Avoiding the fate of many other companies, the Shenyang-based Neusoft Group Ltd - China's largest software development and IT services company, established in 1991 - has witnessed rapid growth.

And a key contributor to this success has been Neusoft's product engineering.

In the first half of this year, the group's revenue reached 1.78 billion yuan, reflecting an increase of 8.4 percent over the same period last year.

"The financial crisis has brought an opportunity to the outsourcing industry owing to funding cuts for R&D by our partners," says Liu Jiren, chairman & CEO of Neusoft. "Moreover, the current economic situation makes it easier to cooperate and deepen this kind of cooperation."

Crisis and opportunity

The crisis has put more multinational companies under the dual pressure of balancing costs with innovation. As a result, outsourcing has emerged as their key strategy to improve competitiveness.

According to an official of China's Ministry of Commerce, American companies are dissolving unimportant divisions and outsourcing the relevant business. And China is one of the main outsourcing destinations.

Wang Chao, assistant minister of commerce, said in an industry forum that in the first half of this year, the value of the outsourcing industry reached $2.59 billion, an increase of 25.9 percent over the same period last year.

Take Liaoning as an example. The value of the province's software exports reached $190 million, accounting for a third for the whole country and ranked second in the nation, behind only Beijing. And Neusoft is a pioneer among local IT companies.

Since last August, Liu has been busy traveling abroad to visit potential partners in a bid to deepen cooperation in outsourcing.

Also, Neusoft constantly strives to strengthen investments in overseas branches, especially in Europe and US. Early this year, Neusoft employed Klaus Zimmer, former CEO of SAP North Asia area, as the chairman of Neusoft Europe AG.

Liu believes the crisis will push developed countries to change their development concept and transfer costs. While this has been happening in the past too, the crisis has accelerated the process.

"Companies with innovation and a solid foundation are in the best position to develop," says Liu.

"China is a big market with the most growth potential. In the coming five or 10 years, China may surpass India and become a world leading outsourcing destination," he adds.

This trend can also be proved by the reaction of India, which is China's biggest rival in the outsourcing industry. Many Indian outsourcing companies have set up branches in China in recent years.

Pramod Bhasin, CEO of Genpact, the biggest business process outsourcing company in India, has told the Financial Times that China is an enormous threat (to the Indian IT industry) and will remain the only real opponent in the long term.

Competitive advantages

Embedded software development is the core business of Neusoft in the global market. The company has rich resources and experience in digital home products, mobile terminals, vehicle products, and IT products.

"Through the accumulation of traditional software outsourcing, we have become competitive in this field, especially with respect to 'QCD' (quality, cost and delivery) capability. Meanwhile, in some product engineering areas, our business basically covers the whole process from system design and development to testing. All these are our competitive advantages," says Chen Ximin, general manager of Neusoft's embedded software division.

In fact, Neusoft Group's main business has been embedded software development since it was founded in 1991. Its first pot of gold came from Alpine, a Japanese company, active in automotive electronics.

While developing the Japanese market, Neusoft has established partnerships with many well-known enterprises including Alpine, Toshiba etc. As a result, Neusoft has accumulated advanced capabilities in product engineering.

After more than 10 years of efforts, Neusoft has carved for itself a big market share in domestic information infrastructure including telecommunications, social security, electric power, finance, transportation and health.

Additionally, the company has cooperative arrangements with 30 multinational companies. Its embedded software has been used in world famous digital home products, mobile terminals and automobiles.

Neusoft's overall revenue and offshore outsourcing income has retained first place, among domestic software enterprises, for six consecutive years since 2002.