Shanghai software companies are embracing an increasing amount of outsourcing orders as overseas technology giants recognize the city's strength in talent and relatively lower costs.

"The city's software outsourcing industry has taken off in the past few years and its growing strengths have persuaded many multinationals to shift orders here from former star countries like India and Ireland," said Song Jinbiao, director of the technology import and export department at Shanghai Foreign Economic Relations and Trade Commission.

He made the remark as the city announced yesterday it is hosting the Global IT Outsourcing Summit 2003 from October 14 to 15. About a dozen executives from information technology giants such as NEC Corp, Tata Group, Microsoft Corp and NTT Data will give keynote speeches at the event.

As of the end of last year, Shanghai had 1,207 major software companies with revenue totaling 11.7 billion yuan (US$1.4 billion).

Software exports were valued at US$175 million last year, nearly 2.4 times more than that of 2000. They accounted for about 12 percent of the country's total.

"The majority of the exports are out-sourcing projects from overseas," Song said.

Shanghai's software is mainly exported to Japan, Europe, the United States and regions of Hong Kong and Taiwan. So far, Japanese companies such as NEC and Fujitsu have set up sub-contract centers in the city. They are responsible for passing the orders to Shanghai's software exporters.

In addition, Microsoft Corp and Hewlett-Packard have set up global software research and development centers in the city, while Ericsson AB has opened a teleco-munications software research and development center.

Indian software giants National Institution Information Technology - better known as NIIT - Tata and Infosys have also set up businesses locally, laying a solid base for Shanghai's software outsourcing industry.

Wang Deming, president of Shanghai Venus Software Ltd, a local company which mainly targets the Japanese outsourcing market, said its export business witnessed a noticeable rise last year.

"The company's clients such as NTT Data and NEC have shifted a big part of their orders from India to China," he said. "Japan's sagging economy has also pushed them to outsource orders to lower-cost markets such as China."

Wang's company, which employs about 500 people, has enjoyed an average 20 percent growth in export orders since the early 1990s.

Last year, it sold US$4 million worth of orders to Japan. Wang expects the figure to jump by 50 percent to reach US$6 million this year.

"Compared with India, China has advantages in language, location and a lower cost of software engineers," he said.

Companies have to pay, on average, US$3,000-US$4,000 to each Indian engineer per month, while their Chinese counterpart costs US$2,000-US$3,000.

Last year, Shanghai also had 86 IT companies with more than US$500,000 in software exports, 22 more than in 2001.

(Shanghai Daily September 20, 2003)