How to leverage outsourcing partners to enter the Chinese software market
As the global economy slows, many business software companies are seeing fewer sales opportunities as businesses cut software budgets and delay purchases. Despite the current economic climate, there is still a large and growing market for business software in China. An increasing number of US software companies are focusing on China market entry strategies and leveraging the knowledge of Chinese software outsourcing companies to aid with China market entry.
A recent study sponsored by Dextrys titled Marketing Business Software in China discusses the Chinese market for US business software. The key findings from the study are: Read the rest of this entry »
Overcoming the Software Developer Experience Gap in China
This article discusses how the experience level of software developers in China has caused challenges for software outsourcing companies when competing with Indian competitors. However, as the software industry in China matures over the next six years, the experience level of Chinese developers will edge closer to international standards.
My last post before the holidays, Chinese software services revenue predictions fall short, discusses how the Chinese offshore services industry has not met analyst predictions in previous years, but did not get into why. One reason China has not reached expectations, is software development experience within the country.
The graph on the left shows an impressive increase in software related University graduates over the past ten years, but when developing software, experience is more important than number of developers assigned to a project. Analysts predict only 5%-10% of software developers in China have the skills and experience necessary to work on projects for Western companies. The difficulty to consistently build effective teams from China’s current labor market is a key issue being faced by software outsourcing companies in China.
Chinese software services revenue predictions fall short
With the year ending, thoughts turn to next year and analysts weigh in with 2009 predictions. I was recently searching my electronic library for historical statistics on software services revenues for India and China and discovered a Gartner Symposium ITXPO report from 2002 entitled, “Going offshore to globally source IT services”. The report included predictions for China and India’s software services industry growth and expert analysis from six years ago.
It was interesting reading because predictions around India were accurate while predictions regarding China fell short substantially. The discovery of this report changed the focus of this post from future predictions to a historical look at the offshore software services industry progress in the past decade.
How to build business relationships in China
It is widely known relationships are key to business success in China and most westerners doing business in China understand basic cultural nuances like how to present business cards, refrain from showing emotions, give face, etc. Although the process for building relationships with Chinese is no different from how relationships develop elsewhere, finding common interests, developing rapport, showing respect, etc., in practice it is difficult due to cultural differences. Unfortunately, many foreigners doing business in China develop negative attitudes of Chinese companies and culture causing unintentionally disrespectful attitudes towards Chinese business associates. These attitudes damage relationships and jeopardize business results.
An essential skill when doing business in China is the ability to develop rapport and build relationships with Chinese associates. There is a learning curve, and these skills develop over time. Having a sincere respect for China and Chinese culture enables foreigners to overlook the small obstacles that inevitably arise when working with Chinese partners. Here are four tips that help improve the ability to build business relationships in China.
Indian outsourcing companies change China market entry strategy
China daily recently reported Indian outsourcing giants are aggressively acquiring smaller Chinese outsourcing companies, including more than 40 local outsourcing companies in Shanghai. Indian tier 1 outsourcing companies have been operating in China for years, but traditionally have built development centers rather than growing through acquisition. There are several reasons for this significant shift in Indian outsourcing companies China market entry strategies.
Economic crisis – As sales slow or decrease in America and Europe, Indian companies need emerging markets to increase revenue.
Opportunistic acquisitions – A previous post on how the global economic downturn has affected Chinese outsourcing companies, mentioned that many smaller Chinese outsourcing companies are experiencing cash flow problems making them prime targets for acquisition.
Has the economic crisis helped outsourcing companies in China?
Richard Brubaker’s article 20 Million Chinese Migrants Out Of Work discusses how the economic crisis has begun to affect the Chinese employment market. Many companies in China are scaling back, increasing China’s unemployed. A decreased demand for Chinese software developers would benefit Chinese software outsourcing companies battling a skilled labor shortage causing wage inflation and increased turnover. However, a further look into Chinese outsourcing companies recruitment efforts shows that the economic down turn has not significantly affected the demand for skilled resources.
