China Software Outsourcing Industry Report, 2006-2007

China software industry has gradually stepped out of downturn since 2005, which is mainly attributable to the decreasing number of new entrants into such industry on one hand; and to software companies extending to software outsourcing market on the other hand. Software industry will go through a long-term rapid growth. Since 2002, china's software and system integration business has been developing exceedingly. In addition, the overall growth of Chinese software and system integration stood at more than 30% in 2006.

However, most domestic listed software enterprises are short of independent core technologies as well as distinctive products. Meanwhile they have a small number of high-end system software, general software and software development platforms. The fierce competition among those enterprises makes their survival environments even worse in the market.

During the course of developing self-owned brands, Chinese software enterprises have long looked down upon software outsourcing business, which they think would damage the images of enterprises. But actually, being weak in strength and technologies at present, most of domestic software enterprises have difficulties in developing independently.

Currently, China software outsourcing industry shares a small proportion globally, which indicates enormous potentials in this industry.. It estimates that the industry will maintain growing at an annual rate of 50% before the year 2009.

It is forecasted in fiscal year 2007 that the market size of American software and IT outsourcing industry alone will be up to US$300 billion. The offshore share will rise from 10% in 2004 to 24% in 2007, and the offshore outsourcing expenses will be approximate to US$70 billion then.

Out of the considerations for economic security and risk decentralization, multinationals don't expect the software outsourcing market to be clustered in one region. As for American software outsourcing, India believe it can take a market share of 50% or US$35 billion, while China is the most competitive rival against India.

In the next few years, the annual growth of China software outsourcing industry will maintain at about 50%, being far higher than that of the international market. As is forecasted, the portfolio of China software outsourcing will be up to US$4.696 billion (even if the total amount of China software outsourcing reaches US$4.696 billion in year 2009, the figure will be only half of that of Japan�s software outsourcing; and one twentieth that of global software outsourcing market.).

The political stability and economic prosperity of China attracts overseas clients inclined to take China as their software development market. More importantly, the labor-force cost in Chinese market is lower by 20%-40% than that in Indian market.