| 2.3.1 Sichuan has developed its capability for international outsourcing tasks. Currently, the global IT industry is in the process of the structural rationalization that creates new business models on a continuous base. The technology transfers and innovations, which directly impacts and interacts social and economic development process, are quite dynamic and will become more active in the future. Technology transfers present new opportunities. The outsourcing becomes the new business model in IT industry. The international IT outsourcing market grows at an annual growth rate of 20%. According to IDC's market survey, the global IT outsourcing for services will grow over to $10 billions. The number of Sichuan firms that engage in outsourcing services is quite limited. Yet some of the Sichuan firms do have the capability to undertake outsourcing requirements. As the outsourcing market gets expansion, Sichuan IT industry will make efforts to develop the outsourcing market.
2.3.2 IT Industry Rationalization Accelerated and Sichuan has Solid Base for IT Application The Global IT industry rationalization process is gaining its pace with feature of the combination of IT industry with the traditional industries. This development makes it possible for cross-industry interaction and penetration. For example, the combination of IT with conventional home appliances produces new digital 3C products. The combination of IT with traditional commerce promotes rapid development of E-commerce. Logically, the industry restructuring will create good investment opportunities in new areas, particularly in the industries where there is a close combination with IT. Sichuan is the important machinery making base in West China with a rather positive industrial environment for IT applications.
2.3.3 Great Number of IT Projects Requiring Investment Sichuan government has stipulated serials of policies that have facilitated a rather positive environment for IT industry. At present, there are quite a number of IT projects that have strong demands for outside capital investment.
IT industry development has phases of seeding, creation, growing, expansion, and mature. Different phases have different characteristics with differentiated risks and revenue levels, requiring different financing ways (Table 3). Sichuan IT industry needs investments at different phases, yet the last two phases require larger financing and present better revenues.
Table 3 Financing Requirements at Different Phases
Phase |
Risk Level |
Revenues |
Capital Requirement |
Financing Model |
Seeding |
High |
Small |
Small |
State/Firms /private |
Creation |
Very high |
Relative small |
Large |
Self-financing with state support |
Growing |
Market risks/Management risks |
Relative small |
Large |
Venture investment/Strategic investment |
Expansion |
Venture capital investment with high risk |
Relative good |
Relative large |
Second board market
Equity
Over-counter market |
Mature |
Low |
Good |
Relative large |
Acquisition |
2.3.4 Room for Growth at different Points in the industry Chain Currently, IT industry chain is not completed yet except for digital audio/video products with unique advantages.
Take software as the example, Sichuan software industry concentrates its efforts mainly on R&D of application software, industrial software, and digital recreational software. It is in the low part of the chain with a rather low profit margin and rather weak control of the core technology, while Sichuan is rather weak in system software and supporting software.
Weakness will create opportunities. Should the investors identify the opportunity and make the right efforts, they might turn the weakness into good growth opportunity. | 