Chinese Service Providers as Leverage in Negotiations

David Scott Lewis, the blogger who offers such interesting insights on doing business in China, had this advice for Chinese service providers in his July 11, 2005 blog posting:

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.

Since I don’t expect I have many people who work for Chinese service providers reading this blog, why do I include it here? Simply as advice for readers who work for the client side. Where price is of utmost importance (and it rarely should be), use non-Indian bids as leverage. Of course, as Mr. Scott points out, you may not get the responsiveness you expect.