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Excerpts

Selected excerpts from Source Code China - The New Global HUB of IT Outsourcing:


CHAPTER 1 - Outsourcing: The Most Important Management Trend of the Past
75 Years

"Outsourcing is more than just a business process—it is also a fad and a matter of face (a very Asian concept). Potential outsourcing customers ask questions like ‘‘What are your capabilities in India?’’ China is clearly a better choice, but it is still a very novel concept that started to appear in 2003. But we will spend a bit more time on that later.
Companies that already have extensive Asian market antennas and history are clear on China’s position and outsourcing potential and moving into the China market. The majority of companies that have experienced this shift away from India and toward China are making aggressive plans to grow further. Others are afraid simply because they do not know what to expect if they enter the China market. They hear a lot, they are curious, they take a discovery trip, but they are still unclear and worried. For many companies, choosing India is less risky because it is already widely accepted as an outsourcing center.
Managers choosing India may now find this is no longer the safe choice, based on past data, and are making poor recommendations to their firms, in the face of rising costs, high turnover, and a diminishing tech talent pool. Over the course of this book, we explain why China is the clear choice for the future as the leading source of offshore outsourced technology talent."

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CHAPTER 3 - China: Your Essential Shore

"One of the most convincing pieces of evidence that the global outsourcing market is shifting to China is the expansion of India's top outsourcers into it in order to take advantage of lower costs and a sufficient supply of available talent.
Since 2005, these companies have come to China in force [...]
This returns to our original concept of the Essential Shore. Outsourcing to China offers not only advantages in terms of quality, cost, and availability of talent, but an IT services strategy here can be incorporated into a complete China strategy, given the existing or developing presence of most major corporations. India's outsourcers had to come to China in order to support their multinational clients, who have smaller or no presence in India. By choosing country over company when selecting an outsourcing market, China's continuing attractiveness as a global business destination makes its use as an IT outsourcing services location all the more obvious."

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CHAPTER 4 - Strategies that Work

"Given the fact that experienced engineers with a high level of English proficiency are in high demand, globally, it is indeed no surprise that in the view of more multinationals moving in to set up captive centers, salaries for certain skill sets have started to soar in some major outsourcing cities. While rates may experience a natural increase, the output or supply in the China market keeps climbing. As the supply keeps climbing, the amount of available talent that enters the workforce has a positive impact on the demand coming to China. It is important to note that until now, primarily only university graduates have been making up the numbers of tech graduates. It is to be expected that the ‘‘blue collar programmers’’ graduating will start adding to the supply of qualified tech talents in the near term.
As the government has selected technology as one of the key pillars and engines of the economy, it is a safe industry to work with and count on. China does not do things halfway."

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CHAPTER 6 - Winning the Talent War

"With China's economy almost doubling in the past five years and expected to maintain about 10 percent annual growth for 2007 and 2008, talented employees face abundant opportunities and temptation to leave for new employment. While the rapid growth of China's economy is a blessing for many companies, it is also proving a headache for HR departments across industries. As the ‘‘war for talent'' heats up, methods such as decent salaries and benefits, promotion, and well-designed training programs are no longer sufficient to retain talent. One feature of China's job market is that it has plenty of talented professionals to offer. But another feature is that demand for talent exceeds supply."

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CHAPTER 8 - IT Outsourcing, Business Process Outsourcing, and Knowledge
Process Outsourcing in China

"While labor arbitrage was the initial business driver for shifting work, the locations for lowest cost labor continue to shift as new markets emerge. It is not economically feasible for companies to continue to chase the lowest cost market. Companies will want to outsource to lower cost markets, but other drivers will become more dominant. In terms of global competition for outsourced business, India appears to have a clear lead over other global players. China, however, is emerging as a significant player that could eventually challenge India. While any presentation from an outsourcing provider will show their company and country as the best solution, clearly there are advantages and disadvantages to any locale that must be considered and weighed against a company's specific strategic needs.

Advantages to outsourcing in China include:

■ A workforce of undisputable size that is educated and skilled

■ Low wages-China is not yet experiencing the wage inflation that is impacting India's outsourcing model

■ A large university system and an increasing cultural emphasis on university-level education

■ Relatively low unemployment and less employee turnover than India

■ Rapidly improving telecommunications and business infrastructure

■ Chinese government has had success in modernizing the economy and these efforts appear to be continuing

■ An undisputed large domestic market with growing purchasing power

■ Outsourcing in China brings access to other markets geographically

■ Culturally Chinese employees are hardworking, dedicated, and eager to learn and satisfy their customers' expectations"

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CHAPTER 10 - China 2020

"It is difficult to predict at which point the output for annual computer sciences and software graduates will start to plateau, but one thing is sure, we have not yet reached that point. It is a reasonable projection by 2012, to anticipate that China will see annual numbers of tech graduates soar close to, if not above, 500,000. Most of the current figures are based on universities and technology institutes graduates. To add to these numbers, the so-called blue-collar programmers are in the ramp-up phase as well. That will see a large number of low-cost high-school graduates enter the work force at even lower labor costs.
So when anticipating what 2020 might look like from a tech talent annual output perspective, expect a qualified output of fluent English speakers (taken as computer sciences—software and related fields) between 500,000 and 1 million per year. It is very realistic to take an outlook of 2020 with 800,000 graduates a year (white and blue collar)."


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