Going Where All the IT Growth Is

There’s an information technology (IT) company out there that looks really interesting. This small-cap is newly listed on the NYSE, and it is growing like mad serving customers all over the world.

The company I’m referring to is called VanceInfo Technologies, Inc. (NYSE/VIT). This firm is an IT service provider and software development company located in China. According to the company, it is ranked among the top three Chinese offshore software development service providers for the North American and European markets, as measured by 2006 revenues.

VanceInfo sells a range of IT services that include research and development services, enterprise software solutions, application development and maintenance, quality assurance and testing, as well as globalization and localization.

VanceInfo provides these services primarily to corporations headquartered in the United States, Europe, Japan and China. The company’s customers are often in the technology, telecommunications, financial services, manufacturing, and retail industries.

There’s been a lot of talk lately in labor circles about high-tech jobs going overseas. While some have, a lot of these jobs aren’t moving overseas; they are newly created jobs that are opening up in developing countries like China and India to serve American customers. VanceInfo Technologies is one of these companies experiencing substantial growth, serving large American corporations who want cheaper IT expenditures.

According to the company, its revenues in the first quarter of 2008 grew to twenty and a half million dollars, representing impressive growth of 97% from revenues of over ten million dollars generated in the first quarter of 2007.

VanceInfo reported that the U.S. market continued to be its largest geographic market, accounting for more than twelve and a half million dollars or about 62% of revenues in the first quarter of 2008. This was followed by 13% for Europe, 13% for China, and almost 13% for Japan.

Revenues from the company’s two largest clients, Microsoft and IBM, accounted for 31% of total revenues in the first quarter of 2008, down significantly from 46% in the first quarter of 2007. Revenues from the VanceInfo’s top five customers came to 51%, down from 66% in the first quarter of 2007.

Net income was $3.1 million, representing a large gain of 138% from the net income of $1.3 million generated in the first quarter of 2007.

Currently, VanceInfo expects to generate revenues between twenty-two million dollars and twenty-three million dollars in the second quarter of 2008, representing a 47% to 54% increase from the second quarter of 2007. Revenues for all of 2008 are currently expected to be between ninety-two million dollars and ninety-six million dollars, representing a 47% to 53% increase from 2007.

This stock listed on the NYSE around $10.00 per share, then dropped to around $5.00 per share in the recent market correction. It has recovered to around $12.00 per share and is very reasonably priced considering its growth prospects.

There’s no doubt in my mind that we’re going to see more companies like VanceInfo Technologies springing up. If you are a large company and you can get the same software development in China for a fraction of the domestic price, why even bother setting up shop at home?