“+” and “-” outsourcing to China
May 7, 2008 – 4:17 pmAn article by Jacquline Zhang summarizes pretty well: by adding up the dangers and benefits of outsourcing to China, you get a fairly mixed report card.
(+) We score service provider availability a positive. There are some true diamonds with potential to grow, given the projects. The challenge is finding the company that’s appropriate for you to work with.
(~) We score personnel talent and experience neither a negative nor a positive. The right managers — strong in staff development and retention skills — can work wonders.
(-) Intellectual property rights gain a negative mark across the board. If your business is IP-sensitive, you’d better be IP savvy too, to protect what’s yours.
(-) Regarding English language skills, we give a negative rating because the results of all that educational effort are uneven. Until students have an on-going opportunity to converse with native English speakers, they’ll never achieve the proficiency in the language that most non-China companies need.
(-) Cultural issues gain a negative too, at least until US and European managers have more experience in working within the bounds of the Chinese culture.
(+) The Chinese government’s support in taxation and other areas is a positive. We give this a plus — though with the caveat that governmental support in China can be fickle. One day they’re wooing your business; the next day, they’re turning a blind eye to vigilante justice, as the Japanese recently experienced in multiple Chinese cities.
Zhang also points out a bonus “+” is use outsourcing relationship as entry to market: a 20 billion $ market and fast growing: In another word, the economic environment is more a plus factor than a negative factor.
“another reason to consider China for IT service is the 1.3 billion people marketplace that China constitutes,” said Stefan Klotz in his study titled The future of China’s software outsourcing industry. “Some examples of sectors that need a remake of their IT-infrastructure are banking and insurance. This opens up further opportunities for foreign software vendors.” Domestic software sales in China is $17.3 billion in 2005 (compared to India’s $3 billion).
A foreign company with established relationships in China has a better chance of getting lucrative Chinese contracts. There is no outright prejudice for foreign companies already in the Chinese market but it is not known to hurt. Also, a company that already has experience outsourcing to China might have a better understanding of the machinations of the Middle Kingdom. The reverse is true too. Those companies already outsourcing to China in the manufacturing sector will probably have greater success in sending IT work there too.
Also, as companies expand into China, outsourcing to a local vendor becomes desirable as ground support for operations there.