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Tale of talent

Updated: 2007-06-18 07:03

Seeing its concept take root and flourish, it must have been satisfying indeed for information technology (IT) company Oriental Standard Human Resources Holding Co Ltd to acquire $10 million in venture capital at the end of last year.

It is the potential resource of China's ability in IT staffing and training that attracted international venture capital, says Wu Lei, CEO of Oriental Standard.

The Beijing-based firm, founded in 2004, is an IT training, staffing and project outsourcing company that provides services for both China and abroad.

"Since receiving the investment, we will further enhance our recruiting process for outsourcing on top of our current professional training business," Wu notes.

The 36-year-old MBA from Yale University has two ambitious plans - building a nation-wide recruiting network and improving recruitment services for clients, especially fast-growing IT outsourcing firms.

There is a shortfall between the talent supply and the demand in China, Wu points out.

Almost all domestic comprehensive universities offer IT-related majors, and each year there are 400,000 to 500,000 new IT graduates from across the country.

But China's IT industry is geographically isolated in pockets of production and demand. IT professionals are mostly based in Beijing, the Pearl River Delta, the Yangtze River Delta and Dalian of Liaoning Province, accounting for at least 80 percent of the total.

It is difficult for many IT firms, especially small-scale companies with only 40 or so employees, to recruit nationwide. It is also costly for new graduates to travel to different cities to look for jobs.

A nationwide network created by professional staffing companies has certain market potential, Wu says.

He notes that if IT outsourcing companies recruit staff on their own, the average cost for hiring an entry-level program developer, including funds for travel and labor, is several thousand yuan. For large firms, the cost may amount to more than 10,000 yuan.

Oriental Standard charges less while providing a wider selection of talent, Wu says, adding the company has alliances with over 30 universities and colleges in the country.

The outsourcing market is not only in China. Due to comparatively lower labor costs, Chinese IT professionals are welcomed by many countries. Over 4,000 Chinese IT professionals went to Japan in 2005 and helped alleviate a shortage of IT engineers there.

Professional training, which was how Oriental Standard began, is still an important part of the business, Wu says, noting university IT graduates in China are usually entry-level professionals. Few of them have intermediate and high-level knowledge.

Cao Xin, Director of the Global Sourcing Consulting Practice of Hewitt China, agrees.

Hewitt's experience indicates only about 10 percent of new university graduates can meet the demands of IT outsourcing employers due to China's college education system.

Hewitt is a leading provider of HR outsourcing and consulting firm.

"The current IT-related teaching materials are too theoretical and not updated in a timely manner, but the knowledge in this industry changes almost every day," Cao explains.

Training graduates - from professional training organizations or institutes run by IT outsourcing companies - has large potential, she notes.

Since receiving its venture capital, Oriental Standard has been growing much faster, opening more subsidiaries and developing new talent evaluation programs.

It has established four directly owned subsidiaries - three in China and one in Japan, its largest overseas market. The initial investment for the operation in Japan was over $2 million.

Before receiving fresh capital, the only method of expansion for the company was through franchising.

After evaluating talent, Wu says that misunderstandings widely exist in the industry.

Applicants seeking jobs in research and development often think logical analysis is the most important ability for such a role, yet employers believe communication skills are the most crucial, and rank logical analysis in about the sixth position.

As well, innovation is always stressed by recruiters. But Oriental Standard's research indicates an individual's ability for innovation is not closely related to a firm's achievements. Systematic innovation by the entire company weighs more heavily than an individual's competence, according to the survey.

Venture capital firms Doll Capital Management and DT Capital now hold a 40 percent stake in Oriental Standard. China's largest IT educational services company, New Oriental Education and Technology Group, has a 20 percent share. The remainder is held by the company's senior management.

Wu says Oriental Standard has no immediate plan to go public, noting there are many ways for the firm to grow, such as acquiring other companies or attracting strategic investors.

"Our current task is to maintain our leading position in the sector," he says.

The Chinese Ministry of Commerce says China aims to develop around 10 IT outsourcing companies, each with over 10,000 employees. Currently, major players such as Neusoft and iSoftStone are seeking growing opportunities, according to Hewitt.

It will be a challenge for IT outsourcing firms to recruit and manage such a huge number of staff, Cao says.

(China Daily 06/16/2007 page5)

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