Special Supplement: Embedded software: New engine for Neusoft

Walking into the Alpine Dalian Car Audio R&D Center, you will see all employees wear uniforms. But actually, some of them are employees of Alpine while others are employees of Neusoft; since most of them can speak Japanese, you can hardly tell which company that an employee belongs to.

In this three-storey R&D building, the third floor is Alpine's hardware design center, the second floor is Neusoft's software design and R&D center outsourced by Alpine, and the first floor is Alpine's product test center.

As the largest embedded software provider in China, Neusoft is facing opportunities brought by the booming development of embedded software outsourcing industry.

Enormous potential

The Chinese government's support to the embedded software industry is playing a major role in the industry's rapid development.

The embedded system technology in software is applicable to various fields in the national economy.

As the status of the information industry will be further elevated worldwide, regions and countries such as Europe, America and Japan are make good use of the abundant human resources in China to reduce their R&D cost and expand the market for, thus shifting their R&D and software business to the Chinese market.

The development of the Chinese manufacturing industry brings more and more businesses such as software development and BPO. Software has become an integral part of lots of household equipments, such as telecommunications facilities, household appliances, automobiles and medical equipment.

All the equipments made in China will also require China-made software components. Currently, China is developing very fast in embedded software service, particularly when businesses for Japanese enterprises in China are booming in sectors of mobile phones, household appliances, auto electronics and semi-conductors. The electronics manufacturing industry in Japan and the software industry in China have established sound complementary partnership.

In the future, China will become a major consumer market and a provider for high-quality and low-cost manufacturing. Meanwhile, with the prevalence of information technology, applications are commonly seen in more and more China-made products, resulting in more rigorous demand in IT R&D and service. All this reflects China's enormous potential as a development base for embedded software.

Fresh opportunities

The sound environment for China's embedded software industry has brought fresh opportunities and challenges as well for software enterprises in China. Taking mobile phones as an example, now consumer electronics typically featuring mobile phones is the field of fastest growth for embedded applications.

In terms of market scale, the mobile phone market in China and around the world will maintain a double-digit growth in the next three or five years. For instance, China saw the sales of 199 million handsets last year, claiming the largest and the fastest growing market for handsets. It is projected that the sales will exceed 150 million by the end of 2007, and the global market size for mobile phones will reach 200 billion dollars by 2011.

In terms of market pattern, there is an ever-increasing brand concentration, a drop in profits in mobile phone market and increased upgrade of mobile phone products, naturally leading to the cutting price strategy of mobile phone producers to reduce R&D costs and shorten the research period. Particularly in terms of R&D of mobile phone software, it is an increasingly obvious trend that Europe, America and Japan are shifting to China and India, meaning opportunities for providers of Chinese software outsourcing service in the next three years, including Neusoft.

Facing these opportunities, Neusoft is actively getting prepared for the future. Chen Ximin, vice-president of Neusoft and managing director of the embedded software division, comments that Neusoft is planning for the next three or five years to establish a strategy for human resource development and will cultivate and retain a talent pool according to predictions made on various aspects of the future business, and focus on the building and cultivation of backbone staff and management team.

In terms of technology, it will establish and make improvements on the technical systems and staff competency model oriented to mobile phone's embedded software, and establish core technical competency in various aspects of mobile software and software models based on the mainstream mobile software platforms, such as Symbian, Linxu, Windows Mobile and QUALCOMM' platform.

In terms of management process, Neusoft has actively implemented a quality management system based on CMMI, and established a management system for information security and passed the verification based on ISO27001 standard.

Chen said, "Through efforts made over seven years, we established partnership with many internationally recognized mobile phone manufacturers. Handset products involved in R&D is open to operators from China, Japan, Europe and America. And in terms of technical coverage, several layers are included in the process such as mobile software platform R&D, R&D for applications and mobile phone testing with the establishment of an expert technical team of over 1,000. Neusoft is planning in the next three to five years to build a specialized research team with staff members between 2,000 and 3,000, and establish a world-class embedded software service provider for mobile phones."

Integration

Embedded software has a relatively steep entry barrier, therefore, apart from specific requirements for technical expertise and experience, model and integration in the process of cooperation are also of vital importance.

Neusoft has been in the industry for so many years, especially in the field of auto audio, maintained a decade long partnership with Alpine. All this good faith with customers attribute to Neusoft's completed development process and quality assurance system, low-cost advantage and high-quality development, good service awareness and positive attitude for improvement. More importantly, Neusoft has been facilitated with the concept of seeking common ground while preserving differences, growing with customers with complementary strength. The new model of cooperation for Newsoft and Alpine is TWO COMPANIES, ONE SYSTEM.

"Neusoft is applying its strength to win good faith from customers. Based on one single platform, both sides of the partnership are seeking a more balanced mode of cooperation. Neusoft's QCD capability has won customer's trust, and consistently brought value to its customers. The software ideas and designing conceptions conceived by Neusoft, as well as the developed Alpine products have won awards internationally for many times, promoting recognition and brand competency for Alpine. This is also the reason for Neusoft and its Japanese clients to be easily integrated," said Zhang Jin, managing director of Neusoft IS division.

Future growth

As CCID consulting forecasts, from 2006 to 2010, the scale for Chinese embedded software industry will maintain a rapid growth of 25.8 percent, and reach a scale of 333.96 billion yuan by 2010. Major fields for applications including handheld mobile devices, digit TV as well as HTV products based on digital TV system. Besides, auto electronics and medical electronics will also become the main fields for embedded software applications.

In 2006, the revenue of Chinese software outsourcing enterprises reached $1.43 billion, up 40 percent compared to the previous year, in which 60 percent is from Japanese market. Looking to the future, leveraging the advantages in geological closeness and language, China will still be the major partner for software outsourcing cooperation.

"Neusoft's outsourcing business towards Japanese customers mainly lies in two fields: application software and embedded software. And embedded software is our key field for future business. With China gradually growing as a global manufacturer, it will further expand in product designing and software development," said Zhang Xiubang, vice-president of Neusoft group and managing director of Neusoft Business Software Division.

However, compared to markets of Europe and America, Japanese market is still merely a "small cake". According to IDC predictions, IT service and outsourcing market of North America and Europe accounts for 75 percent of the global market, and increasing annually at a rate of 60 percent, which is almost twice of the Japanese market. Currently, European and American countries are continually shifting their R&D and software outsourcing businesses to China, to cut R&D cost and expand the consumer market.

"In the coming years, Neusoft will actively expand its outsourcing market in Europe and America, and will maintain a rapid business growth in the next three or five years," said Fang Fahe, vice-president and CTO for Neusoft Group.

(Shanghai Start 09/07/2007 page4)