Xi'an adopts new IT strategy
By Liu Baijia (China Daily)
Updated: 2005-11-04 06:18

XI'AN: Northwest China's high-tech centre aims to tap into the promising business process outsourcing (BPO) market, in order to differentiate itself from leading Chinese information technology (IT) cities, as the wave of IT outsourcing sweeps the country's software parks.

Huang Shengshen, vice-mayor of Xi'an, capital of Shaanxi Province, said in a recent interview that his city had placed the development of the software industry at the core of its strategy to tap into the global economy and that his city would invest heavily in this area, in particular in BPO. This is where companies outsource functions such as human resources, finance and administration to a BPO specialist in order that it can focus on its core competencies.

Xi'an, famous for its terracotta warriors as well as its rich educational resources, is one of the 10 national software industry bases and one of the four software export bases in the country.

However, the city lags behind Beijing, Shanghai and Dalian in development of the software outsourcing market.

Jing Junhai, director of the Xi'an High-tech Industries Development Zone, where the software park is located, said his park will adopt a differentiation strategy in order to distinguish itself from those leaders.

While these cities focus on software offshore outsourcing with orders from overseas markets, Xi'an will focus on providing BPO, which requires less advanced technology but more specific training such as languages, accounting and basic computer skills.

They may initially focus on domestic industries, such as the banking and insurance sectors.

Jing said Chinese banks and insurers, in an attempt to improve their efficiency and data security, are considering building data backup and recovery centres outside their Beijing and Shanghai headquarters, making Xi'an a potentially ideal location.

"We must create an environment for the development of a prosperous software and BPO industry in Xi'an, even if that requires municipal government funds to subsidize new business set-ups," said the vice-mayor.

Jing said that there is a current industrial shift from eastern coastal areas to western parts of China and attributes this to rising costs.

Beijing, Shanghai and Dalian are the country's top software export and outsourcing cities, but the rising land and living costs have started to worry some software firms in these regions.

William Poon, a vice-president with HP China in charge of IT services, said the total cost to run its business in Dalian, which aims to become China's capital of software outsourcing and has already attracted big names like HP, IBM, and Accenture to set up operations there, has been rising quite quickly.

Jing said his zone will control costs in Xi'an, especially the cost of office leases and land.

This year, the city set up an industrial fund for the development of the software industry totalling 100 million yuan (US$12 million) per year for market development, training of professionals, and innovations.

Jing revealed that the city is considering further support in other areas such as financial help, taxation, education, and development.

While many cities compete for talented professionals, Huang said that this may not be such a big problem for Xi'an.

The city has the third largest number of universities in China with a total of 800, 000 students.

(China Daily 11/04/2005 page10)