The process of economic globalization has led to a steady intensification of competition in international markets. To reduce production and operating costs and meet the requirements of global operation, business enterprises have been forced to outsource some non-core activities to countries where labor costs are lower; this enables them to concentrate resources on key activities, thereby strengthening their overall competitiveness. Widespread outsourcing by multinational corporations has provided a major stimulus for the development of the global service outsourcing industry.
This study examines the major trends in the development of global service outsourcing, the extent to which Taiwan possesses the environment needed for the successful development of a global service outsourcing industry, and the potential economic benefits from the development of such an industry. Besides collating and analyzing data relating to the current status of global service outsourcing, the study also makes use of a review of the literature and of data obtained in interviews with companies and institutions in India and China to analyze Taiwan’s competitiveness with regard to securing international service outsourcing business.
In addition, a seminar was held, attended by representatives of Taiwanese companies and of relevant government agencies, to gain a clearer understanding of the problems that may affect Taiwanese enterprises’ efforts to secure international service outsourcing business, and of Taiwan’s resources and capabilities in this area, to identify those areas where Taiwan has particularly strong potential for securing service outsourcing business, and for the putting forward of policy suggestions regarding steps that might be taken to improve the environment for international service outsourcing business development and for helping Taiwanese firms to develop outsourcing business opportunities. There are many areas where Taiwan enjoys significant competitive advantage or opportunities with respect to securing international service outsourcing business. These include an attractive investment environment, active encouragement of outsourcing business development by the government, and the fact that Taiwanese workers have the language skills needed to provide Chinese-language outsourcing services.
The present study found that the area in which Taiwan has the greatest potential for successful outsourcing service development is IC design, followed by software, e-learning, game development, and animation. As regards policy recommendations, it is suggested that the relevant government agencies should overhaul Taiwan’s professional licensing system, establish a service outsourcing information exchange center, support the private sector in the development of the Overseas Chinese outsourcing market, establish a global outsourcing statistical database, and implement a further relaxation of the restrictions governing the recruitment of human talent from overseas. The greatest single legal/regulatory obstacle hindering the development of international service outsourcing business in Taiwan is the legal restrictions that make it difficult for companies to recruit talent from other countries.
It is suggested that the government should revise the relevant provisions of the Employment Services Law, the Management and Approval Regulations for the Employment of Foreign Nationals, the Regulations Governing Alien Visits, Residence and Permanent Residence, etc., to bring about a further relaxation of the restrictions.
The experience of other countries that have been successful in developing an international service outsourcing industry indicates that high-quality human talent and language skills are the key factors that determine whether or not contracts to provide outsourcing services can be secured.
In all of the areas where it has the potential to develop service outsourcing business – including IC design, software, e-learning, game development and animation – Taiwan needs to strengthen the professional capabilities of its talent base, and to improve the quality of language training, so as to upgrade the quality of the outsourcing services that it can provide and enhance its competitiveness in the global service outsourcing market.