China Business

China’s "Next" Top Ten Cities For IT Outsourcing

China IT outsourcing

Alsbridge Consulting, a Dallas, Texas, based consulting company that describes itself as an “award winning outsourcing, offshoring and shared services advisory firm, just came out with its list of “China’s Next Top Ten Cities for IT Outsourcing.” Alsbridge’s press release regarding this list says these ten Chinese cities were selected “based on accessibility, population, education, resources and economic stability.

These attributes complement the notion that China offers a wealth of outsourcing promise and that the larger cities such as Dalian, Hong Kong and Shanghai are not the country’s only outsourcing hubs.” To see the full report, click here [link no longer exists]

In alphabetical order, these ten “next” cities are, as follows:

  • Chengdu
  • Dalian
  • Guangzhou
  • Hangzhou
  • Jinan
  • Nanjing
  • Shenzhen
  • Tianjin
  • Wuhan
  • Xi’an

If you ask me, this list is quite strange in that it is missing both Shanghai and, most importantly, Beijing. I guess we are to assume both cities are in today’s top ten cities for IT outsourcing and this list is just the “next ten.” But if that is the case, why is Dalian on the list when Alsbridge specifically says this list is meant to go beyond cities like “Dalian”? I cannot even imagine what other eight cities round out the present top ten (beyond Shanghai and Beijing), especially if Dalian is not on this list.

Can anyone help me out here?

30 responses to “China’s "Next" Top Ten Cities For IT Outsourcing”

  1. There is a dearth of really good programmers here in S.China. Macau has sucked many via huge casino salaries.
    My money is on tiny Zhuhai (where several Key Universities Zhongshan, Beijing Normal…)are setting up shop and attracting a huge number of students to fill mass vacancies in the market….

  2. Beijing, and more so Shanghai, are getting too expensive. Quite close to India prices these days. I used to work for a Beijing-based software outsourcing company and we were working on setting up a Tier-2 center, either Xi’an or Chengdu. Companies who remain solely in Beijing or Shanghai cannot compete for long against the Indians. Period.
    And yeah, I also have no idea what the other 8 would be…. Maybe its “Next 10 after the current top 2”.

  3. Hi…thanks for the trackback.
    The news release clearly states: “….these attributes complement the notion that China offers a wealth of outsourcing promise and that the larger cities such as Beijing, Dalian, Hong Kong and Shanghai are not the country’s only outsourcing hubs…” so we did not leave out these cities. We were pointing to the next top ten.

  4. Shanghai and Beijing are not “missing” from the list.
    The news release clearly states that “…these attributes complement the notion that China offers a wealth of outsourcing promise and that the larger cities such as Beijing, Dalian, Hong Kong and Shanghai are not the country?s only outsourcing hubs…”
    We were pointing to what our research indicated as being the next top ten cities.

  5. Skipping through this entry the first time around, I found it strange that you asked for a list of TEN of the current top destinations. Could just be the current top two and the next ten. After going back to examine the grammar of “next top ten cities”, I wasn’t so sure any more.
    If translated into Chinese though, it would mean something like “the top ten cities in the next rounds of IT outsourcing”, and won’t beg a list of ten in the previous rounds.
    hehe, dunno if twisting the grammar is a possible way of explaining it.

  6. Lonnie —
    Good pick, but for which list, the old or the next ten? Certainly Zhuhai belongs on one, but it has been fairly well known for some time. Maybe we should take Dalian off the “next” list and replace it with Zhuhai, figuring Dalian clearly belongs on yesterday’s top ten list, along with Beijing and Shanghai.

  7. Chris —
    Yes, of course, Shanghai and Beijing are expensive and, yes, of course, companies are going to move outside these two cities to save money (Chengdu seems to be the most often mentioned these days), but I still see Shanghai and Beijing contining to rapidly grow this business, particularly Beijing, and particularly on the high end.

  8. Chris —
    That would appear to be what it is, but then should not Dalian, for instance, have been on the prior list, making it 3? I mean, everyone knows Dalian is an IT center and even Alsbridge told us this next list would go beyond “Dalian.” And how are we supposed to know how many and which cities constitute China’s present?

