The Landscape Today
Automation, government, health care, insurance, logistics, retail and telecom are some industry verticals that are currently using BPO services from China. BPO providers in China provide a range of services from order taking, telemarketing, mortgage, call-center services and claims processing (See Table for more).
In this run, various operating models are emerging in China. Many global and Indian providers support the China operations of their customers and supplement their global delivery capabilities with their China resources. There are also many Asia-Pacific regional deals where the provider companies are using China as the main delivery center while supporting customers from other regional delivery centers. The global players make use of service level-based offshore outsourcing, and most of them have been servicing their key customers for the past couple of years as they continue to service them with their standard global delivery model. Not only this, many local deals are also being executed by local providers who provide a range of models from the basic build-operate-transfer model to full outsourced model.

China’s BPO market is concentrated around Dalian as the center, and major cities such as Beijing, Shanghai, Guangzhou, and Shenzhen as the main nodes. The new cities coming up as secondary alternatives include Chengdu, Xi’an, Changchun, Tianjin and Suzhou.

Global MNCs such as Accenture, Dell, SAP and Braxton are among the host of companies that are already running their BPO centers from China’s BPO hub, Dalian. IBM, too, opened its BPO center in Dalian in May ’06, with an initial target to hire 600 people. The number has already crossed 1,000! Indian BPO provider Genpact is another company that has close to 2,500 people in Dalian.

Being the financial capital of China, Shanghai houses most global financial-services companies. All such companies have been present in China for a long time, and now have Shanghai as their hub for contact-center and back-office processing needs. As China headquarters for most global manufacturing companies, Beijing is also a key location for providing BPO services. The majority of voice-based BPO services are provided from cities such as Shenzhen and Guangzhou.

Presence in other alternative locations, in order to mitigate the saturation risk, is coming up as an integral component of the long-term strategy for many key BPO service providers. In line with this strategy, IBM has recently opened a center in Chengdu and Genpact in Changchun. Cities such as Chengdu, Xi’an, Tianjin, Suzhou and Changchun are gaining popularity as companies are looking out for more resources and cost effectiveness. For instance, the labor cost for running a BPO business in Chengdu is about 30 percent lower compared to major cities of Beijing and Shanghai. In addition, the attrition rate in these big cities is more than 30 percent while that in Chengdu is about 5 percent.

ITO Vs. BPO
Big global players such as Accenture, Capgemini, Genpact and IBM have mature capabilities in China, and usually focus on functions such as finance and accounting, supply chain management, customer services and marketing. On the other hand, Indian players such as TCS, Infosys and Wipro are very small in terms of their scale of operations.

Chinese service providers can also be categorized in two broad categories: Those with an IT focus (Neusoft, Worksoft, iSoftstone, Freeborders); and the pure-play BPO companies (CDG, 95Teleweb, CompuPacific). The IT-focused Chinese providers largely engage in data-center, contact-center and administrative back-office operations. The pure-play Chinese BPO companies, on the other hand, focus on multilanguage data entry, application processing for insurance and the credit-card industry.

It is expected that the rate of growth for BPO in China will be much faster than IT outsouricng. This can be attributed to the base of customers and capabilities that the relatively new BPO industry has inherited from the IT outsourcing industry. The demand for BPO in China will continue to grow given the burgeoning growth in the region. Moreover, China offers multiple regional-language support to the surrounding customer markets, which set it apart. The service-provider community is slowly realizing the importance of BPO, as many global and regional providers are now ramping up operations and many Chinese IT companies are now offering BPO services. This coupled with extensive government support will enable the BPO industry to grow much faster in the next few years.

Sridhar has spent several years in China, advising companies on sourcing IT and BPO services from there, and is now Director, Global Sourcing at EquaTerra’s London office. Vibhash is a consultant, global sourcing with EquaTerra. He is based in Shanghai and understands the current outsourcing market trends in the Asia-Pac region.

Services sourced from China BPOs
Sector										Functions
Automotive										Order taking, telemarketing
Financial services										Credit card, mortgage, loan, lockbox processing, information validation
Government										Mortgage, deeds, birth/death, school records
Health care										Claims & enrollment processing, explanation of benefits
Insurance										Customer services, new application
Logistics										Call center, back office
Retail										Purchase to pay, order to cash
Telecom										Technical processing, e-mail support
Transportation										Technical processing, e-mail support
Source: china-sourcing.org.cn; Figures are based on market estimates