Software Outsourcing in China and Japan

Software and IT services (SITS) industry will shamble along for at least the rest of this year and the next before staging a very gradual recovery. This is according to bean-counters at Tech Market View, whose stats show the sector has been in annual decline since the recession that started in 2008 – and shows no signs of improving in the medium term.

China’s growing Software Outsourcing trade with Japan is expected to rise even faster after Premier Wen Jiabao’s “ice-melting” and DHC started outsourcing computer software from Japan in 1996, a time when Sino-Japanese relations were at low ebb tide.

Political hindrances have not impeded our business,” said Liu. Dalian Hi-Think Computer Technologies (DHC) Co. Ltd is one of China’s leading Software Development firms. Manager Liu Jun is proud of its big-name customers, including technology giants Hitachi, Sony, Mitsubishi and NEC.

Dalian, a Japanese colony for 40 years before the end of World War II, became the outsourcing center of information technology to Japan due to its geographical proximity and its skilled labor force. The city’s software industry sales last year set a new record at 10 billion yuan (1.23 billion U.S. dollars), maintaining a 60 percent annual rise in the past six years.

China accounted for more than 60 percent of Japan’s outsourced software trade in 2009 and has become the country’s biggest software outsourcing base,” said Mine Shentaro, of the Japan External Trade Organization based in Dalian, northeast China’s Liaoning Province. “We think 2011 could be even slightly worse than 2010,” it warned. “We are now forecasting that the UK SITS market will shrink again in real terms by 3 per cent … and then one more year of decline in 2012, of just another 1 per cent.”

This is why we have reduced our growth forecasts from 2012 onwards,” it said, “We still believe that we remain in the midst of a five-year market decline in real terms. Cloud computing will have the most disruptive influence on the UK SITS segment, accounting for 30 per cent or £12.5bn of sales by 2014. But only software outsourcing company resellers and service suppliers that overhaul business and operating models will take advantage of this new delivery mode and those can do this the quickest stand the best chance of making money.

Previous years According to a government plan for the software development and information services, China aims to generate 168 billion U.S. dollars from the software sector and export 12.5 billion U.S. dollars worth of software services in 2010.

INDIA is in a recovery mode from the hugely impacted global financial meltdown surfaced in mid-September 2008. An advance estimate of the Central Statistical Organization indicates to 7.2 percent GDP growth during the current fiscal year (2009-10), though the government expects it may even surpass the CSO estimates. Coupled with this, the industry is sending encouraging feeler to fuel the hope for a better revival of the economy from the onslaught of the meltdown that had impacted among others India’s exports like most of other countries around the world. The cumulative growth for the period April-December 2009-10 stands at 8.6 percent.

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