Editor’s Note: China’s offshore software testing and application software development industry is booming. If any of your staff (on- or offshore) require training, click here to review the workshops that LISA is hosting in Beijing from August 27-31. At the same time, plan to attend the Managing Globalization Requirements Roundtable that will be held on August 29.

TIBCO is one of the top 20 software companies in the world and is consistently rated at the top of its markets by analysts worldwide. It currently has more than 3,000 customers and 1,600 employees. When it went looking for an outsourcing partner in China, it was extremely careful and picky.

Worksoft is a leading worldwide provider of adaptive IT outsourcing services, including IT consulting, packaged solutions, BPO, technical support, QA & Testing and localization. It runs offshore development centers for TIBCO Software, Citibank, PeopleSoft China, Reynolds & Reynolds, among many others. It employs around 3,000 people and is doubling every 8-12 months to meet the market needs.

A process-oriented relationship in which trust is the key

According to Dr. Liu, its strength lies in its adaptability to the working models of its customers. Every long-term relationship is a bit different. In the case of TIBCO, Worksoft has spent 18 months adapting and responding to the way that TIBCO works. It is a process-oriented relationship in which trust is the key.

Liu also emphasized that Worksoft is very sensitive and understands completely the value of intellectual property (IP). It works together with its clients to protect IP, so that there will be no incidents. He pointed out that this is related to investment – Worksoft has invested and developed expertise to protect its clients’ IP, so it has the same interest in IP protection as its clients.

India has spent about 15 years establishing its outsourcing reputation, but China is catching up very quickly – it is currently the world’s second most attractive outsourcing destination.

Fiona Tan then shared TIBCO’s outsourcing timeline. Over time, the company has switched from partnering to a captive TIBCO site in India. In 2001, TIBCO outsourced its full product lifecycle for Enterprise Adapters to India. The initial model was a revenue-sharing model in which the partner owned all aspects of the product lifecycle, product management, development, QA, release, documentation, etc. In 2003, it changed its mode of operation by taking over product and development management. Its Indian partners continued to perform the development, QA, release and documentation functions and were paid monthly on a per-head basis. In 2004, TIBCO opened its own development center in Pune. It currently employs about 140 people, of which 100 are in R&D and 40 are in professional services.

The company signed a contract with Worksoft to build the TIBCO China Development Center (CDC) in 2005. Its strategy in China is similar to Cisco’s. Chinese companies are reluctant to buy from companies that have no local support, and TIBCO wanted to drive sales in the local market. Therefore, it decided to establish a strong presence to help drive sales locally and in the region. It also wanted to leverage the talent pool and cost efficiency in China to build a development center responsible for the entire product lifecycle, including localization/globalization and pre/post-sales support.

TIBCO has learned lessons similar to Cisco in India.

TIBCO has learned lessons similar to those learned by Cisco in India (for details, download a copy of Cisco Lessons Learned in India and China, by Brian Shorey, Director of Engineering, Cisco Systems Inc. – instructions provided above for LISA Members). This means that it does much more to support globalization – both in the U.S. and in China. Even original documentation is created in China. The TIBCO CDC (with 110 engineers and growing) also has a very strong technical support team that handles service requests from the Americas, as well as all requests from Asia Pacific.

Success factors include (1) experience, (2) a strong partner, (3) team building, (4) training, (5) communication and (6) work distribution.

Experience

TIBCO has tried three different approaches to outsourcing/offshoring to varying degrees of success. The lessons learned from the previous experiences were crucial in helping to define a successful strategy with Worksoft.

Strong Partner

TIBCO wanted a leader who was already strong in the outsourcing industry in China and who shared the same values. It selected Worksoft due to its leadership position in the Chinese outsourcing market. TIBCO and Worksoft share a similar company culture that is very focused on delivery and on customers, so they have been able to build a very collaborative relationship that is very transparent. Worksoft has a strong executive team that has experience working in and with U.S.-based companies – this has been key. The relationship with India is very different.

There has been joint investment on both sides that has fostered a collaborative model. TIBCO now has full visibility into the day-to-day operations of the CDC, and Tan knows all of the engineers – without having to actually manage the operation or worry about dealing with real estate brokers for space. For her, that’s the best of both worlds.

CDC management and engineers have full visibility into product strategy and roadmaps. The onshore/offshore teams and managers work closely to deliver products. TIBCO maintains a big focus on career development for all staff worldwide, with joint performance reviews for the CDC staff. Tan emphasized the fact that, unlike the Indian operation, TIBCO in the U.S. treats the outsourced CDC staff like its own employees in order to avoid simply building a big team of contractors.

