Archive for the ‘Chinese software outsourcing companies’ tag
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.
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?
Advice for selecting a Chinese software outsourcing company
Many companies have internal experience and best practices for choosing outsourcing vendors, few have experience working with Chinese software outsourcing companies. Here are 5 key areas to consider when looking at China as a global services delivery location.
Choosing a Chinese software outsourcing company should not be a yearly task. However, many American companies are forced to go through the vendor selection process more than once which is time consuming for managers and defeats one of the main advantages of offshoring, to allow managers to focus on core business activities. Below is a list of five selection criteria that are often neglected or forgotten causing the need to switch to a new vendor.
What is the vendors financial stability?
Without naming names, there are more than a few Chinese software outsourcing companies going through tough times financially. Over the past three years most companies competed on price with India which resulted in margins that were raze thin. These companies have gone through tough times over the past year with the appreciation of the RMB causing cutbacks and even layoffs. Check the financials of your chosen partner to ensure they will be in business for the length of the contract. This is not easy as most local vendors are not public but if you build a good relationship with the vendor through the sales process they will normally share this information with you.
5 things to know before offshoring software outsourcing to China
So, you go and talk to Gartner and they say that after India, China or Mexico are the next best options for software outsourcing. Great, now what? Well before you start contacting vendors, here are 5 things to think about before investing any more of your time, or money in considering China. If you decided to go with China as an offshore software development destination you will come to terms with these 5 eventually, so why not start now.
1. This is China - China is not India, Mexico, Ukraine ….
This statement may seem so obvious that you can’t believe you wasted your time in reading it. However, the number of people who have said, “but it worked when we did it this way in <insert second world country name here>, why didn’t it work in China” would amaze you. Plan time to adjust approaches and strategies (often substantially) for China.
2. Communication will be a problem
No matter what the vendor tells you, how many English teachers are on staff, or if you have native Chinese speakers you have at your company, communication will be a challenge. Plan for increased ramp up time of the offshore team. If a key success factor is speed to setup the offshore engagement then China may not be your best option.
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