The report provides an analysis of how China’s software development out­sourcing sector and globalization services companies are transforming the country into a global product development center. It will introduce you to the players through their own words, and through the perspective of top Western companies who are working with them, based on face-to-face interviews.

We “whet your appetite,” here’s an excerpt from Chapter 3, Looking for an Outsourcing Partner? Then Know Thyself! Click here to order your copy or to download your free copy if you are a LISA Sponsor or Corporate Member.

What Does the New Chinese Partner See on the Horizon?

Based on comments from all of the executives whom LISA interviewed over the last several months for this publication, it’s apparent that your new Chinese Partners for outsourcing perceive you as a possible “800-lb. gorilla.” According to Grace Chen (Chairman and CEO of Oceansoft International),

“Today’s challenge for China will be in how it globalizes itself. To take the best from others who have gone before and to adapt it through innovation. At a company-level, it’s a question of how to “nab the 800-lb. Gorilla,” while still maintaining a successful relationship. The gorilla will choke you if you don’t have good processes in place.”

What Does the New N. American, European (or Japanese) Partner See on the Horizon?

And, what do you see as you consider starting one of these relationships partway around the globe? The top two issues, based on our interviews (rightly or wrongly!) remain intellectual property (IP) protection and language.

Headquarters executives still view IP protection as the #1 risk to offshoring in China – rightly or wrongly

According to Fiona Tan (Vice President of Engineering for TIBCO Software),

“IP is the most important asset for a software company like TIBCO to protect. Executives at headquarters still view this as the #1 risk to offshoring in China – rightly or wrongly. It’s probably due to a lack of up-to-date information and outdated advice in the media.”

VanceInfo Technologies runs TIBCO’s China Development Center (CDC), and Dr. Junbo Liu (Executive Vice-President) sums up what all of the Chinese outsourcers emphasized during our interviews:

“We are very sensitive and understand completely the value of intellectual property. We work together with our clients to protect IP, so that there will be no incidents. IP, of course, is related to a company’s investment. Since VanceInfo has invested and developed expertise to protect its clients’ IP, we have the same interest in IP protection as they do.”

(For more on the IP issue, see chapter 2, Myth vs. Reality: 5 Popular Misconceptions.)

The lack of English in China is a transient problem

Aside from intellectual property, language is usually the second most often cited factor when people consider the risks of doing business in China. In other words, they don’t think there are enough people who can speak English. Jan Gronski (Managing Director of Cisco’s China R&D Center) sums up the view of several executives whom we interviewed for this report:

“Now, first of all, I look at this as a transient problem. I think that in twenty years there will be more English-speakers in China than in any other country in the world. In fact, here in Shanghai, they started teaching children English in elementary school a few years back. Therefore, in historical terms, this is not really an issue. However, to the company that has to deliver something today, it matters.

But we’ll get there. We’re not there yet, but everybody understands that this is important, and they’re doing something about it. Now, what about us today? Well, first of all, because there’s such a vast talent pool, we can draw upon it to select the engineers who speak English, right? In other words, the ones who have a sufficient enough knowledge of English to communicate.”

Mid-level managers at Adobe, HP and Sun all confirmed this view during the LISA Forum Asia CHINA FOCUS in Beijing in March 2008.

On-going Executive-level Commitment Is Critical for Success

As you can see, both partners in this type of outsourcing relationship are starting out with a fair amount of trepidation at the executive level. That’s why it is critical to have executive-level buy-in at the beginning and on-going support in the form of daily/weekly communication between the appropriate levels at the executive level at each partner.

There must be full authority invested in an executive on each side, with “collaboration” and “transparency” as the guiding principles

In a joint interview last year with Tan and Liu, both stressed that the only way for a full partnership to work is for there to be full authority vested in an executive on each side to make/change decisions. This allows them to resolve issues quickly. There must also be a plan for a lead position for each team, with a focus on hiring that person first. The rest of the team positions should then be composed of a mix of senior and junior engineers.

TIBCO has full visibility into the day-to-day operations of its CDC, and Tan knows all of the engineers there – without having to actually manage the operation or worry about dealing with real estate brokers for space. For her, it’s the best of both worlds.

On the other side, TIBCO provides its CDC management and engineers full visibility into its 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 and management training on both sides of the ocean. Tan emphasized the fact that 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.

Developing the Perfect Outsourcing Partner Profile: 14 Questions to Ask

Developing the perfect profile for your outsourcing partner candidates depends on two areas:

Knowing your own organization

This means intimately understanding its strengths and weaknesses, and having a clear vision of how your partnership strategy meshes with your overall corporate strategy.

Involving your executives and managers in developing the actual profile

Obtaining buy-in from your management team up-front for the partner profile will make it that much easier to ensure that all teams across the enterprise are committed to making the outsourcing partnership work from day 1.

Here are some questions to help you and your managers to develop an outsourcing partner profile to keep you on-track and focused during your search.

• Why are you looking for an outsourcing partner at this point in time? Pluses? Negatives?
• What are your organization’s core values? Which ones must a partner share in order for both of you to build a successful, long-term relationship?
• Will top executives from each organization be able to work together on a daily/weekly basis to ensure the success of the partnership? Have any of the top executives gone to school or worked in the others’ home country?
• How should an outsourcing partner candidate leverage one or more of your organization’s strengths, or cancel out one or more of its weaknesses?
• Are you specifically looking to source “routine” vs. “adaptive” expertise in certain areas?
• What type of customer (if any) should your ideal candidate bring to the table? How much in incremental revenues over the next 12-24 months?
• Does your ideal candidate need to have any special technical, linguistic or domain expertise? What about R&D, operations, sales, marketing or support expertise?
• What characteristics in an ideal candidate would enhance the integration of your workflows, processes and tools?

Editor’s Note: For the rest of the questions, along with a chart with sample weighted criteria that will help you organize this information, click here to download a copy of The New Breed of Chinese Outsourcers: Building Global Champions.

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Rebecca Ray is a highly accomplished Globalization Consultant in the high-tech industry and co-author of the book, Doing Business in the USA: Marketing and Operations Strategies for Success. She is currently a Consulting Partner and Managing Editor with LISA. Throughout her 29-year career, Rebecca has been a pioneer in managing worldwide product design, localization, marketing and distribution for several high-tech companies. She is fluent in English, French and Spanish, and proficient in Portuguese and Turkish. You can reach Rebecca at rebecca@lisa.org.