Wang Bin feels lucky every time he sees the software produced by his company released in 2001, and which teaches people how to use Microsoft's Windows and Office programs is still on the shelf of a computer store in Wuhan, capital of Central China's Hubei Province.

Part of the reason for his feeling is Wang, chief executive officer of Beijing Beyondsoft Co Ltd, is happy his firm's products remain popular. But, more importantly, he was lucky to get out of the education software line in 2001, when heavy accounts receiveable almost dragged his company into bankruptcy.

Now, with a deeper understanding of his firm's core competence, Wang has decided to focus on one, more promising, area: Software outsourcing.

The company, which works for global software giants such as Microsoft, IBM, HP, SAP and Oracle in software development, testing and localization, has grown from a small firm of 100 people in 2001 to one of China's major software outsourcing providers. The company now employs 800 developers.

"In China, the key to starting an enterprise and becoming successful is locating the target business, and keeping that focus," Wang tells China Business Weekly.

In the past four years, the environment for software outsourcing in China has changed significantly.

Chinese software companies, troubled by piracy, began looking at neighbouring India for inspiration, as some Indian outsourcing providers, such as Infosys and TCS, have grown into big international names. Those firms now employ tens of thousands of software developers, and India has grown into a global software powerhouse.

The central and local governments in China have begun learning from India, and they have begun encouraging software outsourcing. At the same time, software multinationals such as Microsoft, IBM and Accenture, trying to tap the talent pool in China and increase their efficiency in China have set up their own development centres.

With the local software development capability building up, other multinationals, which want to avoid too much concentration on India for software outsourcing, have begun awarding contracts to China-based software firms.

"Software outsourcing is still technology hype, but we have seen significantly higher interest from foreign clients this year," says Wang.

However, he believes the real "good times" will come within the next three years, as many customers will seriously start to outsource some projects to China, after they have time to study the market.

One major US-based customer visited Wang's company in mid-June, and said his company would soon award contracts to a suitable software developer. The project is expected to require 4,000 developers within three years.

However, even the largest software outsourcing provider in China has fewer than 2,000 software developers, compared with Infosys' almost 40,000 software engineers. So, the problem is Chinese software developers are still too small to win huge contracts.

Wang's firm, trying to prepare for the increased demand, will more than double its employees, from 500 at the end of last year to 1,200 this year. Wang expects the number will rise to between 2,200 and 2,500 next year.

The firm last year opened an office in Shanghai, but Wang aims to build the Shanghai branch into another national centre, similar to the one it has in Beijing. The firm also signed office leases in Wuhan and Xi'an, in Northwest China's Shaanxi Province, last month. Its next office will likely be opened in Dalian, in Northeast China's Liaoning Province.

For the software outsourcing business, finding an abundant number of qualified engineers is the biggest challenge. So Beyondsoft will set up centres in those cities, which are known for having technology-based universities.

Another area of importance is the client, as software-outsourcing firms usually rely heavily on several major customers.

While Infosys earns more than half of its revenues from its top five clients, Beyondsoft makes most of its money from several top customers including Microsoft, IBM and HP.

To maintain and expand the contracts, which are mainly from the United States, Wang says his firm will expand its offices in Seattle, the Silicon Valley and Denver, where Beyondsoft has five employees. The team in Denver will be further expanded to grow the company's customer base and to find partners, which will help the Beijing-based firm attract more customers.

(China Daily 07/04/2005 page7)