  9. Mr. Weinkrantz —
    What you say still does not make sense and here’s why. The press release talks about this list going beyond Shanghai, Beijing and Dalian, yet it mentions Dalian. So why not Shanghai and Beijing? Mentioning Dalian without mentioning Shanghai and Beijing implies Dalian is both part of China IT’s past and its future, but Shanghai and Beijing are just a part of its past.
    But let’s assume Beijing and Shanghai are on the present top ten list and therefore do not qualify for the next top ten list, then the question becomes what other cities are on the top ten list of which Beijing and Shanghai are a part?
    Also, you say this list left off “larger cities such as Beijing, Dalian, Hong Kong and Shanghai,” but many (most?) of the cities on the list are larger than Dalian, so small size does not appear even to have been a criteria. Was it?

  10. Handan —
    Yes, you might be right to read this as not requiring a list of the present top ten, but then shouldn’t we be told what cities other than Shanghai and Beijing were intentionally left off this list as having already arrived. I mean, Alsbridge mentions Dalian in the same list as Shanghai and Beijing (I am guessing this is the already arrived list) but then puts it in the top ten. And, anyway, does anyone really think Beijing will not be one of China’s top ten IT outsourcing cities next year, five years from now and ten years from now?

  11. It’s interesting to see Guangzhou and Shenzhen on the “next” top 10 list since both cities already have higher per-capita income then either Shanghai or Beijing. Programmers in those cities can’t be cheap. Moreover, Shenzhen are home to the leading domestic tech companies such as Huawei, ZTE, Tencent (QQ) and tons of other promising Internet startups. How do “outsourcing” house competing with those for talent? Jobs at Hwawei, ZTE or Tencent can’t pay worse then an ITO house and are definitely much more interesting.

  12. David Li —
    I concur and that’s my point. If you are going to leave Beijing and Shanghai off this list, others should be taken off as well. I do not understand the criteria. At all. I mean, certainly the idea of Shenzhen isn’t new to anyone, right?

  13. Since Chengdu has made the list, I must nominate my hometown and Chengdu’s arch rival, Chongqing. Even though Chongqing is probably consider more in the context of manufacturing, it has its share of excellent colleges and universities. I always thought Chongqing had better universities than Chengdu but my opinion might be biased since my dad use to teach at the University of Chongqing before he came to the United States 🙂 During World War II, most universities in China (or I should say their staff) relocated to Chongqing to escape Japanese occupation since Chongqing was the war time capital of China at the time. IMHO, (disclaimer, I last visited in 2001) Chongqing is probably the most cosmopolitan city in Southwestern China, making it more IT city (pun intended) than Chengdu. Another trait that could attract and keep talented young peeps. I will stop before headhunters from Chongqing tourism bureau start to make me an offer I couldn’t refuse.

  14. Plus I am sure the wage in Chongqing is lower than Zhuhai and Shenzhen. That’s probably why many of my sister’s high school classmates in China (from Chongqing) are now working in IT sector in Shenzhen.

  15. I forgot about Dalian. Good point. however, Dalian has been known to be rich in Japanese speaking talent thus primarily serving the Japanese market. Dalian is growing rapidly in price as well. First of all, Dalian doesn’t pump out as many CS grads as Beijing, Xi’an, Chengdu, etc. So the tech talent is limited (although still far greater than other cities such as Xiamen which has a large Dell presence).
    Someone earlier mentioned Hong Kong being a hub for outsourcing. Well, ok, maybe for the high level tech talent, but you cna forget about getting a crazy deal pricewise. Prob. still cheaper than the U.S. though.
    A big problem I see with mainland china is the supply of upper-level tech talent. Extreremely limited! This was a constant problem we had dealing with our overseas customers. We had no problem putting developers on projects, many of whom have limited, at best, English skills. But once the customer wanted near-fluent speakers, developers with 8+ years experience, forget it! This is Beijing, mind you. For those people, we have to compete with Microsoft, IBM, etc. Companies with deep pockets. We could easily adjust our rates, but then our customers would bock and say “isn’t this China?!”

  16. Good point, I forgot about Dalian.
    Dalian has traditionally served the Japanese market due to the relatively high level of Japanese proficiency. However, Dalian has challenges:
    1. Dalian doesn’t produce that many tech graduates as say, Beijing, Xi’an, Chengdu, etc. So the supply, while growing, is limited. Yes, you do have people from other cities migrating there to fill many of the jobs, but probably not fast enough.
    2. Dalian is getting expensive. Its hot. It attracts talent. But with supply/demand, companies need more than there are, so prices are growing quickly.
    3. Most of the work is Japan related. I assume everyone here knows the China-Japan issues? Many people I have interviewed (developers) who came from either Japanese companies or companies serving Japanese clients told me point blank the reason they left their previous company was due to the Japanese link.
    Crazy.

