ITO firms struggle with increasing costs, competition

China's information technology outsourcing providers are rushing to consolidate and adapt their marketing strategies, as they struggle to survive amid rising labor costs and competition from major multinationals.

Chinese ITO companies VanceInfo Technologies Inc and HiSoft Technology International Ltd announced in early August that they had signed an agreement under which the two companies will complete a tax-free, all-stock merger of equals with a combined equity of about $875 million.

According to the agreement, VanceInfo and HiSoft shareholders each will own about 50 percent of the joint venture, whose shares will continue to be listed on the Nasdaq Global Select Market.