Chinese Companies Should Seize Post-Earthquake Opportunities

Published:2011/6/28 2:39:00 Author:Phyllis From:SeekIC

Major Chinese software outsourcing companies said that he impact of Japan’s March earthquake has been largely diminished with staffs returning to normal work and suspended projects being restarted. The Japan earthquake and tsunami affected these companies seriously as many outsourcing projects can not function well due to the the nuclear radiation leaked and troubled facilities around quake zones.

The impact is not as serious as expected and all the delayed outsourcing projects can get restarted now, according to the research company CCID Consulting. The third largest software outsourcing company said that about 400 of its employees in Japan have been back to work after temporarily interruption. China’s biggest software outsourcing company said their growth rate would be higher if the earthquake had not occurred but its effect was not too negative for them.

The Japanese government’s reconstruction investment may take outsourcing opportunities to areas that are not belong to the current companies whose 80% of business came from Japan last year with 120 million dollars transaction volume. So, there will be uncertainties in the next two years. Hi-Think is trying to further explore other markets to reduce risks. Like domestic business, for example, to take up 30 to 40 percent of the company’s total revenues next year.

Japan is the largest software-outsourcing destination for China. Although Japan’s contribution to the total business has fallen from 70 percent at its peak to 40 percent at present, it remains a major market for the country’s outsourcing companies. What matters is opportunity that appears since clients are changing their strategies after the earthquake. After the disaster many Japanese companies were considering outsourcing more of their non-core operation or moving them to other countries to reduce risk.

The earthquake caused great losses in many Chinese companies in the first quarter. Moving forward actually is a question of whether Chinese outsourcing companies can grab opportunities. According to market research company International Data Corporation (IDC), the growth rate of the offshore software development business from Japan is expected to reduce 4 to 5 percentage points this year because of the earthquake. Annual growth rate is expected to be about 8 percent. And companies that have long, stable relations with clients and whose services touch clients’ core business will not be easily affected by the earthquake, while those providing low-end outsourcing services will suffer more.

The demand resulting from the reconstruction will begin to appear in 2012, reaching its peak around 2013, and then experiencing a steady phase afterwards. Companies providing outsourcing services in the transportation and manufacturing industries, which were damaged in the disaster, will have more opportunities. The related integrated circuit is MA795.

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