David on IT Outsourcing in China: July 2005

David on IT Outsourcing in China

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Monday, July 11, 2004

Dateline: China

Stanford Summit & Panel on China

Before I get to today's topic, I'd like to remind all subscribers of an upcoming conference at Stanford starting next Tuesday night, 19 July and going through Thursday afternoon. It is the AlwaysOn Network Stanford Innovation Summit. For background, the AlwaysOn Network is the largest professional and social online network based in Silicon Valley. I write a weekly or so column titled, "Letter from China" and I will be the moderator for the panel on China. The title for the session, "Are you ready for the Chinese revolt?" was not my choosing, but such is life. Matter of fact, five of the six panelists are definitely pro-China and even the one detractor has an objective take on things.

My panelists fall into three buckets: Two venture capitalists, both with portfolio companies in China; two outsourcing specialists (one is the CEO of a Beijing-based solution provider, the other heads Tsinghua's outsourcing efforts); and, two policy wonks. To me, all six are "star" panelists, but the best know is certainly Sandy Berger. In a previous life, Sandy was the White House National Security Advisor. At over US$2,000 per person, the 600 or so attendees will be mostly C-level executives. (US$2,000 is a rather high hurdle these days, even by U.S. standards.) Top venture capitalists, hottest Silicon Valley firms and chief execs. I will summarize my panel in the August issue of this blog/e-newsletter. For more information, click here or go to http://doiop.com/Stanford.

Lessons from SIMChina: Is It Really China vs. India?

My last two AlwaysOn Network "Letter from China" columns focused on lessons for Westerners, but are also applicable management lessons for China's solution providers, systems integrators and contract software development shops. I don't want to rehash what I wrote. You can read the first part here and the second part here. Alternative links: http://doiop.com/Management (part one) and http://doiop.com/China_vs_India (part two).

In this posting, I'm going to elaborate a bit beyond what I wrote for my AO columns. And I'm going to focus on India and Indians.

First, most firms in China should know the reality: If an Indian firm is in the bidding process, the odds are overwhelming that the China firm is being used as a bargaining chip against the Indian firm. Something that evidently isn't widely understood by China's solution providers is that most American firms require at least three competitive bids. However, if an Indian firm is already in the bidding process, it is quite likely that they have already been selected and all other firms, from China, Russia, the Czech Republic, wherever, are being used to provide a lower bid and benchmark which in turn is used to get a lower price from the Indian firm. Like it or not, that's reality.

Bottom line: Before spending too many resources on proposal preparation, find out if an Indian IT outsourcing firm is in the bidding process. If so, adjust your efforts and pricing accordingly. There may still be strategic reasons for competing; however, it may also be a signal to walk from the bidding process.

Second, is the key decision maker an Indian? I'm going to write about this at length for an article in Forbes China, but I'll touch upon it here (as I did at SIMChina). I've heard from more than a few Indians that there's very little chance that they would let a contract to a non-Indian solution provider. For one thing, it's easier to do due diligence on the Indian providers (sans Western providers). More transparency and geographically far more convenient: It's nice to scope out a half-dozen CMMi5 providers in the same city. Also, American management realizes that there is closer cultural affinity for their project manager. (How much this really matters varies by company and the internal relationships of the PM.) It's also hard to get fired for choosing an Indian global. TCS, Wipro, Infosys, Satyam, Cognizant. Can't get fired for choosing one of these. Finally, a little known secret: A confession that when the Indian PM chooses an Indian provider, he gets free trips to visit his extended family in India. This is more important than many may think. I call this the "unspoken criteria."

Bottom line: Your mileage may vary, but be wary when the key decision maker on an outsourcing/offshoring contract is an Indian. This plays a bit into the above recommendation since there will likely be an Indian provider in the bidding loop. If the key decision maker is Indian and if there is at least one Indian solution provider in the bidding process, your bidding efforts might be better spent on other RFPs/RFQs.

Worksoft hits a Grand Slam

Okay, maybe a three-run homer. But still pretty good. Everyone reading this already knows (or should know) that Beijing-based Worksoft received an infusion of capital from DCM. DCM (Doll Capital Management) is considered one of the most forward-looking Silicon Valley-based venture capital firms and a leader in the China market. Other venture firms look to DCM for guidance. For Worksoft to bag them says a lot about their senior management team. Kudos to Chris and David!! You can read the release here or click on http://doiop.com/Worksoft. Also, read the related piece in USA Today. Very nice.

Although the idea of choosing PeopleSoft as their preferred partner was an obviously bad decision -- even three years ago, it was clear to any analyst that PeopleSoft was living on borrowed time -- at least Worksoft demonstrated (and quite effectively I might add) that they had a real, workable strategy. Also, I realize that picking partners is often opportunistic; one vendor may be an obviously better choice, but it might be nearly impossible to get traction with them versus another vendor.

Bottom line: Expect more Silicon Valley-based venture firms to follow in DCM's footsteps. Tremendous opportunities for many domestic (in China) solution providers. I will get a better read on this in my FTF (face-to-face) discussions at the AO Stanford Summit.

A Pat on the Back

I want to thank Vinnie Mirchandani for putting me in good company. In one of his recent postings, he listed his choices for the top seven "global ambassadors for our (U.S.) technology industry." The eight include Bill Gates, Larry Ellison (Oracle), John Chambers (Cisco), Jeff Immelt (GE), a couple of others, and yours truly. Thanks Vinnie!! See his posting here or click on http://doiop.com/Ambassadors .

New Marketing Strategies

Prussian (the spelling is correct) outsourcing firms take a new approach to marketing. Best to download and watch this. Click here to download or click on http://doiop.com/Prussian_Outsourcing . I can't wait to see the NeuSoft music video!!

Finally, China reaches out to Silicon Valley and America. Who are China's best known living pair and ambassadors for peace? Well, they're not who you think. Try these guys, or click on http://doiop.com/Goodwill_Ambassadors. I want to dedicate their song to my someone special; she's the ultimate cutie!!

Enjoy ...

Cheers,

David Scott Lewis

President & Principal Analyst

IT E-Strategies, Inc.

Qingdao, China & Menlo Park, California

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