SINGAPORE--Cloud computing is the highest form of outsourcing, according to the CEO of Chinese outsourcing firm HiSoft. He added that while China is still catching up with India's level of sophistication and dominance in the offshore market, the mainland has unique advantages that will enable it to eventually emerge as the outsourcing hub of the world.
When a company goes cloud and buys an Internet-based service, it is not running its own data center or buying its own software or hardware, he said. But the move to cloud also means a company has "practically outsourced its data center, software development, everything", pointed out Loh, who described cloud computing as the "highest form of outsourcing".
In other words, cloud computing is "an outsourcing model on steroids," the CEO summed up.
That said, Loh noted that the current adoption rate of cloud is not at a level where an outsourcing company can entirely bank its services. He added that the cloud has just arrived at a point where it can really start to take off because there are enough people who understand it and the price point has become very attractive.
The publicly-listed HiSoft, which on Friday unveiled its new, integrated regional headquarters in Singapore, offers both traditional outsourcing and cloud services and applications. Loh noted that though cloud computing is an important portfolio of its business, depending on what service model the customer is comfortable with, he emphasized that the company ultimately takes the lead from its clients.
Outsourcing giants: China vs. India
Loh acknowledged that China's current stake in the global outsourcing industry is where India was 10 years ago. However, in terms of rate of growth, Chinese is definitely growing faster despite its late entry.
He considered China to be today's outsourcing hotspot, thanks to a huge domestic IT market, the tremendous size of its labor force, increasing proficiency in English--now introduced as a second language in high school--and most crucially, a supportive government.
For an outsourcing industry to flourish, Loh identified that there must be a very high bandwidth infrastructure and Internet connectivity. Part of the Chinese government's efforts to promote outsourcing involve building infrastructures that prioritize these necessities, which lead to what Loh sees as stronger infrastructural capabilities than India.
The CEO also highlighted another unique differentiator that China has in outsourcing: it is leading in the global telecommunications and Internet industries.
He commented that the country is one of the fastest-growing mobile Web markets and has the world's biggest online population. In addition, it has successful local equivalents of Internet giants from the West, such as search engine Baidu, online video site Youku, and e-retail site Taobao.
To manage such a huge volume of consumers and data, Loh reasoned that China's domestic tech companies possess an advanced level of IT expertise, skills and support architecture. This, he said, puts China in a good position to export such services to foreign companies operating in similar industries.
Furthermore, several global firms want to enter China because it is a "very important end-market that [they] cannot miss out on".
Therefore, despite the competition from India as well as the Philippines and Malaysia, "China will definitely emerge the outsourcing hub" as the industry continues to grow, Loh said.
Outsourcing will only get bigger
In contrast to the sustained rise of outsourcing, Loh elaborated that the hardware industry is not growing as rapidly and is heading toward a device-centric market because more consumers are turning to mobile phones instead of laptops and PCs. Similarly in the software sector, people are not buying as much software and are instead switching to cloud services, such as Salesforce.com.
It is the services sector of the global technology industry that is getting bigger and bigger, of which outsourcing makes up approximately one-third of the whole, he reiterated.
To better leverage this increase, Loh said HiSoft takes an international and global perspective in the way it approaches outsourcing. He elaborated that rather than focus on building capabilities solely in China, where the company was founded, it also extends its strategies and business operations to the West (the United States and Europe), Japan and South Asia, of which Singapore is its regional headquarters.
The city-state was a logical choice for HiSoft because of its bustling economy and government openness to talent migration, Loh explained, adding that Singapore is a strategic gateway to the South Asian market and taps neighboring countries such as Malaysia.