2006

A life insurance policy for China

A strong life insurance industry could help China tackle its economic and social challenges. Stephan H. Binder, Heidi Z. Hu, and Peter B. Walker Web exclusive, March 2006 After 20 years of breathtaking growth and massive industrialization, China is now facing economic and social challenges to its sustained development. On the one hand, it must find 12 trillion renminbi ($1.5 trillion) over the next five years1 to finance the construction of a staggering amount of physical infrastructure if it is to keep its growth on track and extend economic development to smaller cities and rural areas. On the other, it must address increasingly pressing issues of social harmony and stability, in part by tackling shortfalls in its pension and social-welfare systems. Both of these efforts will be crucial for narrowing the potentially explosive gap between the wealthier coastal and urban regions and the poorer countryside.


Leaks in the Great Wall


China Software Outsourcing – A 29.5 Billion Market by 2009
By Danny According to a new research, China's domestic software outsourcing market will develop rapidly with a growth rate of 35.6% from 8.71 billion in 2005 to 29.43 billion in 2009. Analyses...


China strives for offshore outsourcing supremacy
Communist China is vying to become the favored global offshore outsourcing destination. With many a government initiative in this direction, it is indeed making calculated moves to achieve offshore outsourcing supremacy.
Strong government initiatives, an education system creating a larger skilled work force, and unique economic conditions has positioned the country to challenge even India for dominance in offshoring......

Outsourcing to ChinaIN A vast curtained room in Xian in western China, rows of dark, pony-tailed heads are sliently bowed, fingers moving quickly and expertly. They might be in any Chinese factory- except that they are not assembling shoes, nor soldering circuit boards, but sitting at computer terminals processing medical-claim forms from New York and car-loan applications from Detroit and marking examinations for high-school students in Melbourne, Australia. This is the future of the global back office, says Michael Liu…

2005

China's looming talent shortage

To make the move from manufacturing to services, China must raise the quality of its university graduates.
Diana Farrell and Andrew J. Grant
2005 Number 4
With a huge supply of low-cost workers, mainland China has fast become the world's manufacturing workshop, supplying everything from textiles to toys to computer chips. Given the country's millions of university graduates, is it set to become a giant in offshore IT and business process services as well?

Can US auto suppliers stay ahead of Chinese rivals?

Chinese parts producers do have one advantage—cheap labor—but that isn’t the whole game. Stefan Knupfer and Glenn Mercer Web exclusive, September 2005
The US automotive industry is understandably concerned about the competitive threat of low-cost cars and components from China. The United States already imports almost $4 billion a year in Chinese parts, and that figure grew by an average of 25 percent annually over the past three years.

How private equity firms can play in China

Given the difficulties of doing business there, direct investment in Chinese companies isn’t always the best option. Gordon Orr Web exclusive, February 2005
International private equity houses are stepping up their efforts to invest in China in the next few years, reflecting a gold rush mentality that could leave some investors disappointed.
Private equity funds with good connections and deep insights account for the bulk of recent investments. But some new entrants have relatively untested China investment teams.
The influx of new money reflects the pulling power of the "China story," which suggests that there are opportunities that investors cannot afford to miss.

Can China compete in IT services?

Many of China's companies have proved that they can compete with any business in the region. But a close look at the Chinese IT industry shows that it must overcome significant obstacles before it can pose a threat to India.The take-away Fragmentation and a consequent lack of scale will prevent China's IT firms from capturing a larger part of the outsourced-IT-services market until the industry consolidates and learns to manage its talent more effectively.
This article includes the following exhibit:

• Exhibit: M&A not a priority for Chinese software-services companies

India Vs China - The IT Outsourcing War
Changes in the Chinese IT Industry have been phenomenal. The country is making remarkable improvement in increasing English-speaking software engineers to sustain IT offshoring projects. The Chinese government is making serious efforts to attract investors and widen its revenue from the IT sector. The transformation has been termed as the 'Changing face of China'. The growth had left the leading IT outsourcing giants and the government of India, tense. Is the growth of the Chinese Software Industry a threat to the Indian IT rule? This paper presents a discussion India and China IT Outsourcing War.

Making It in China
It’s Cheaper In China When Mike MacKenty first considered sending Web-based development and maintenance work to China two years ago, he was already well-acquainted with the fourth-largest country in the world. He'd visited his company's various manufacturing sites in China, a country coming on strong in the offsourcing scene, several times. So he thought he had a good handle on the problems he might face in sending IT work there. He knew he would need to find good IT talent with decent English skills and beef up his own IT department's internal processes for packaging up projects to send abroad. And he would have to address any internal opposition to offshoring.


