David Scott Lewis, who blogs about doing business in China, wrote a fascinating two-part story about IT outsourcing. This guy really knows his stuff — and even better, he’s not afraid to share what he considers the truth. Part 1, titled, “Lessons for Westerners at SIMChina 2005,” contains a lot, but I’ll condense two key points he makes.
China will never become a power in the delivery of software as a service, which limits its future as a real power in the software business. The companies there don’t trust other entities to host their data, which means providers won’t be able to hone their expertise in a domestic market before taking it to the US or European markets.
Chinese providers believe they can target global customers by “remote control” — without having a presence in the countries where they want to sell their services. “Others believe that a 28-year-old engineer–turned–salesperson staffing a shared secretarial office is good enough. Few are willing to make the necessary investment in staff: sales, project management, and technical support.”
Part two, “Reality Bites: Is It Really China vs. India?” calls into question the common thought that somehow China is perhaps only five years behind India in delivering software development services and that it’s “catching up at a breakneck pace.” Mr. Lewis wrote that with few exceptions, Chinese firms “don’t’ have a chance to build enterprise-class capabilities.” Those contracts, he said, typically go to IBM Global Services. As he points out, it’s a leap to go from doing custom application work to the enterprise level: “Java coding to a 150-page spec is not the same as integrating i2 with Siebel.”
However, he explained, as Indian firms take on more complex work, China stands a chance at getting the “tier 3 and tier 4” level work that peer firms in Indian will begin charging too much for.
Entertaining, informative read.