A Study Of Factors Influencing Competitiveness Of Software Service Offshoring

Our country has become a large country in the field of international trade because of a great deal of processing trade in manufacturing, and therefore a huge economic development has been achieved. But today our way of processing trade is not sustainable due to changes of domestic and international environment. Firstly, since our minimum-wage has been continually increasing, the increase of labor cost has greatly compressed the profit of processing trade. Secondly, our serious situation of environment cannot tolerate the erosion of manufacturing. Comparing to the manufacturing, the service trade which is technology-intensive and environment-friendly can make our economic development more sustainable and healthy. The service off shoring, especially to the software service off shoring, is an important part of the service trade. It not only fit our idea of low-carbon economy and circular economy, but also can absorb a great many rural labor surplus by enlarging employment, which can improve our level of urbanization. Just like other industries, the industry of software service off shoring cannot develop without support of environment, which is the main reason why some excellent firms and champion firms of one industry are always in the same country. To construct an environment which can support the development of software service off shoring, it is important to find the factors of environment by using the theory of Michael Portor.This paper is divided into six parts. The first part is literature review of related references in recent five years. Through the literature review, it can be found that most recent studies about software service off shoring are from microcosmic point and most of foreign literature are from the point of clients of outsourcing.Therefore,this paper is designed to study the software service off shoring from macro point, and use more proper variable in the empirical analysis, which will make conclusion more correct. The second part mainly illustrates the history and current condition of Chinese software service off shoring.In this illustration,it can be found that the past development of Chinese software service off shoring is based on our low cost of labor. Nowadays, although our high value-added business of software service offshoring has increased, it is necessary to continually adjust our market structure of software service off shoring if wanting to keep competitive advantage on the market of software service off shoring for a long time. The third part mainly illustrates the theories of international vertical specialization and Michael Portor’s competitiveadvantage of actions,and the relationship between these theories and the development of software service offshoring. The theory of international vertical specialization includes comparative advantage theory, scale economy theory and transaction cost theory. These theories explain the reason of software service off shoring are different comparative advantages of countries, the function of cutting down cost in the scale economy and the transaction cost which is lower than the administration cost of internal producing. Although the theory of international vertical specialization can explain the reason of software service off shoring, it cannot explain why a country can sustain its competitive advantage on the market of software service off shoring,for the precedent software firms probably lose its market after some time. However,using the theory of the competitive advantage of actions can explain it, which is what the fourth part content is. The fourth part illustrates the reason from the point of Michael Portor’s Diamond System on the condition of current domestic and international environment about software service off shoring. It clarifies the factors of domestic environment which a country need if wanting to sustain its competitive advantage on the market of software service off shoring. These factors includes labor cost, labor quality, language and culture, ability of software industry association,financing,facilities of communication and Internet,the scale and quality of domestic demand,development of domestic IT industry and communication industry,strategy and structure of software firms, competition of software firms, external factors on the software service off shoring, government’s tax policy on the software service off shoring and protection of intellectual property. After the qualitative analysis, the fifth part use panel data of each province to make an empirical analysis and it can be concluded that at the moment what most affect our competitive advantage of software service off shoring are labor quality, financing and the protection of intellectual property. At last, in the sixth part, conclusions and relative policies are made. Government should cultivate relative talents, make finance market perfect,guide software industries in different areas to develop coordinately and improve the protection of intellectual property right.