There’s been a fair bit of speculation regarding whether the current “challenging” economic environment would have an impact on the Chinese software outsourcing vendors.  We’ve already seen some operational changes at Dextrys (read the comments for some real insight).  Now, a very well informed source in China is telling me that both iSoftStone and BeyondSoft have shelved their IPO plans indefinitely.  As I’d previously suggested, iSoftStone was rumored to be moving towards tapping the public markets this year.  The same source also told me that a significant number of the smaller providers are on the verge of shutting down.

Unfortunately, the firms are facing an unhappy combination of declining demand from the West and rising costs in Beijing and Shanghai.  While the Chinese economy may be slowing, the demand for skilled programmers who can understand English and interact with customers is still quite strong, so their salaries continue to shoot up.

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