By guest author Tony Scott
Growing in China
Tony: Are people reacting positively to the China alternative, or is it something that you have to work on changing their perceptions over time?
Jean: Some clients simply don’t care. It doesn’t matter if they are going to take it across the street or across the world, if they are taking it out of their own organization, it doesn’t matter where it’s going. Their goal is to get the best price and the best skills that they can. For others in the financial services world, they are very concerned about security and have protocols for what can and can’t be off-shored. We deal with that either by not taking some types of work to China, or by tapping into their systems rather than trying to open up something in China directly. We are not creating CDs or DVDs that you can sell on the street, so there is essentially no “IP leakage” risk in the kind of work that we do.
Tony: Are most of your people in China in one location or in multiple locations?
Jean: We have our largest location in Shenzen, which is forty minutes from Hong Kong, but we do have other locations as well. You get good management leadership out of Shenzen. It has great colleges, and it’s very good in English schools. The government incentives there are wonderful – the local government support is wonderful. The infrastructure they built is what you need for good IT outsourcing: telecoms, power, good roads and all those kinds of things, they are all there.
Tony: One thing the Chinese have done very well is to make sure the infrastructure is there to work.
Jean: The first time I was there I expected India; I was just in awe of what they had created.
Tony: It is pretty amazing. If you go to many of the regional airports in China, they are quite good. When you realize that all of this was built in the past twenty years at best, it’s quite impressive.
If you look out at the next, say, three years, hopefully by that time things are getting back to more normal in the global economy, or at least we will understand what the “new normal” is. What do you think the big challenge is going to be over that period in the outsourcing and off-shoring arena in general, and for Freeborders specifically? Are there areas that are specific to what you do that makes you feel it will be more challenging by having so much of your workforce based in China?
Jean: I think generally the Indian market will heat up again as people start to spend more, because demand in IT organizations has increased. As economic demand builds in India, they will again have wage inflation and turnover and all of those problems. This will create additional opportunities for China and likewise for South America and Russia. But I think China will benefit more than South America or Russia because of the Chinese government’s dedication, and the country’s education systems and infrastructure. All of those things give China a head start. Plus, there is such an affinity between the U.S. and Chinese economies these days that lots of people want into the Chinese market, which creates opportunities to launch off-shoring there. So, generally, I think India will heat up, and that will create opportunities for China.
Specific to Freeborders, I think there is a pure momentary approach to outsourcing by some companies, but many companies understand that it isn’t just about a rate card, so we’ve been able to have more intelligent conversations focused on value rather than purely on price. Again, specific to us, I think we will continue to see opportunities to have a more holistic relationship with clients that goes from consulting all the way through building and maintenance. I also think that going after the mid market will continue; companies need to reduce costs and find what works for them.
The third challenge I think is for everybody. There has been a growth in business process outsourcing (BPO), which has been call center low-end stuff, marrying specific business processes with the IT associated with them. I think it’s an opportunity and a challenge for everybody. When you outsource the process along with the IT associated with it, you want to make the process cleaner. Because if you are going to do process improvement you really have to fix the IT as well; otherwise, you can’t really achieve the highest level of improvement.