administrative committee of Xi’an Hi-tech Industry Development Zone and Xi’an University of Arts and Science should join hands in establishing Xi’an Software Outsourcing College. As a model college that develops professional talents, it’s a non-profit higher education training institution. Attached under the college are Xi’an Software Outsourcing Talent Training Base and Software Outsourcing Talent Practice Base which shoulder the tasks of academic education, skill training, internship training, high-end talent cultivation and focus on the cultivation of project managers, software technology engineers, basic outsourcing operators, etc. According to the requirements on the establishment of outsourcing model cities in China, the college sets out to reach a primary scale of 10,000 students every year and a long-term scale of 15,000 to 20,000 students annually.

Starting February 2008, the administrative committee of Suzhou Industrial Park invested in the establishment of SIP Software and Outsourcing Vocational College. Upholding the thought of open education, it plans to adopt the joint construction mode by government, colleges and enterprises and design the curriculum system according to the “2+3 Matrix”, in which 2 stands for the two public courses of public quality education and public specialized training that run through the whole process of academic education, while 3 means the three specialized courses of theory learning, real project operation and enterprise internship and Matrix refers to the establishment of direction for specialized courses according to the vertical outsourcing industry and the types of outsourcing business. The teaching purpose is to develop practice-oriented outsourcing talents and realize the employment of graduates in SIP.

(The author is Vice President of Hangzhou Institute of Service Engineering.)

(Reproduced from "ChinaSourcing" magazine)