  17. Dan, since you’ve asked me to comment, I have.
    Quick background for your readers: I have a unique perspective as the only laowei who has been a VP in the two largest U.S.-focused, China-based ITO firms, Worksoft and Beyondsoft. I also covered solution providers and ITO when I was VP, E-Business Strategies at the META Group (now owned by Gartner). And I’m currently SVP with the outsourcing hub for Tsinghua University. Held senior positions, too, with Oracle (Director, E-Business), Samsung (Director, Strategic Planning) and Microsoft (Manager, New Markets). OK, so I’ve spelled out my credentials. Oh, forgot to mention that I’ve visited over 100 ITO firms in China based in 20+ cities over the past 3+ years that I’ve lived in China (and I still live here). Dan (and David Li), you know this stuff about me, but some of the other readers may not.
    First, sounds like Alsbridge should contact me; I’m sure I can help them expand their presence in this market, effectively taking on Gartner, Forrester, IDC and neoIT.
    Second, now to the list. I’ll clarify the discussion and simply list the top thirteen and we can take it from there.
    The Top 13: Beijing, Shanghai, Shenzhen, Dalian, Xi’an, Hangzhou, Suzhou, Nanjing, Wuhan, Chengdu, Zhuhai, Tianjin, Guangzhou.
    BTW, I produced this list without looking at the report. I’m now taking a look at the report.
    Wow, we’re pretty much in total agreement!! Jinan is an interesting choice. I put Suzhou ahead of Jinan, but it really depends on what one needs. I’d still give a slight edge to Suzhou. Also, Jinan is better than Zhuhai in some areas, too.
    What’s a little bit silly is that a better list would be: Beijing, Shanghai, Shenzhen (the undisputed top three); Xi’an, Wuhan, Chengdu (the up-and-coming); all other cities have their quirky advantages, but I generally wouldn’t consider them. Even Dalian falls into this category since English-language skills in Dalian are awful, i.e., Dalian is best for servicing Japanese clients (Qingdao can better serve Korean clients).
    But even this is misleading. Let’s face it, China is about manual software testing and localization/globalization. That’s it, folks!! Yes, Augmentum can do software development, Freeborders can do apps integration, but let’s not play a game of statistical outliers. In general, Chinese firms are stuck in the bottom end of the IT food chain — and the gap between Chinese firms and Indian firms is increasing, not decreasing. I’ll repeat, the gap is WIDENING.
    It’s also an embedded versus enterprise game. In the enterprise space, China is extremely weak. However, China is very good in the embedded space, better than India in general — and it’s the only area where China has a chance for software development work. Again, we can talk statistical outliers (Sinocom, iSoftStone, Wicresoft), but in general China is much, much better — and much, much more competitive — in the embedded sector.
    There’s also reality. Dealing with reality is a good thing. Fact is, many/most potential American clients would rather work with firms based in Shanghai or Beijing. Gee, what a surprise!! Let’s face it, perception matters more than reality. So it’s often best to look for a firm in BJ or SH, but with satellite operations in a Tier 2 or 3 city like Xi’an.
    Regarding rates in BJ and SH versus India, it’s true that rates in BJ and SH are about equal to Tier 2 Indian cities, but they’re still cheaper than Bangalore or Mumbai. But this is like splitting hairs since the rates are not significantly different on a comparable size basis. In other words, a Worksoft with 2,000 versus an Indian firm with 2,000 in Bangalore. OK, that’s a bad example. For as goofy as Worksoft is (and it’s an extremely goofy company), it’s also a cost leadership-based company and can usually win on price. Take Beyondsoft. At about 1,000 in headcount, Beyondsoft’s pricing may not be much lower than a 1,000 person Bangalore-based solution provider. However, I’d suspect that the blended rates from a Beyondsoft would be slightly lower than a comparable Indian firm. But only slightly lower, probably not worth the risk to go with BYS (that’s the acronym they use internally). Alas, life isn’t this simple. Keep reading.
    Remember, it also depends who the client is. Most of the work being done for U.S. firms is being done for ISVs (i.e., software vendors). Their requirements are different than end users. China can’t service end users; an end user in the States needs quick response time and Chinese firms often need months to get visas for their engineers. None of the pure play China-based firms can really provide timely service for U.S. customers. (One exception: Darwin, although I think they’re one of the goofiest companies in the industry, even goofier than Worksoft. Doomed to fail, IMHO, whereas Worksoft will continue to grow in the manual testing/localization part of the IT services value chain.) Remember, I said pure play. Augmentum, Achievo, Freeborders: They’re U.S.-based firms doing most of their development in China. They play by different rules, as do we at Startech. As U.S. headquartered companies, all of us can provide timely service.
    Also remember that U.S. ISVs may have no other choice but to do some development work in China, either as a captive operation (think Oracle) or as a blended operation (think Microsoft), the blended operation doing some work internally combined with a lot of outsourced work.
    Finally, what’s most important is the company, NOT the location of the company. I could make a stronger case for location if it were high-end development, but since little of this is done in China, it’s less of an issue. Focus on the best companies to work with, NOT the best location.
    Not-so-short list:
    Augmentum, Achievo, Freeborders, Startech, Worksoft, Beyondsoft, Neusoft, DHC, iSoftStone, HiSoft. Quite a mix, trust me. Anyway, it’s really a short list since Neusoft and Worksoft should NOT really be in a competitive bid. Worksoft shouldn’t be competing against Augmentum, either, although this sometimes happens (especially since both share Microsoft as a key account).
    For BPO with any sort of English-language slant, Roc Yang has the only viable option. He hypes about BPO capabilities in China, but his firm does have an excellent reputation. Xi’an hypes their location, but they’re really pretty good at BPO, as is Dalian (for Japanese clients).
    Hope this helps. Dan, I’ll do the guest posts as you have requested, expanding upon the ideas that I’ve presented in this post. Warning: I’ll probably cross-post them to my “Letter from China” columns for the Sand Hill Group and AlwaysOn Network.
    letterfromchina a+ sandhill d-t c-m

