“We started by delivering the projects that other people don’t want to do, and now we are delivering services that other people are not able to."

Wang’s company belongs to the top tier of Chinese outsourcing companies that is now beginning to do just that. Starting in 1995 with only four people and a focus on language services, Beyondsoft now has an army of over 3,000 engineers, delivering a wide range of ITO (IT outsourcing) and BPO (business process outsourcing) services for global clients. And not just from China – the company recently established its footprint in India through acquiring an ERP services company. Beyondsoft was ranked among the Technology Fast 50 in China and the Technology Fast 500 in Asia by Deloitte and Touche last year.

Editor’s Note: For an analysis of how China’s software development out­sourcing sector and globalization services companies are transforming the country into a global product development center, read The New Breed of Chinese Outsourcers: Building Global Champions, a new Industry Insights Report from LISA. Click here to order your copy or to download your free copy if you are a LISA Sponsor or Corporate Member.

On intellectual property (IP) protection in China:

Sophia Wang: Security, of course, is among the top concerns on the list when Western companies consider outsourcing to China, but the fact that we have been working with Microsoft, HP and IBM from day 1 tells our clients something. We actually have direct access to some of our clients’ source code. We have also received ISO 27001, which is the global security standard. All of this really gives clients a level of guarantee to where it’s not really an issue for them.

Editor’s Note: If you’re a LISA Member, you can log into the LISA web site and go to http://www.lisa.org/archive/forums/2007beijing/presentations.html to download a wealth of information on IP protection in China that was presented during the LISA Forum Asia 2007 CHINA FOCUS.

I think some people in the media are just trying to play negative. Of course, people can have this perception before they come to China, but if they come, once they see the infrastructure, the facilities and the security standards that Chinese companies are following, then they feel much more comfortable. Once you invite decisionmakers and influencers to experience what’s going on here first-hand, it makes all the difference.

On Indian outsourcing companies coming to China:

Wang: Most of the top ten Indian players have established themselves in China. They have more resources, and they are more experienced. Actually, I have to admit that they were a bit frightening to us at first, but I don’t see head-to-head competition because we are not at that level yet. The positive impact is that these companies bring lots of experience, and they will improve the caliber of talent in this market. That will also increase the supply of talent, which is a good thing.

Editor’s Note: To meet Sophia Wang in person, join your globalization colleagues for three days of workshops and two days of networking and program content during the LISA Forum USA when our theme will be Building a Globally Integrated Organization: Reducing the Learning Curve. Wang will participate in China’s Innovative Approach to Global Outsourcing: What It Means for Silicon Valley on June 24. Click here for more information and to register.

Wang: Most of the localization vendors in China, who are in the top tier like Beyondsoft, have a very strong capability to handle CCJK (Simplified and Traditional Chinese, Japanese and Korean). In our case, we cover 35 different languages, and our customers are asking us to produce more in these languages.

On how and why Beyondsoft has changed its business model “on the fly”:

Wang: At the beginning, we were focused strictly on language services, including translation and localization. We didn’t do any outsourcing, and we only had a small vendor pool of skilled translators and software localizers.

With over 3,000 employees, localization services now represent less than 5% of our total revenues

But we have a very different focus today. Due to the commoditization of translation and localization services, we have shifted to IP outsourcing, similar in scope to Infosys and Wipro. With more than 3,000 employees, localization services now represent less than 5% of our company’s total revenues. We generated USD 20 million in 2006 and are on-target to do USD 35 million in 2007.

We evolved quite naturally to IP outsourcing through listening to our own clients describe their business requirements. We moved up the value chain as customers came to understand China's huge talent pool and how companies like ours were evolving their languages services to include a full range of localization and internationalization services for product testing, product engineering and software coding.

Our business focus illustrates Beyondsoft moving up the outsourcing value chain

The next step was for us to focus on developing higher valued skills in terms of management expertise and long-term contract management to meet what was becoming a much greater need on the part of our clients. We found that we had the ability to leverage our own company infrastructure, with a very skilled and fully trained workforce, in a very positive economic climate to move up to a higher margin services business, which would be very difficult to commoditize. We have now switched completely from a cost-based, price-sensitive business model to one that is based on higher-value services and longer-term contracting.

In a nutshell, this shift in our business focus illustrates Beyondsoft moving up the outsourcing value chain to mature as a full-service, globalization development outsourcing partner. That has been our goal, and our revenue split now shows how successful we have been.

On the challenges Beyondsoft faced along the way:

Wang: As with any shift in business models, we faced challenges that we turned into opportunities. Client demand and timing had to be managed, but it turned out that management depth was our biggest strength, and remains so today.

2003 was the turning point

The global business climate was also a major factor. When IBM implemented its globalization resource development strategy comprising Chinese companies and skilled labor as key components of its tactical implementation in 2003, that was the turning point. Many companies began to view China as a partner in developing and implementing a global product strategy.

We didn’t face any financial obstacles – our business generates enough cash flow for us to grow. And for strategic initiatives, VC money was, and is, always available.

However, the challenge that we face today is that the talent market is truly an open one and a global one. That means that finding, training, motivating and retaining quality people resources are crucial for our success. Career path development is key.

On why IP outsourcing in China is based on competitive collaboration and co-optition:

Wang: It’s important that people outside of China understand that IP outsourcing in this country right now is based on competitive collaboration and co-optition among the companies themselves. This is because we’re all focused right now on selling China first when it comes to outsourcing. What this means is that it’s a very good thing when any Chinese outsourcing company wins a contract – even if it’s not Beyondsoft. One more contract means one more opportunity to keep building an educated and skilled work force locally, and one more opportunity to continue increasing China's potential as a global economic force. We all work together through a professional group called China Sourcing.

On what sets Beyondsoft apart from its competitors:

Wang: We have focused on developing talented senior and middle managers through management training. Several of us have prior careers with very respected international companies and MBAs from the U.S. Based on all of this expertise and talent, we have created an environment where global standards are set and followed. Our local and international clients now understand and appreciate the added value of this for their own teams.

We are very careful to set expectations that can be exceeded with our customers

Our commitment to quality means that we have less of a marketing emphasis and more of a focus on developing long-lasting customer relationships based on a low-key style. On a practical level, this means that we are very careful to set realistic expectations with the client that can be exceeded. This way, our customers are happy because we are predictable, and they can always depend on us, no matter what.

On where Beyondsoft is headed in the future:

Wang: At Beyondsoft in the early years, we built up our software engineering services capability around localization, and then we added QA/testing and product development on top of that. The software engineering services are what we’re providing to high-tech product companies now. At the same time, we are investing to build our applications development outsourcing services capability that can add business value to our clients in vertical industries. This includes applications development maintenance, customization, IT infrastructure, etc. It’s actually going to allow us to penetrate further. We can shorten the distance to our clients and have the chance to work together with end clients, instead of with product vendors only.

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Sophia Wang is Vice President of Marketing & Business Development for Beyondsoft, a leading China-based provider of global outsourcing services. Previously, Wang served in various management positions at IBM China. She holds a B.A. in Biomedical Engineering from Tsinghua University (Beijing) and an Executive MBA from the China European International Business School. She is a 2007 winner of the International Woman of Influence Award from GlobalEXECWoman.