Michael McCourt of the China-Britain Business Council in Shanghai describes the opportunities for UK IT companies in China in reaction to a Computer Weekly articles about IT offshoring in China.
Chinese companies such as Neusoft, UFIDA, Seioglobal, VanceInfo and Wicresoft are developing and learning extremely quickly. Issues that were real perhaps only three or four years ago either have been or are being addressed - eg, it was often said that Chinese ITO vendors had extremely good technical talent but lacked good project management skills. Given that the Chinese software/outsourcing industry was really only formed in the mid-1990s, this was perhaps understandable, but the main players in this market are getting it right by watching and learning from the foreign competition in the market.
I would say, however, there are opportunities for UK vendors who want to enter the Chinese market in partnership form either in ITO/BPO or software. Many of the mid-sized software companies (400+ staff) have very good programming talent, good software engineers, have experienced but variable quality in systems architects and a lack of industry leadership particularly in international markets. Looking at the UK software industry, our issues seem to be the inverse. There are opportunities in bringing these two needs together.
I have some issues with comments on physical environment, communications infrastructure and language barriers. Yes, outside of Shanghai good enough English language skills for any reasonably large BPO operation are hard to come by.
For the ITO industry there is less requirement for fluent English speakers in tech teams that are not customer facing - there is already a large talent pool of tech staff with (fluent enough) English language skills for tech teams in many of the second-tier cities. For example, Dalian Software Park employs 25,000 in software/ITO with 6,000 speaking fully fluent English (and an additional 5,000+ speaking fluent Level 1 Japanese) where among others Oracle has been successfully operating a technical support centre for the US market.
When you consider university cities that are up and coming outsourcing destinations, such as Nanjing or Wuhan - these cities each have more than one million students on campus - and that every student must take compulsory English language classes no matter their academic major, the sheer scale of numbers will tell you that the Chinese will get there, if not now, very soon.
In addition, organisations such as NIIT are already in China with 170+ centres around the country preparing graduates on language programmes for the outsourcing industries.
With regards to physical environment, please let's remember we are not comparing China with the UK but with India. Sure, China is still developing, but anyone who visits Shanghai/Beijing or any of the second-tier outsourcing locations of Nanjing, Dalian, Chengdu and Suzhou can't help but be impressed by the scale of environmental development there. Much more so than India.
With regards to communications infrastructure, anyone who has spent time working here in the industry will tell you the infrastructure is excellent and far exceeds that of India for reliability. When the Chinese government decides to target an industry for growth, the first thing they do is make certain that the infrastructure investment is in place - their recent stimulus package of RMB4trillion was almost entirely spent on infrastructure improvements (in its widest definition).
With regard to a lack of entrepreneurship and organisations only being set up by government, I could name at least three dozen Chinese ITO/BPO and several HR outsourcing companies that are both privately-owned and successful in their own right. The size of these companies would range from 350 to 14,000 staff.
I do agree with some of the issues about cultural barriers. However, I tend to take a slightly different view. Many of the more well-known ITO/BPO operators here already have international contracts. However, for those smaller and emerging companies, the most compelling issue is that many of the staff have never experienced let alone visited a foreign country. It is extremely difficult for the teams in these companies to have any understanding of the required user experience (software).
In turn, I see business opportunities for the more China-seasoned and industry experienced foreign companies here in vendor management services operations that can bridge that gap and oversee the technical development of ITO projects. The more established companies know this and are putting the building blocks in place now.
To me, the suggestion that China is five years or more behind India is incorrect - that may be their status now, but they have accelerated programmes in place - and that the gap will be bridged within two to three years. Coincidentally, it is my own personal experience that Indian service providers suffer the most in dealing with cross-cultural differences in China, not the Europeans, Americans, Japanese etc.
This was first published in July 2009