  18. How come Shenyang isn’t mentioned. Shenyang’s city logo should be “not as shitty a place as it was 10 years ago!” and it would be completely true!
    Not sure how well it would be for IT outsourcing requiring a high command of English, but for other R&D purposes I think Shenyang would be pretty good. A little overlooked tidbit, but second tier cities home to major military-industrial complexes generally have a lot of talent to draw upon from spillover.

  19. China: Next Big Cities for IT Outsourcing
    “…why is Dalian on the list…?” Only old China hand Dan Harris of China Law Blog is both knowledgeable and sophisticated enough to spot a recent list of the “next” top 10 cities for IT outsourcing in China, post it…

  20. China: Next Big Cities for IT Outsourcing
    “…why is Dalian on the list…?” Only old China hand Dan Harris of China Law Blog is both knowledgeable and sophisticated enough to spot a recent list of the “next” top 10 cities for IT outsourcing in China, post it…

  21. China’s Top Ten IT Outsourcing Centers (give or take a couple)
    China Law Blog has an excellent comment thread on the top ten up-and-coming IT Outsourcing cities in China. Don’t miss it if you’re looking for insights into how China’s development as a Knowledge Economy is developing, and where its IT

  22. China: Next Big Cities for IT Outsourcing
    “…why is Dalian on the list…?” Only old China hand Dan Harris of China Law Blog is both knowledgeable and sophisticated enough to spot a recent list of the “next” top 10 cities for IT outsourcing in China, post it…

  23. In discussing Dalian, don’t neglect the fact that its position in all maritime areas, including shipbuilding and port services, is very important for northeast China. Adding to impressive capacity already there, Kawasaki Heavy Industries and COSCO recently signed a huge shipyard construction deal. Dalian has also tried to position itself as the most logical port for exports from Manchuria. The Dalian Maritime University is also an academic powerhouse in the region.

  24. Haha, just because chinalawblog spotted the error they threw out Dalian and added Shenyang, which was in a comment here in the blog. I love incompetent companies 😀

  25. China Versus India: Hefei as Silicon Valley
    Came upon an excellent article in Prospect Magazine, thanks to the China Bystander’s post entitled, “Getting Off The Bottom Rung In India And China.” China Bystander had this to say on the article, itself entitled, “The Silicon Valley of China”: Here i…

  26. The funny thing about this list is that I thought it was pretty flawed when it came out, but I think it is looking pretty good now.

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