Report on iSoftStone by Pamela Quintero & Selena Steffy-Fuoss

On our final day in the city of Beijing, we had the opportunity to visit Zhong Guan Cun Software Park (also known as ZPARK). That visit provided an excellent platform for our afternoon meeting with one of the companies that operates its IT outsourcing business at the ZPark facilities.

In preparation for our visit with iSoftStone, we learned that the founder, Mr. Liu, also co-founded AsiaEC.com in 1999. With the help of Mr. Liu, that company became China’s largest on-line office supply and services provider. Later, the company was acquired by Office Depot, the largest office supply provider in USA. Mr. Liu, founded iSoftStone in 2001 and since then it has continued to grow market share in a highly competitive sector.

The host for our visit was Seth Pinegar, the Head of Corporate Development. Seth stated that the company currently employs 4000 people and by the end of 2008 expects to grow that number to 4400. He mentioned that 80% of the company’s employees are located in China, mainly due to the lower costs.

In terms of the financial progression of the company, Seth stated that they expect revenue to increase from 45 million (in 2007) to 90 million by year end (2008). He conveyed that in general, the company has a positive outlook on their future growth and by 2011, plans to employ 15,000 and increase revenues to $500 million. He suggested that it is anticipated that this growth will be a result of a successful merger and acquisition strategy as well as the continual growth of global outsourcing needs. Seth stated that while Gartner shows that the outsourcing sector growth rate is at 35% per year, iSoftStone plans to grow by more than 50% per year - that higher than average growth will be attributed in part, to the company’s planned mergers and acquisitions.

As we learned throughout our studies at Purdue, companies are wise to continually analyze their strengths, weaknesses, opportunities and threats. It was apparent that iSoftStone had examined their company in the context of SWOT and our discussion with Seth revealed the following about his company:

Strengths

• Access to Government Incentives (Tax Breaks and Land grants)


• Government Support of clean and green businesses


• Ability to borrow money at low rates

Weaknesses

• The service business is dependent on other markets


• The service business can be impacted by global influences

Opportunities

• The economic downturn could result in companies looking for cost cutting measures – leading to growth opportunities in outsourcing


• When dealing with the growing Asian markets, there are fewer cultural barriers compared to firms in India.

Threats

• India's existing labor force


• Vietnam's growing labor force

Our visit with iSoftStone was quite informative and provided a first-hand view of a successful company with an aggressive strategy and global perspective.