Outsourcing companies merge

Two Chinese outsourcing companies listed in the United States announced they were joining forces, reflecting fierce competition and harsh market conditions.

HiSoft Technology International Ltd (HiSoft) and VanceInfo Technologies Inc announced they were forming one new company, Pactera Technology International Ltd, to provide a better service for customers worldwide.

HiSoft is headquartered in the coastal city of Dalian, one of China's main software outsourcing bases. VanceInfo has headquarters in Beijing and a branch in Dalian.

HiSoft focuses on exploring the IT outsourcing market of Japan and the United States. Its major customers include IBM and Hewlett-Packard. VanceInfo focuses on the Chinese mainland and the United States and its major customer is Microsoft Corp.

Tiak Koon Loh, former chief executive officer of HiSoft, was named CEO of Pactera. VanceInfo's founder, Chris Chen, is chairman of the board. Cheng-Yaw, chairman of HiSoft, is to resign after the merger is completed.

Pactera will be listed on the Nasdaq Global Select Market. The company information said that it will "provide a powerful array of offerings to customers worldwide as the new company is a premier world-class IT services provider in China, with extensive global reach".

Chinese financial writer Chang Qing supported the merger and said it will create a "super aircraft carrier" for outsourcing because the new company's revenue will exceed $670 million this year, according to Techweb reports.

However, others are not so sure.

Qi Haitao, CEO of Devott, a renowned outsourcing company based in Tianjin, said Pactera faces many challenges and there are many uncertainties.

"The first and most important task for the new company is to adjust its management teams because they have different cultural backgrounds. At the same time, it has to control human resources costs," he said.

Neusoft, the nation's top outsourcing company, which is also based in Dalian, appears unconcerned.

Liu Jiren, chairman and CEO of Neosoft, said: "We focus on high-end customers dealing with industries such as automobiles, mobile terminals and digital home appliances. Moreover, our outsourcing business only contributes 20 percent of our overall revenue. I believe the current situation will not change."

China Daily tried to contact Pactera but the company did not reply by publication deadline.

Public information shows that HiSoft's income was $17.21 million dollars in 2011, a year-on-year growth of 33.9 per cent. VanceInfo's revenue was $20.86 million, a year-on-year decrease of 34.5 percent in 2011.

Both companies' share prices have been hit over the past two years. Their market capitalization has plummeted more than 50 percent since 2010.