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Shanghai Software Park: An Outsourcing Base to Serve the World Expo 2010 and Beyond

It may be hard to imagine that in the early 19th century, Shanghai was little more than a fishing village upriver from the ocean. However, its location at the mouth of the Yangzi River on the central coast made it a natural choice for foreign traders in the mid-1800s, and Shanghai quickly grew into China’s commercial capital. Today, the city is a true metropolis and is also the most westernized city in China, with characteristic European architecture along its waterfront, commonly known as the Bund.

In terms of outsourcing, Shanghai has pursued an ambitious strategy from the start: it has aimed to make foreign companies locate their Chinese headquarters and R&D posts in Shanghai rather than any other Chinese city. To date, this strategy has paid off handsomely: 215 R&D centers have been established in Shanghai, along with the regional headquarters of 178 multinationals- among them global outsourcing giants IBM, HP, EDS, and Accenture.

The hub of all outsourcing activity in the city is located in Shanghai Pudong Software Park, a national outsourcing base. To date, the park has established a whole chain of outsourcing services, including software exports, ITO, SI, E2E solutions, service outsourcing, and more. As an example of the park’s success, total revenues for software products in 2008 reached 14.5 B RBM (2.1B USD); this included 700M USD of software product exports and service outsourcing.

While the park has enjoyed many successes already, the next big thing on its horizon is undoubtedly the World Expo 2010, which will be held in Shanghai from May 1to October 31, 2010. Indeed, this expo, expected to attract 200 participating countries and over 70 millions visiitors, will be significant for the entire nation of China, and will prove an excellent follow-up to the impressive Beijing 2008 Olympics.

As an indication of the Expo’s importance, more than 10 billion RMB (150M USD) will be spent on IT alone for the Expo, and the Expo organizers have signed an agreement with the Pudong software park for developing IT applications and providing back-office services. The park has also already established a special branch to meet the requests and needs of the Expo.

PROFILE: Shanghai Pudong Software Park, a 580,000 square-meter outsourcing base, was first established in March 2002 and certified by the State Planning Commission at the end of 2003.

There are over 1200 government-certified software enterprises in Shanghai area and many of them are associated with the park, including 92 enterprises with CMM3 and seven with CMM5. Their main operations include software development, chip design, information security, information service, system integration, electronic commerce, software export and various other IT industries.

Many international outsourcers and corporations, attracted by the city’s infrastructure and talent, have settled in the park. Significant international companies with a presence in the park include Sony, Olympus, Kyocera, Citibank, Motorola, SAP; global outsourcing leaders Infosys, Tata, HCL are there as well. Most of these companies have also established their R&D centers in the park.

If anything, Shanghai’s biggest drawback for the potential outsourcer is cost. Software engineers in Shanghai are the second-highest paid in the country, trailing only Beijing, and office space there is routinely China’s most expensive. Nevertheless, many outsourcers and corporations are able to find enough benefits in the park to justify making it their software base in China.

INTERNET/TELECOMMUNICATION INFRASTRUCTURE: Shanghai has one of the most advanced communication and internet infrastructure systems in the country; it includes designated trunks for international gateway (> 4000 GB) and direct access to nine international undersea optics. There are over 11 million fixed-line users, 17 million mobile users, and 10 million internet users in a city of close to 14 million habitants.

TOP UNIVERSITIES and TALENT POOL: Shanghai has over 60 universities and colleges that graduate an average of 45,000 IT engineers every year. Fudan University, Tongji University and Shanghai Jiaotong University are the city’s best and are among the nation’s top institutes of higher learning. Shanghai Jiaotong University has the distinction of being former President Jiang Zemin’s alma mater. There are also more than 500 IT training centers and short-term programs in the area that have trained over 100,000 IT specialists. As a result, Shanghai has one of the largest talent pools in the country for leading software and IT professionals, with over 140,000 people working in those areas.

TRANPORTATION: Shanghai Pudong International is China’s busiest airport for international passenger traffic, connecting to more than 70 international cities by 48 international airlines. Flights to and from Pudong include major destinations in North America, Europe, the Middle East, and Africa, along with every major city in Asia. Hongqiao Airport, Shanghai’s other airport, connects to 62 domestic cities through 500 flights every day.

Shanghai’s location on the central coast makes it almost equidistant from the other major cities of Beijing and Hong Kong, with about a two-hour flight to either destination.

However, air is not the only means of transportation to and from the city; Shanghai is also an excellent starting point for a rail journey, and features regular express service to destinations such as Nanjing and Hangzhou.

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GOVERNMENT INCENTIVES: Like other outsourcing parks, Shanghai receives incentives for outsourcing activities in the Park, including favorable tax codes, training & estate subsidies, etc.