For companies that are considering offshoring their IT development projects to China, the benefits extend well beyond pure cost savings to include a better educated workforce, world-class IT infrastructure, lower employee turnover, and a proactive commitment towards protecting intellectual property. In fact, China is transforming the IT development/outsourcing landscape from the low cost talent strategy that made countries such as India, Thailand and the Philippines hot markets, to one driven by better value, talent, and alignment with key organizational initiatives.
Once the CEO, upper executives, or board of trustees gives the green light to offshore to China, there are three key steps that allow companies to quickly and effectively gauge the viability and value of choosing an offshore outsourcing partner
Identify Potential Partners - According to IT research company Gartner, Inc., there are approximately 30,000 IT and software companies in Asia, and roughly 10,000 Chinese software companies identified by the Chinese government. Many of these firms are small companies with minimal project management and architecture capabilities, but house young development talent primarily focused on the JAVA, Windows and general C programming environments.
Companies this size typically average about 25-50 employees, thereby minimizing the size of project scope. Some of these firms are skilled in offshore development, while others are likely to specialize in a particular industry such as eGovernment or gaming. Quality among companies varies significantly so choose carefully before making a decision to move offshore.
When looking for an offshore partner, take note of where Fortune 1,000 companies are turning for their offshore needs. Although this group might not have the same financial considerations of small or medium enterprises, they can be considered benchmarks for weighing the right qualifications properly and selecting the most suitable partner. What is good for Boeing or Citibank might be quite satisfactory for a more consumer-focused company.
Consider also who is taking advantage of emerging talent pools, development environments, and strategic partnerships. Cost is a driving factor in determining the validity of moving offshore, but partners should be highly aware of the world's top development talent, critical global vendor relationships, and current technology offerings. It's best to look around at companies who are already building a positive reputation among the emerging IT outsourcing communities.
Also, always make sure to check customer references before making a final decision. Snazzy Web sites are nice, but they don't yield an accurate sense of who a company is and how it really operates so find out what other customers have to say.
Keep an Eye on Quality - After compiling a list of five to 10 firms, winnow it down by asking each company five simple questions:
1) Where are you located and why?
It is important that partners are able to provide reasons for establishing a presence in a certain geographic area because every location has talent and cost implications. Certain regions provide different or more specialized workforces as well as differing wage structures for specific areas of development.
For example, if a company thinking about outsourcing to China is looking for Japanese customer support, it's best to find a partner with a presence in Dalian, which has a rich tradition of Japanese outsourcing. If it's application development talent you're looking for, then the partner should have offices in Suzhou; if it is BPO services, the expertise in Kunshan is vital. Companies need to mix their own objectives with the right region.
2) What is the average experience level of your employees?
Complex projects require a variety of skills beyond simple software programming. Architecture and integration are also required for product releases, code revisions, new version releases, etc. You don't a want JAVA programmer with one year of experience tasked with the front-end product planning for your project, so strive for a mix of experience levels among employees.
3) How are your communication skills?
The worst thing that can happen to a company with a new outsourcing partner is to encounter an inability to communicate effectively due to language barriers or cultural misunderstandings. Many domestic Chinese IT firms are not well-versed in developing products according to programming or Western product specs and sometimes English documentation is minimal or absent. Companies need to ensure the IT firm they choose has strong communication skills and an understanding of its own business or cultural language to ensure everyone has the same objective and can communicate effectively if something veers off schedule.
4) What is your employee turnover rate?
Over the past few years, India has been plagued with rapid turnover among IT outsourcing firms due to the entrance of larger Fortune 100 companies seeking development resources in Mumbai or Bangalore. It would be disastrous to pick a partner only to have 25% of their workforce leave for Google or IBM. To avoid this, ask partner candidates about their last four quarters of employee turnover to determine if it is merely a rapid training ground for multinationals or a stable environment where where employee longevity is valued.
5) Who do I contact if something goes wrong?
In a world of intellectual property sensitivities, disparate software quality, employee turnover, wage appreciation, and infrastructure concerns, companies need to be sure the partner they select will fully protect the organization and its products.
Risk looms everywhere in the business world so, ideally, a partner will share the same business ethics and operational common ground. For example, finding an outsourcing partner that has Western experience or an American front-end presence is a great advantage and may save a trip to India, Vietnam, or Thailand if something goes wrong. It also narrows the distance between engineering and outsourcing development teams, since both are usually required to work collaboratively.
Build the Relationship - Once an outsourcing partner is selected, focus energy on building your relationship. Both parties will need to collaborate on creating an effective development plan, executing tasks on a timely schedule, and facilitating a successful engagement. Such groundwork ensures a long-term relationship that will grow from project to project, building a successful knowledge transfer from the client to a dedicated and committed outsourcing partner.
A partner's value is best perceived as a natural extension of the client's engineering efforts. Up-front collaboration will begin the process of sharing intelligence and important technology considerations. It may even shave a few months off the software development cycle.
On the other side of the coin, an outsourcing partner that simply takes the development plans and works independently won't truly be able to understand your inherent development needs. Thus, the right outsourcing partner is one who is responsive and flexible in design, delivery, and development solutions.
Following these guidelines will not only help you find a valuable development team for future engineering needs, but can also help you gain an optimal combination of cost savings, accelerated productization, and even a foreign market presence.
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