China software outsourcing overtakes India opportunity

Author: Wu Wei at the end of 2007, the New York stock market.　　At that time, Citigroup and Merrill Lynch two big investment banks at low prices to share 114 Nothing 750,000 shares preemptive rights, the Chinese service Outsourcing enterprises listed overseas listing "first" model. A year later, the global outsourcing industry was greatly affected by the international financial crisis, according to data from the consultancy firm McKinsey, which showed that in January 2008 ~ September, Global outsourcing in the financial sector fell by 7 billion U.S. dollars, down nearly 40%, compared with 2007. Although China's software outsourcing industry has also experienced a revaluation of the renminbi, labor costs rise, the number of orders to reduce the number of tests, while the innovative still has a good performance, the first quarter of 2009, its main business income of 30.1 million U.S. dollars, the year-on-year growth of 46.8%.　　Enough money to let the innovation began the trend of the contrarian buy the journey. Recently, the company announced that it would acquire a subsidiary of the East Cypress Group, which is headquartered in Hong Kong, China, operating its CRM software business.　　In the current economic environment, Evans Innovation this contrarian takeover, for China's software outsourcing industry and what does it mean?　　The deal, Stone, wrote in a press release published by Evans, that the acquisition, which will pay about $1.1 million in cash to the East Cypress Group in the early stages of the takeover, will depend on the specific market performance of the East Cypress Group for the next 18-30 months. For the innovation of Evans, this way of buying bets is obviously a good choice. According to industry personage analysis, this kind of acquisition method, for the acquirer, obviously is stone.　　First of all, Evans Innovation does not have to pay a large amount of cash, this will not have a big impact on the cash flow of the enterprise itself, for the current operating conditions will not have any negative impact, but also have the East Cypress Group 100% of the controlling power. Second, the recent economic situation, although there are some positive signs, but the prospects for recovery is still unclear, which also brings many uncertainties to the future development of enterprises, as the acquisition of Evans Innovation, it is also impossible to predict all the uncertainties of the future, moreover,　　There is an inherent problem of asymmetric information between the investors and the management of the invested enterprise, once the company's business development is not as good as the expected innovation, Evans Innovation can terminate the cooperation between the two, or at a lower price to complete the acquisition, which for the creative, the need to assume less risk. Again, there is no one-time completion of the acquisition of the premise, the East Cypress group if you want to obtain a higher price, it means that it will have to maintain good performance and development space in the future, which to some extent stimulated the existing managers and employees of the East Cypress group enthusiasm.　　It is expected that in the first 5 months ended May 31, 2009, the East Cypress group revenue of about 3.9 million U.S. dollars, and the current mode of cooperation, but also to help the East Cypress group to obtain the funds needed for development. Again, the East Cypress Group is mainly engaged in CRM softTo develop and provide enterprise call center services, it is understood that the East Cypress group authorized to install more than 25,000 CRM software, customers, including telecommunications operators, financial services providers and government agencies, etc., once a one-time acquisition, the quality of these enterprise follow-up services will be difficult to ensure that, as a writer of innovation,　　Information is the focus of its future development, and the acquisition of gambling, that is, to help keep the original customers, but also let them better understand the market, it is understood that at present, the East Cypress Group has staff to the creative work of Evans.　　Finally, if the East Cypress group in the future has a good performance, although the innovation may need to pay a higher purchase price, but through the improvement of corporate performance, Evans Innovative harvest of customers and operating income will be far beyond the cost of the acquisition, for the Evans Innovation is also a cost-effective deal. Mergers, acquisitions and acquisitions have always been labor-intensive industries in the IT field.　　Compared with other enterprises, the large scale of outsourcing enterprises not only means that the overall operating costs can be reduced, but also represents the improvement of the capacity of enterprises to operate large projects, and mergers are an inevitable means of expanding the scale of enterprises. India's outsourcing companies have developed so quickly that mergers and acquisitions are an extremely important tool. In 2004, for example, Tata Consultancy in India acquired the Australian FNS Company to refine its banking and financial services outsourcing product line, and in 2006 bought Tksteknosoft companies in Switzerland and France to further enhance financial services capabilities while speeding up the European market; October 2008, It also announced the acquisition of US Citigroup's outsourcing business in India with 5 nothing 500 million dollars.　　And for China's software outsourcing enterprises, the biggest trouble is the size of enterprises, small enterprises in the international market, the competitiveness is relatively weak. But with investment and mergers in recent years, China's outsourcing firms are growing in size.　　Evans Innovation is a typical example of expanding the size of an enterprise through mergers and acquisitions. At the end of 2007, with the IPO of the NYSE, a total of $65 million was raised, and at the time, it had said that part of the listing would be used to buy potential rivals. Small and fragmented companies have been the pain of China's outsourcing companies. In the Spring Festival of 2004, Evans was given a $40 million trillion in venture capital, and it embarked on a series of mergers and acquisitions after it got the investors ' money.　　October 2005, Evans acquired the Union letter Yong Yi International Business, September 2006 merger Broad Affirmative, and the subsequent years, Evans Innovation has not put down the pace of acquisition, Evans Innovative Wuhan branch is its previous acquisition of a small company. Acquisition is a simple means of making capital into productive force, and also an important reason for the sharp expansion of the staff of Evans.　　Evans's turnover jumped from around 100 million yuan in 2004 to more than $100 million in 2008, and the number of people from 1200 in 2005 increased sharply to more than 5,000 in 2009.Whether it is possible to seize the food in March this year, Huaxin and Neusoft China software outsourcing industry "first case" after the announcement of miscarriage, many people are sorry, China's software outsourcing companies when the Indian outsourcing enterprises there to eat the food has become a lot of people in the hearts of doubt.　　