TIBCO and Worksoft are now developing a joint training program that students can participate in without leaving their universities. The program is intended to supplement the good theoretical knowledge of these students. A few universities are already participating. Upon completion of the training program, selected students are invited to Worksoft for additional TIBCO-specific training. Worksoft has already hired a handful of these students, and TIBCO has been extremely happy with their capabilities.

There must be full authority invested in an executive on each side.

Tan stressed that the only way for a full partnership such as this to work is for there to be full authority vested in an executive on each side to make/change decisions. This allows Tan and Liu to resolve issues quickly.

Best practices for building and maintaining such a partnership include (1) team building, (2) training, (3) communication and (4) work distribution.

Team Building

There must be a plan for a lead position for each team, with a focus on hiring that person first. There should also be a mix of senior and junior engineers for the rest of the team positions. Everyone needs to be realistic about the work to be done. In other words, don’t hire candidates who are over-qualified for the available positions

Training

Formal training materials and documentation are extremely important. It is worth the time and investment required to prepare exhaustive training materials. Once the team is built, someone from the onshore team should go to China to conduct formal training. Again, the training sessions should be well-documented so that the process can be repeated for new hires without requiring anyone to fly over again.

The bottom line? Over-communicate.

Communication

IM and Skype are invaluable tools for enabling the right level of communication between virtual counterparts. The CDC team should provide weekly status reports, and there should be weekly conference calls with the Director and his/her team to discuss how the team is doing and to provide feedback. In the beginning, you should be prepared to call/IM the team on a daily basis. Always ask questions to satisfy yourself that the team truly understands what is expected of them. Provide a detailed project plan so that the team (worldwide) is clear about their deliverables. Communicate with the Team Lead often to provide feedback, and encourage all CDC team members to be proactive. The bottom line? Over-communicate.

Work Distribution

The best model is to give full ownership of a product/component to an offshore development center. TIBCO’s CDC team is extremely proud of what they do, exhibiting a high level of passion. The rest of TIBCO now recognizes this.

Q&A

Eric Silberstein (Idiom): Could you share your employee turnover rates for the various models that you’re using for your offshore teams?

Fiona Tan: We could never really tell with our partner in India. They moved people in and out without TIBCO’s control. We were paying for a head, not for a specific person, so we were always having to return to do training. Even at our captive site in Pune now, attrition is a big problem – it’s not as bad as for many other companies, but it’s still painful. Employee turnover is much less of an issue in China and much more manageable. I will say that, when it’s a problem, it wreaks havoc on project schedules.

Michael Anobile (LISA): Could you walk us through how Worksoft transformed itself? Localization is now only about 25% of your business. How did you evolve to supporting companies like TIBCO? How did you steer your model away from being just a localization provider?

Dr. Junbo Liu: Every company is competing globally today. At every stage of our development, we have been very clear about (1) what the market required, (2) what we could do and (3) how to clearly communicate our capabilities to our potential customers.

We started originally by providing IBM with testing for Simplified Chinese, which was considered to be a very sophisticated task at the time. We learned from IBM how to be a global company. We progressed by providing local services to global companies, then providing global services to global companies, and now we have evolved to providing global services to global companies globally. For example, we are providing over 50% of worldwide support now for one global company’s product line.

My advice? Don’t oversell yourself. Many companies start with localization – China has a very strong domestic market. For example, there are over 4 billion messages sent daily in China! If you can win in this market, you can win globally.

Non-Chinese companies have a very clear goal: to come in and to grow their local business. It is critical that they understand the local value of their product. That’s why there have been so many local companies providing localization services in the past. The next step, though, is for these non-Chinese companies to understand how to integrate their product into the local environment. This is our current value to TIBCO – we enable them to understand and to meet the needs of an IT environment that is changing quickly.

That’s how we transformed ourselves.

Editor’s Note: If you are logged in as a LISA Member on the LISA web site, click here to download a copy of the slides for this presentation. For insights into how TIBCO originally entered China, click here to download a copy of the presentation, China as a Springboard into East Asia for Enterprise Software Companies. For the latest insights into trends in the outsourcing industry in China, click here to download a copy of Cyrill Eltschinger’s (CEO of I.T. UNITED) presentation, China’s Global Sales and Marketing Evolution: Applying Business and Culture to a Flat World.

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LISA is supporting the education drive by service providers in China by distributing the LISA Globalization Industry Primer in both Simplified Chinese and English for free. Click here to download your copy today.