China Is Next Offshore Frontier

Opinion: China looms over India as the next hotbed of IT outsourcing.

Its conventional wisdom that in it outsourcing, China is the next India. Its also conventional wisdom that China is not yet ready to be the next India. And it may be conventional wisdom that theres always someone whos ready to attack conventional wisdom.

One such attack is coming from Freeborders, an offshore outsourcing company that is placing its bet on China now, before most observers think that country is ready to assume—or usurp—the mantle of India as the worlds No. 1 offshoring destination for software development.

"Our goal is to build the Infosys or Wipro of China," said Ramsey Walker, co-CEO of San Francisco-based Freeborders. Walker asserted that a company that has developed sufficient scale and maturity of process will emerge to fill that role within 12 to 24 months. "We believe that only China can rival India because of raw numbers of talent. So we are making our bet on China," Walker said.

Freeborders gamble is well under way. The company now has 400 workers in Shenzhen, about 40 miles from Hong Kong, and aims to increase that number to 1,000. The company specializes in developing software for three vertical markets: retail and consumer products, software, and financial services. Walker described the privately held companys financial condition as "break-even."

The software development market in India is rapidly reaching saturation, Walker said. He agreed with the conventional wisdom of India critics that the countrys tech sector is undergoing rapid wage inflation and that corporate loyalty extends only as far as the biggest signing bonus. "When you have teams that are turning over, and you have wage inflation of 15 to 25 percent, then India is running into issues," he said.

One Freeborders customer, software vendor BroadVision, found the outsourcer on target. Jim Harrington, senior vice president of human resources at BroadVision, said his companys decision to have some product development done by Freeborders in China was not about cost alone, although he acknowledged that BroadVision is spending only about one-fifth of what it might in the United States for the same development services. BroadVision is no newcomer to offshoring, having established a Moscow development center in 1997 and having some development work done by Indian partner Infogain.

Harrington said his company wanted to put down roots in the next offshore destination thats soon to explode with demand. "We view China as the next site of industrial revolution. We want a foothold long term in the enterprise China software market," he said. Harrington said his companys hope is that the group developing BroadVisions software will spread its expertise in China, creating a pool of talent from which BroadVision will later benefit. This will help in the future when BroadVision sells its wares in China; company executives figure the more Chinese people who are familiar with the BroadVision product line, the better the chances of future sales in that country.

One gripe of outsourcing customers is that the team working on their project is subject to change without notice. A customer may think it has signed up with the "A" team, only to have the "B" team swapped in later. But according to Harrington, BroadVision was able to meet and check out the Freeborders team that would be handling its work, with the understanding that the team would stay intact. "We did complete due diligence on the employees, HR, compensation and incentive compensation," said Harrington.

India—old news? China—the happening place? Conventional wisdom is under attack.

Out and about

Alsbridge—thats the new name for the company formed by the recently completed merger of Trowbridge Group and ALS Consulting. Trowbridge was an outsourcing consulting company based in Dallas, and ALS was a European shared services and outsourcing consultancy based in London. The company will continue to advise clients on both outsourcing and insourcing strategy and vendor selection. The combined contract value of all deals negotiated by Alsbridge executives is greater than $50 billion, the company said.

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