Source of Competitive advantage

The industry, which has recorded growth rates in excess of 60 percent for three consecutive years, is likely to be a $90-billion industry by 2015 and account for more than 50 percent of the global market, the report says.

"China's offshore outsourcing market will reach $100 billion by 2015, with a year-on-year increase of 40 to 50 percent in the next five years," says Wang Gang, an analyst at CCID Consulting Co Ltd, a Beijing-based IT industry consultancy.

A report on the outsourcing market in China published by KPMG in June this year says that China is a crucial part of the global services and pan-Asia strategies for many global companies. The same report says that outsourcing contracts carried out by Chinese companies currently account for 23 percent of the global total.

The real potential of China's outsourcing industry can be gauged from the latest data provided by the Ministry of Industry and Information Technology. According to its figures for the first five months of this year, the combined value of China's exported outsourcing services grew by 26.4 percent year-on-year to $2.94 billion.

Domestic power

"Many multinational companies are expanding their outsourcing from China not only because of the low costs, but also to gain more business from the fast-growing Chinese companies," says Mao Qiong, an analyst with the US-based IT research company International Data Corp.

The "China-to-China" market is expected to be the fastest growth segment for the industry as more State-owned enterprises and private companies have started to realize the advantages of outsourcing, says the KPMG report.

Fast-growing industries like banking, financial services and insurance, telecom and healthcare have spurred demand for outsourcing services, the report says.

Large telecom companies such as Huawei and ZTE have outsourced most of their software development needs and also set up call centers for customer solutions. In the healthcare sector many leading hospitals have outsourced their IT development requirements. Large banks like China Merchants Bank have also outsourced software development and card processing.

If there is one factor that all companies unanimously vouch for, it is the strong support accorded by the government to the outsourcing sector.

"We are amazed by government support for the industry," Arjunan from Wipro says.

In February 2009, China designated 21 cities as the trial ground for the outsourcing business, including Beijing and Shanghai. Each of these cities got annual grants of 5 million yuan ($783,000, 644,000 euros) between 2010 and 2012 from the central government to develop their outsourcing service platforms.