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Beijing Software Park: An Olympic Outsourcing Base in China

The 29th Olympic games go down in history as a showcase of some of the greatest performances ever seen, from Michael Phelps’ record-breaking eight gold medals in swimming to Usain Bolt’s numerous world records in track.

As the host city to these memorable games, Beijing also showcased itself this summer as a city capable of creating a nearly-flawless logistical and infrastructural system that supported the outstanding athletic achievement seen across the board.

Although the Games are over, Beijing’s high standards have not changed: the city is setting a similarly ambitious bar for its outsourcing industry as well, which is currently concentrated in the Zhongguanchun national outsourcing base. This base hosts over 4000 software enterprises, including some of the country’s leading outsourcing companies such as iSoftStone, Worksoft, SinoCom Software and Beyondsoft.

Beijing holds a unique appeal as the capital city of China and benefits from the presence of over 200 Fortune 500 Companies and 350 foreign-funded research institutions. Moreover, forty-six Fortune-500-listed companies have established independent research institutions in Beijing to date. Its outsourcing business has grown an average of 35% over the past five years, partly due to the fact that Beijing’s rapid economic growth offers many channels for service outsourcing enterprises to receive business orders.

ENTERPRISES PROFILE: Two-thirds of the software outsourcing enterprises in Beijing are small- and medium-sized enterprises with less than 500 working staff members.  Wholly Chinese-owned enterprises comprise 42.6% of the total, foreign-owned  25.5%, joint ventures 14.9%, and  oversea-returnee-owned 8.5%. About 25% of enterprises are less than 3 years old, 35% between 3 and 5 years, 20% between 6 and 10 years, and 17% over 10 years old.

The large proportion of outsourcing orders come from the financial industry (28%), telecommunications industry (26%), and IT development (25%). The remainder of the sources are numerous and range from government IT projects to spaceflight and aviation to agriculture.

TRANSPORTATION: There are 78 airline companies with operations in Beijing Capital International Airport; of these, 15 are domestic airline companies and 63 are foreign. Beijing has opened 127 domestic aviation sites and 172 international aviation sites. Every year, there are on average 400,000 airplanes carrying 60 million passengers departing from and landing in Beijing Capital International Airport, which is among the top 10 airports in the world.

INTERNET/TELECOMMUNICATION INFRASTRUCTURE: After more than 20 years of tireless effort, Beijing’s communication infrastructure has become among the best in the world.  In 2007,  75% of the population owned a fixed-line telephone, while 98% had a mobile phone. In 2008, the city completed $2B worth of upgrade projects on its communications and internet infrastructure in preparing for the Olympics games.

TALENT POOL: In the software park, there are 1.5% employees with Ph.D. degrees, 15% with Masters degrees,and 72% with Bachelor degrees. The average number of foreign employees in each enterprise is less than 3; 63% of all foreign employees are from the USA, 20% from Japan, and 10% from Europe.

The majority of engineers in the park are software programmers (50%) and testing engineers (21%). Other types present include project manager (9%), system engineers (5.5%), and others.

There are 20% of enterprises which have obtained CMM3/CMMI3 certificates. Over 10 enterprises have passed CMM5/CMMI5 certifications.

Beijing has 83 higher education institutions, including the renowned Tsinghua University and Peking University, which are considered among the best universities in China. In 2001, the Ministry of Education and National Development and Reform Commission approved the launch of 7 software colleges in Beijing.

GOVERNMENT FAVORABLE POLICY: Beijing is the first city in China to launch so-called “green channel” financing, which provides an efficient and convenient financing guarantee to qualified outsourcing enterprises.

Since 2003, Beijing has credited outsourcing enterprises 0.02 Yuan for every one dollar of software export, a more 0.02 Yuan will be added on a quarterly basis (???_

Beijing has set up various training funds to promote CMM and other trainings. The graduates and unemployed graduates can enjoy a 15% refund of their training fee from the local government if they are employed by outsourcing enterprises after examination.

Interestingly enough, not all entrepreneurs are taking advantage of these favorable government policies. According to a recently-published survey, only 20% of enterprises took advantage of these funds and 29% were not aware of them at all.

OPPORTUNITIES BEYOND OUTSOURCING: Booming outsourcing activities have also generated many related opportunities. A recent survey shows the percentage of outsourcing enterprises in need of various services:

Needed Services            Large ME     Medium ME     Small ME
International Roadshow     61.54%             28.57%             23.53%
Outsourcing Exhibition     46.15%             38.10%             35.29%
Promotion Document        69.23%             52.38%             52.94%
Int’l Project Management   69.23%             61.90%             47.06%
Hi-T Club                          30.77%             23.81%             52.94%
Customs Agency               38.46%             23.81%             29.41%
CMM Certificate                61.54%             38.10%              52.94%
Policies Training               38.46%             9.52%               35.29%
Venture Capital                46.15%              28.57%             47.06%
Investment Consulting     61.54%             19.05%             47.06%