So, while India's software outsourcing companies have been hit hard by the financial crisis, China's outsourcing companies have the opportunity to seize the food, so that the outsourcing business to the big one? When it comes to this, experts in software outsourcing companies are cautious and optimistic. At present, China's software outsourcing enterprises and India's outsourcing enterprises are the main target of the European and American markets, and according to Beijing Service Outsourcing Enterprise Association director Chiling said that China's software outsourcing business can be divided into two parts, one is from the U.S. enterprises to obtain direct orders Second, the orders from the U.S. companies from China to transfer to the Chinese enterprises to complete. While direct orders from US companies may be affected by some degree of economic decline, China is now the only country in the world with better economic growth, so transfer orders from China may increase next year. On the other hand, one of the determinants of software outsourcing is labor costs. According to industry experts, at present, the average wage of China's outsourcing personnel is about 40% of India, and China's software talent reserves to a certain extent relatively sufficient stability, is a huge advantage.　　In the past few years, 70% of European and American outsourcing orders in India, the situation will inevitably change, as the budget is tight there will be more European and American orders came to China. But for Chinese software outsourcing companies, it is also worth considering whether they can swallow these orders. Citigroup, for example, may need 50,000 of people to outsource a project, but China does not have such a large business, so such projects are generally in the pockets of Indian outsourcing giants. In addition to scale, more critical is the technical capacity of enterprises, because of technical reasons, China's software outsourcing enterprises more emphasis on the low-end market competition, and high-end market has been India's outsourcing enterprises, but at present, this phenomenon has eased,　　The innovative TIBBCO research and development Center has been seen as an excellent example of a tiger's prey, and this year, after news of the Sati Yang financial scandal, its European and American clients have turned to Evans for innovation. In addition to the competition in Europe and the United States, outsourcing enterprises in China's domestic market competition is also very fierce. According to McKinsey, in 2008, China's total IT services spending accounted for only 0 of GDP. Nothing 2% while India is 0? Nothing 5%, Korea is 1? Nothing 3%, Japan is 1? Nothing 8%, the United States is close to 2%, Britain is even 3%, China is far lower than other countries, China's domestic potential contract enterprises are often accustomed to their own dry, the failure to provide business to professional service providers, which means China has a broad domestic demand market, is expected in the next few years from the government and the domestic large and medium-sized enterprises will increase the amount of the contract in a short period of time, which will help the service outsourcing enterprises to obtain stableOrder。 According to industry sources, some Indian outsourcing companies are secretly acquiring China's small and medium-sized outsourcing enterprises, currently only Shanghai has been acquired by more than 40 companies.　　Compared to Indian outsourcing companies, China's software outsourcing companies to the domestic market understanding and language advantages, will open up the domestic market to win the opportunity. ———————————— Analyst View ———————————— The international financial crisis is dangerous to China's software outsourcing industry in 2008 for the software outsourcing sector is more "sad" year, the appreciation of the renminbi, labor costs rise, The US financial crisis, and so on, has just begun to flourish in the shadow of the industry has become more and more thick.　　According to the latest statistics released by Sadie consultants, the growth rate of China's software outsourcing service industry in 2008 will drop below 30% from 40% in the first 3 years, with a market size of 2.58 billion dollars.　　Over the past 3 years, in the field of software outsourcing, there are a lot of mergers and financing events. But since the 2008, due to the appreciation of the renminbi and the international financial crisis led to a decline in external demand, software outsourcing enterprises generally put their energies into the consolidation of old customers and open up new markets, for the expansion of investment is cautious.　　Therefore, China's software outsourcing enterprises in the 2008, the phenomenon of mergers and acquisitions significantly reduced, from the point of view of financing, the 2008 capital market downward oscillation, the process of listing enterprises is difficult and slow, for the investment recovery period of concern also makes the venture capital for including software outsourcing in many areas of interest also greatly weakened　　The impact of the international financial crisis on China's software outsourcing industry can be divided into several aspects. First, due to the international financial crisis caused by the reduction of outsourcing orders, but the main battlefield of China's software outsourcing in Japan, and Chinese service providers are engaged in more decentralized services, the impact will be much smaller than India.　　About 61% of India's software revenues come from the US, about 30% from the financial sector, and about 58% of the top five companies in India's software industry come from the US.　　The second is affected by the international financial crisis, foreign companies in order to further reduce the cost of the need to expand the scope of outsourcing to some extent; and because of the impact of India, some orders to India will be transferred to China. Third, in the international financial crisis, China's economy showed a relatively large elasticity, in particular, China's ten measures to stimulate the economy, as well as the "industrialization and information integration" and "rural informatization" and other strategic background, the Chinese market for multinational companies to become more attractive destinations, multinational companies will further increase investment in the Chinese market　　To strengthen cooperation with Chinese enterprises and governments, including in the field of software outsourcing. Four is under the influence of international economic situation, and the RMB appreciation causes the outsourcing business profit margin to reduce, software outsourcing enterprises will pay attention to and vigorously develop domestic and foreign package business, in order to improve the ability to resist risk.