China security outsourcing getting attractive

Security firms there are gaining an edge from supportive government IT policies, cybersecurity innovations, and a robust talent pool, but face obstacles in bad publicity.
Written by Ellyne Phneah, Contributor

Chinese security firms can potentially make good outsourcing partners as they have a high level of competence boosted by supportive government policies and a strong talent pool. However, the country will not be among the top choices among non-Asian vendors due to security-related fears.

According to Kevin der Arslanian, business analyst at China Market Research (CMR) Group, China has a large pool of IT talent, which pushes the quality of its IT industry upward. This is driven by heavy government investment in this sector, strong graduate programs, and a number of major online Chinese players such as Baidu, Tencent, and Alibaba.

With these efforts from governments and large Chinese companies, a powerful ecosystem, and strong culture is also achieved, he explained. This enables China to differentiate from other Asian competitors such as Vietnam and Indonesia, even though China's labor cost is higher, the business analyst added.

China's Internet ecosystem has also driven improvements in the IT security, der Arslanian added. The Chinese Internet is unsafe with viruses, Trojan horses, and in worst cases, keylogging or espionage software can be downloaded without users knowledge, he explained.

Within its pool of IT talent and supportive government policies, Chinese security firms also develop very strong security protocols, der Aslanian observed.

Chinese security firms make potential outsourcing partners due to the high level of competence boosted by supportive government policies and a strong talent pool.

"This has driven all [Chinese] companies to increase their IT security and continuously seek better and safer IT processes," he added.

In terms of IT security outsourcing to China, the demand is primarily from companies based in markets such as Hong Kong, Taiwan, Japan, and Korea, said John Tan, Greater China director of Spire Consulting and Research.

The similar cultures of doing business, along with lowered cost and time spent on managing IT security, prompts some companies to choose China over other Asian outsourcing hubs, he said.

In terms of wider outsourcing services, China is currently the world's second-largest player, and Asia-Pacific is the strongest region for this, said Allen Lee, manager of Solidiance China.

"India and China together occupied almost 80 percent of the global service outsourcing business, both countries have invested significant amount of time and resource to cultivate the industry," he said.

Not top choice among foreign vendors
However, China is rarely the first choice for most vendors outside Asia-Pacific, der Arslanian remarked.

Within Asia, the Philippines and India are both cheaper than China, and workers from both countries come with better English skills, he explained.

Agreeing, Lee noted other Asian countries such as Malaysia, the Philippines, and Vietnam are catching up with their good price for value and good English ability.

But most foreign firms will also be hesitant to outsource anything related to security to China, out of fear that the firm supposed to help them will actually turn out to be "the thief," der Arslanian noted.

The fear is currently driven by China's "poor" record of dealing with IP-protection cases, and the US Congress having flagged Huawei, ZTE, and other major Chinese IT firms as security threats, der Arslanian explained.

In order for Chinese IT security firms to be considered strong potential security partners and increase their global market share of outsourced IT security services, they will need to demonstrate superior quality compared to other Asian counterparts while maintaining low costs, he advised.

The quality of outsourcing will also depend on the processes in place such as whether it has non-disclosure agreements (NDAs), Lee pointed out. It will also depend on the company's overall assessment of its outsourcing partner such as its credit status and project-management ability, he added.

These two steps are very important, and companies need to focus on finding the right partner with proven track record on good credit, signed NDAs, and managing the project carefully to enjoy all the outsourcing benefits regardless of which country the company is located, he advised.

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