Moving to China
For many years, Plantronics, a manufacturer of headsets, resisted moving production to Asia. Given the nature of Plantronics' business, the cost savings afforded by a Chinese workforce were small, and when the additional costs associated with a physically longer supply chain--higher inventory, higher freight costs, and lower flexibility--were added, the savings were quickly eaten up. So why, after dismissing such a move for decades, did the company decide to break ground in December 2004 on a manufacturing facility in Suzhou, China? And why is the company operating the plant itself instead of outsourcing manufacturing altogether to reap the biggest cost savings? The answer to both questions is found in the way Plantronics' corporate strategy drives decision making in its supply chain. The company's strategy requires a manufacturing process that is highly flexible, relies on skilled and innovative workers, focuses on optimized total cost, is close to markets, and protects its intellectual property. It was an analysis of each of these demands that led the company to its present course of action. And by understanding further how Plantronics viewed its supply chain through the lens of its business priorities, companies may discover a stronger framework for thinking more strategically about their own supply chains.


China Rivals India in Services
Software outsourcing in Asia’s billion-dollar-plus giants bears distinctly different fruit.
September 5, 2005 Print Issue
China’s burgeoning software outsourcing sector knows where its advantages lie. When bidding against established Indian rivals for a contract from an American or European company, “certain companies encourage prospective clients to fly to India first, and then come over to Beijing, Shanghai, or Shenzhen,” says Dion Wiggins, a Hong Kong-based analyst for Gartner Research.

China’s gleaming new cities are a surprise to some Westerners, who still see millions of bicycles when they think of Beijing.


Research Summary: The China Reality Check
Impressions from a Recent Market Visit
By neoIT
neoIT conducted an extensive visit to china during the latter half of April with the intent of obtaining a clear understanding of the IT services market and service provider capabilities. During the visit, neoIT met with 16 leading suppliers across the country in cities such as Shanghai, Beijing and Dalian. The trip was extremely informative as it allowed us to better appreciate the facilities and capabilities of Chinese IT services companies as well as evaluate the state of the infrastructure in various parts of China. We were also able to assess key gaps between perception and reality.
In this paper, we will address the follwing questions:
-What are the characteristics of the IT services market in China?
-What are the perceptions foreign companies have of China with respect to the IT services industry?
-What key trends can be postulated for the China IT services industry?


The ICT landscape in the PRC: market trends and investment opportunities in China
Information and Communications Technologies (ICT) are increasingly an important tool for supporting sustainable development and economic growth in developing markets. By embracing communications at unprecedented rates, people around the world have demonstrated their appreciation for the contribution of ICT to the betterment of their lives. It took 113 years from its invention for the fixed telephone to reach ten percent global penetration. It took 15 years fromt its invention for the mobile telephone to reach the same penetration, and ten percent of the World's population are now Internet users less than twelve years after the birth of the World Wide Web.
China: Golf, Sushi -- And Cheap Engineers The Chinese port city of Dalian is becoming an outsourcing centre for multinationals

Stroll along the aptly named Japanese First Street in downtown Dalian, and it's easy to forget you're in north eastern China. With its faux rice-paper lamps and shoji sliding doors, the street could easily pass for a tidy neighbourhood in Tokyo. There are restaurants with names such as Fuji and Fukuhana, and signs on storefronts are all in Japanese. Kimono-clad women stand outside sushi bars and karaoke joints, beckoning salary men to come inside. JCB credit cards -- or, even better, Japanese yen -- are accepted everywhere.


2004
China IT Outsourcing Panel: Managing Perception and Improving Reality to Capture the IT Opportunity

Plotting a "China Strategy"

More often than not, it's necessary for Westerners to act like a missionary with an evangelism apostolate. (Part One of Two.) David Scott Lewis [IT E-Strategies, Inc.] | POSTED: 12.01.04 @00:01A lot of Western companies are in the midst of designing (perhaps "divining" is a better term) their China strategy. And many Westerners are trying to figure out what China might mean for them. Although there's way too much to say in these columns, I can toss around some basic considerations.

Like always, it's important to figure out what you personally want and/or your company wants to accomplish in China. Although it may seem like I'm stating the obvious, many of all ilks are treating China like it's the new Gold Rush. Maybe it is, but the actions of many seem foolhardy at best. For the balance of this column, I'm going to take the perspective of an individual rather than a company—although my comments apply to both individuals and companies.

