With 18 daily flights from Beijing, only an hour away by air, Dalian airport is a mere ten minutes from the centre of the Pacific coast city it serves. Dalian is home to 620 computer companies – 230 of which are foreign – employing a total of 40,000 people. “Back in 1998, it was a small town,” says Cabell Chen, Commercial Director of Dalian Software Park (DLSP), the private operator of this Chinese version of Silicon Valley. “Dalian has 6 million inhabitants, 26 universities and institutes of technology, and 810,000 students. There are 31,000 computer science graduates every year.” Almost as many as in Bangalore, the city’s great Indian rival.
And, just like the capital of Karnataka, Dalian earned its export spurs in the 1990s thanks to Business Process Outsourcing. Working for major international companies, this “offshore” industry outsources functions (or processes) such as accounting, salaries, invoicing, customer service and IT maintenance for specialist firms. Dalian’s big draw: salary costs are substantially lower than in India. “In India, an employee starting out in BPO takes home 225 dollars per month,” explains Ronnie Sengupta, Managing Director of Type-I, an Indian BPO company based in Mumbai. In Dalian, the same entry-level worker would earn 100 dollars per month. Furthermore, the salaries of Indian BPO people and IT workers are increasing at a rate of 15-20% per year. Worse, the turnover of Indian personnel – referred to as “attrition” – varies from 25% to 50% per year. For their part, the official Chinese authorities claim that salaries are increasing at an annual rate of between 5% and 10%, with an attrition rate of 12%.
Salaries are 60% lower than in Japan
CSK, Hitachi, Mitsubishi, NTT, NEC, Omron, Panasonic and Ricoh… These are just some of the major Japanese and South Korean companies who have become involved in this offshore market. “100,000 people speak Japanese fluently,” says Cabell Chen. In 1999, IT services stepped up a gear with the development of software applications (40% of people currently employed in China’s Silicon Valley), followed by the development of embedded computing (10%) and the outsourcing of R&D programmes (5%). CAO (computer-assisted design) services are also outsourced. “Here, salaries are 60% lower than in Japan,” says Mika Koguchi, Managing Director of the Japanese company Transcosmos Design Development’s Dalian-based subsidiary, which provides CAO services for Japanese architects specialising in houses and villas.
However, the fact remains that the Chinese computer “champions” employ no more than 10,000 people, 3 to 8 times fewer than Indian firms like TCS, Infosys, Wipro and Satyam. “Dalian began 30 or 40 years later than India,” says Mason, Managing Director of iSoftStone, which develops software for clients including BT. “But since our company was founded in 2001 we have grown very rapidly. We intend to double the number of personnel to 10,000 by the end of 2008!” One thing is certain: China is no longer happy with merely being the world’s factory. The country also wants to be its central IT supplier.
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