BPO in China - beyond the cities you know

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The Silk Road once linked traders from the Roman Empire to the imperial court of China in Xi'an (pronounced Shian).
Two thousand years later Xi'an businessmen are once again trying to open up trade links by attracting foreign companies to use their business process outsourcing (BPO) services. It would appear that the digital Silk Road is now open for business.
Several representatives from Xi'an's Software Park appeared at a press conference in London yesterday to convince journalists their city is at the heart of China's BPO scene.
China needs its own Nasscom. You need to have one, unified voice.
Hong Gang, Gartner
"The Xi'an government has provided us with a lot of incentives such as tax reductions and office rental and language training subsidies [to offer companies]," said Chen Junfeng, vice director of Xi'an Software Park.
Xi'an is regarded as a second-tier city in China, as is Nanjing, Dalian and Guangzhou, in comparison to first-tier cities such as Beijing, Shanghai and Shenzhen.
The Terracotta Army was built in Xi'an in 246BC but more recently the government has injected $1.5bn into its infrastructure. The Xi'an' Software Park, part of the development, is currently home to 20 BPO companies, which mainly provide back-office processing for industries such as healthcare and financial services. One example: CompuPacific, which processes car loan requests for a company in New York.
Although companies in the park do not offer English language call centres yet,[link widoczny dla zalogowanych], some are setting up facilities to take calls from Chinese nationals.
"Two years ago it was just software development [in China] people were talking about," said Hong Gang, managing director for analyst house Gartner in China. "In that time there's been a huge change and more people now know about BPO."
The software park is typical of many in China - recently built,[link widoczny dla zalogowanych], in very little time, home to more than 500 companies and competing with about a hundred others in China in places such as Dalian, Nanjing, Shen Zhen and Beijing. In Shanghai alone there are 12 software parks.
But as Xi'an is looking to attract foreign investment, as are many of the provinces in China. Beijing's Zhongguancun Software Park is one of many to have representatives based in London and other capital cities around the world.
"Tianjin [a region next to Beijing] has been losing out to other places lately," says Benjamin Schmittzehe,[link widoczny dla zalogowanych], CEO of China-focused management consultancy Schmittzehe & Partners. "They have a sizable budget and advertise in the UK. A lot of the provinces have representatives here, from China - it's getting more and more sophisticated and the Chinese learn quickly."
Gartner's Hong agrees competition is tough. "We can see that [competition] is strong but companies have to listen to government policies because this can help businesses grow faster. If they don't work with the government it can be very hard on them. Even now in China the government owns 70 per cent of IT companies.
"China needs its own Nasscom - in India that's the one [an Indian IT industry trade body]. You need to have one, unified voice."
Competition between the provinces is currently strong and while the Ministry of Information and Industry is trying to unify China's efforts, local government officials in second-tier cities are determined to improve the business environment as fast as possible.
"For a communist country it's more capitalist than a lot of western countries," says Schmittzehe. "Central government will develop five-year plans that look at issues like services. And one of the big focuses is to develop the tech sector in software outsourcing.
"A lot of the benefits of Xi'an is that because they are further west than other cities so the cost of labour is lower. You also get a lot of skills coming from that place."
BPO is a growing industry in China as some of the global outsourcing giants have recognised the advantages of cheap,[link widoczny dla zalogowanych], skilled labour there. Outsourcer EDS is planning to double its headcount at its operations in Beijing,[link widoczny dla zalogowanych], Chengdu, Guangzhou, Hong Kong and Shanghai to 2,000 by the end of next year and has invested $50m over the last three years.
But Xi'an is selling on its own merits - with a large pool of cheap human resources from the 100 universities in the area, it hoovers up around 3,000 computer graduates every year, each earning approximately $120 a month - half the wages for the equivalent job in Beijing.
To capitalise on this, a number of foreign companies, such as Intel, Nortel and Japan's NTT Data have set up shop in the park.
"We're seeing more and more multinational companies in China and they need outsourcing," says Gartner's Hong. "Indian [BPO] companies are also moving to China. Tata has a target of 6,000 people over the next two or three years and Infosys has the same."
But Schmittzehe isn't convinced that Xi'an will be known as China's outsourcing capital.
"Is Xi'an the centre of BPO? I'm quite surprised to hear that. The provinces are very active in terms of competing with each other."

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