Plotting a "China Strategy"—The Bonus Points

Location considerations for the enterprising expat. (Part Two of Two.) David Scott Lewis [IT E-Strategies, Inc.] | POSTED: 12.08.04 @01:28Continued from Part One.)Certain places are "safer" than others, too. If I were a VC with limited experience in China, I'd place my first bets in Shanghai (SH) and Beijing (BJ). Actually, I'd bet on Hong Kong (HK), then BJ, and then SH. SH is my favorite city in the mainland, but it wouldn't be my first choice for IT investments. However, even this requires a bit of refinement. For example, contrary to so-called conventional "wisdom," SH is in many ways a better place to locate an enterprise software R&D unit—i.e., a better place than BJ. (Proof points to follow in a future column.)



2003

Can Chinese brands make it abroad?

2002

Roadside retail in China

A buyers guide to Offshore Outsourcing: China
CHINA: Up-and-comer
Geopolitical risk: Moderate
Infrastructure/Communications: Fair. Best in software centers.
English proficiency:Poor
Labor cost advantage (average IT programmer salary): $8,952/year
Pros: Think India 10 years ago-low-cost workers and lots of them. China is currently experiencing the opposite of brain drain: the number of IT professionals returning to the country is increasing.
Cons: Multinationals are eating up the labor supply. Not the best option for enterprise customers seeking to outsource development or maintenance-poor English skills, lack of exposure to Western business culture, shaky U.S. relations and immaturity of processes all pose risks.
Insider tip: China could be a better place to outsource in five years.



Analyst David Scott Lewis Shares his China Perspective

By Dian Schaffhauser
You can never know what's going to come out of David Scott Lewis' mouth next -- but you should know whatever he says will be insightful and you'd better pay attention. An ex-METAGroup analyst who -- along with many others -- lost his job when the company was acquired by Gartner Research, he had never been to China, aside from Hong Kong. But not so many months ago, he moved overseas because little was keeping him in the US and love beckoned from afar (and online). The last time we caught up with him -- in July 2005, when he’d returned home for a brief visit to speak at the AlwaysOn conference at Stanford University -- he was providing consulting services in China, primarily to US clients trying to locate just the right service providers to work with.In this interview, Mr. Lewis supplies a no-holds-barred rundown on the current state of the outsourcing business in China. Part 1 of a three-part article.

Is it easy for an American to get a job in China?

David Scott Lewis: Well, because I was sponsored by a software park, it was easy for me. If you don’t have connections, it can be difficult to get a visa. I mean you can go for 30 days, but to get for one-year multiple entry... Once you’re in the loop, it’s very easy to stay in the loop, but to get in the loop could be a little bit difficult, which is good for us. Keeps other people away.



Doing Business in China

By Mark Streich
One billion customers!

That has been the siren song for countless businesses thinking about selling their products in China. But unlike the mythical Ulysses' order to his men to ignore the song, James McGregor's book, ONE BILLION CUSTOMERS: Lessons from the Front Lines of Doing Business in China (Wall Street Journal Books, $27), attempts to prepare you for what you may encounter when you are enticed by it.
McGregor was The Wall Street Journal's China bureau chief after the 1989 Tiananmen Square massacre, chief executive of Dow Jones' China business operations during the 1990s, and a venture capitalist. These positions gave him access to people and information that few businesses have.

That is perhaps my greatest misgiving about the book. His experiences are not likely to be relevant to the vast majority of readers, as you're unlikely to have the same access in your business dealings. How many of you will be able to draw upon high level contacts in either the U.S. or China government when you're being strong-armed by a ministry official, or have the media's ear when your intellectual property is being stolen?

Global Outsourcing: Destination China
A pre-recorded Webinar that discusses the advantages and disadvantages of offshoring to China as well as tax and legal issues.


Interview with a Beijing Official on Outsourcing By Dian Schaffhauser The People’s Republic of China, if you haven’t noticed, is mind-bogglingly big. A behemoth of a country, just the Great Wall alone stretches longer than the distance between New York and Los Angeles. So, it would not be too shameful a thing to confess that, beyond the economic jugular cities of Beijing and Shanghai, beyond the well known fact that China is the largest consumer market in the world and the source of industrious and dirt-cheap workers, you have no idea where to begin to make sense of the country in terms of IT outsourcing and -- most importantly -- how and where best to find an outsourcing partner that will serve your needs and/or help you establish an offshore development center.

