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China still safe for IT outsourcing, despite US security concerns, says vendor

Michael Kan | May 15, 2013
Pactera is one of China's largest IT outsourcing vendors.

"These Chinese outsourcing companies have been around for 10, 15 years or more," said Tina Tang, an analyst with research firm Gartner. "They've been following the Western companies' standards, so I don't think security would be a problem."

China's outsourcing vendors, however, still lag behind their Indian counterparts in terms of scale. One of India's largest vendors, Infosys, has over 150,000 employees, with an annual revenue at US$7.4 billion. Pactera, in comparison, has only over 23,000 workers, and an annual revenue at US$360 million. In addition, the country's outsourcing vendors are facing China's rising labor costs, along with a depreciating U.S. currency.

It's why the Chinese companies such as Pactera want to wean themselves from low-cost outsourcing, and move toward developing their own more profitable enterprise services and products for customers. Currently, it receives about 70 percent of its revenue from outsourcing, with the rest coming from consulting and products.

"If we can become successful, I think we can definitely become a leading service provider in China," Su said. "That will be the challenge for the next two or three years."

 

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