In China, online recruitment websites account for the majority of software outsourcing companies job applicants and recruiting budgets. Zhaopin.com is the Chinese equivalent of monster.com and is used by most outsourcing companies in China for recruitment. A search of the number of jobs posted on zhaopin.com is a indication of open positions at outsourcing companies and recruiting budgets.
Is the global economic downturn affecting Chinese outsourcing companies?
Dean Stevens recent blog post Uncertain Global Economy Hits Providers highlights specific examples of changes occurring within Chinese software outsourcing companies. Industry wide, smaller Chinese suppliers are running into cash flow problems, while larger Chinese software outsourcing companies are changing strategic plans and generally shifting focus away from servicing Western companies towards the local market.
However, China Daily and China Tech News both report continued growth in the industry and increased demand both at home and abroad. Also, the majority of demand for services outsourcing from China does come from America or Europe, the areas impacted most by the economic down turn. So, why are these Chinese outsourcing companies in trouble?
IT career opportunities in China
Last night I was introduced to a potential software developer in the Chinese software outsourcing industry. His English name was Dragon (a very popular name among Chinese men, I have met several Dragon’s over the past couple of years), and he is a 30 year old medical doctor. Dragon recently decided to change careers and has left the medical profession and returned to University to study IT. My perception of Dragon was very positive and he came across as professional and well educated, as one would expect from a doctor. It seemed he spoke decent English but it was still more convenient for us to communicate in Chinese. In the west, a physician is considered a prestigious career, so I was interested in his reasons for making the switch. Dragon had a very different perception of his chosen profession as he explained his frustrations with the bureaucracy and inefficiencies of the Chinese medical system and desire for a faster paced career with more opportunities for advancement.
Onsite offshore coordinator vs. offshore onsite coordinator
Traditionally outsourcing vendors place coordinators on the customer site to facilitate communication with the offshore team. This article discusses a different approach to coordinating offshore outsourcing projects where the client places a coordinator on the outsourcing vendor site to manage the offshore project.
I recently read a good blog post on Pragmatic Outsourcing titled The Myth of the Onsite Coordinator. Often offshore software outsourcing vendors place employees on the client site as part of the offshore engagement. As Nick Krym mentions in his blog post, there are disadvantages to having an onsite offshore coordinator, the main being cost to the client. An alternative approach that can be more effective is for the client to place an employee on the outsourcing supplier site.
Although an offshore coordinator could be employed by the outsourcing vendor or client, for the purpose of this post when I refer to “offshore onsite coordinator”, I mean a client employee or contractor managing the outsourcing initiative offshore. This offshore onsite coordinator is responsible for managing the communication and coordination between the client and the vendor and may also be responsible for managing the vendor.
Chinese software outsourcing company lists
Building a Chinese software outsourcing company shortlist can be time consuming and tedious. Fortunately, IAOP and Neo IT publish yearly global services company lists of the top outsourcing providers globally. This article looks at the Chinese software outsourcing companies listed and the validity of these lists.
Wading through websites developed by Chinese software outsourcing companies who have meticulously placed keywords to rank high in Google becomes tedious quickly. It is easy to find more than 100 websites of Chinese software outsourcing companies that are generic and do not actually represent the companies core competencies. As a result, buyers of offshore services often opt for expert option from service provider lists to create their initial shortlists of potential software outsourcing partners in China. Although these lists are helpful and save time in creating shortlist, buyers should understand the analysts who create the lists do not have the resources to verify the information provided by the outsourcing companies in the application form. Without being referred to a vendor by a trusted colleague, or hiring an outsourcing consultant to aid in vendor selection, lists provide an inexpensive way to create a shortlist.
The two most respected lists in the global services industry are compiled by IAOP and Neo IT. Both lists include outsourcing companies from around the globe, and are compiled by thought leaders in the outsourcing industry. IAOP ranks the top 100 companies, while Neo IT lists the top service providers without rankings. Here is how the Chinese outsourcing companies have ranked over the past three years on the two lists.
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