Can you qualify how important outsourcing is to Beijing government and what it adds to the economic progress of the area?

First of all, I think it is necessary to make sure you know some of the background of Beijing. The population of Beijing is quite large -- 17 million. Among the 17 million, 14 million [are] permanent residents. Three million [are] temporary. For the last 10 years, the [gross domestic product] growth is almost 10% per year. As for the capital of our country, the government in Beijing promotes policies for the comfortable living of [all] of Beijing.


Outsourcing in China: The Beijing Region

By Jacqueline Zhang
The People’s Republic of China, if you haven’t noticed, is mind-bogglingly big. A behemoth of a country, just the Great Wall alone stretches longer than the distance between New York and Los Angeles. So, it would not be too shameful a thing to confess that, beyond the economic jugular cities of Beijing and Shanghai, beyond the well known fact that China is the largest consumer market in the world and the source of industrious and dirt-cheap workers, you have no idea where to begin to make sense of the country in terms of IT outsourcing and -- most importantly -- how and where best to find an outsourcing partner that will serve your needs and/or help you establish an offshore development center.

SPECIAL REPORT: Outsourcing to China, Part 1

By Jacqueline Zhang
According to some reports, China is just a few years away from catching up with India as the destination of choice for companies looking to outsource all or parts of their operations. Others say, no way! Too many barriers sit between it and success. The important question right now is what recent developments in China mean to your organization and its outsourcing strategies.

Taken at face value, China’s presence in the service provider world is good news, since much of the impetus to outsourcing is cost management, particularly in the area of labor. China’s cost advantage -- which can translate into as much as a 70% savings over US salaries -- sounds compelling.


SPECIAL REPORT: Outsourcing to China, Part 2
By Jacqueline Zhang

Intellectual Property Concerns

There’s just one way to describe the record of intellectual property (IP) rights protection in China: appalling. Pirated DVDs and fake branded goods are ubiquitous on the streets, and -- more relevantly -- up to 98% of software products sold in China are unlicensed or pirated copies. There’s almost no cultural awareness for IP rights. It’s been said that in China, anything that can be profitably copied will be.


The Current State of Services Outsourcing in China
By Dian Schaffhauser
You can never know what's going to come out of David Scott Lewis' mouth next -- but you should know whatever he says will be insightful and you'd better pay attention. An ex-METAGroup analyst who -- along with many others -- lost his job when the company was acquired by Gartner Research, he had never been to China, aside from Hong Kong. But not so many months ago, he moved overseas because little was keeping him in the US and love beckoned from afar (and online). The last time we caught up with him -- in July 2005, when he’d returned home for a brief visit to speak at the AlwaysOn conference at Stanford University -- he was providing consulting services in China, primarily to US clients trying to locate just the right service providers to work with.In this interview, Mr. Lewis supplies a no-holds-barred rundown on the current state of the outsourcing business in China. Part 3 of the three-part article.


The Passage to Outsourcing in China
A rundown on outsourcing in China by attorney Peter A. Neumann that includes useful advice about how the legal system in China works, the risks you face in doing business there and how to mitigate potential problems.



This expert explains how to work with China
By Dian Schaffhauser Just like IT service providers elsewhere in the world, those in China would have you believe they can handle just about any aspects of your programming, testing or localization work. Only a small percentage has actually succeeded in attracting business outside their own border.
Using International Arbitration to Resolve Disputes in China
By Walter J.Duffy, Jr.
Walt Duffy is the head of Faegre & Benson's international arbitration pratice. He recently represented a U.S. equipment manufacturer in a highly successful arbitration in China.


Your China Strategy Development: Advice from an Analyst
By Dian Schaffhauser
You can never know what's going to come out of David Scott Lewis' mouth next -- but you should know whatever he says will be insightful and you'd better pay attention. An ex-METAGroup analyst who -- along with many others -- lost his job when the company was acquired by Gartner Research, he had never been to China, aside from Hong Kong. But not so many months ago, he moved overseas because little was keeping him in the US and love beckoned from afar (and online). The last time we caught up with him -- in July 2005, when he’d returned home for a brief visit to speak at the AlwaysOn conference at Stanford University -- he was providing consulting services in China, primarily to US clients trying to locate just the right service providers to work with.In this interview, Mr. Lewis supplies a no-holds-barred rundown on the current state of the outsourcing business in China. Part 2 of a three-part article.