Pros and Cons of doing business in China

From 30,000’ view Pros and Cons of giving your outsourcing business to China could be summarized as

Pros

  • Comparatively low rates
  • Low attrition rates
  • Large pool of talent in many areas
  • Superb work ethics of the workforce
  • Well organized / highly disciplined organizations
  • Staff’s desire to succeed (learning and becoming stronger professional rather than pure career move)
  • Flexibility of the contract arrangements

Cons

  • Poor English skills
  • Weak grasp on western communications style, wide cultural gap
  • Poor theoretical knowledge in many key areas
  • Weak technical skills in comparison to the mainstream Silicon Valley resources
  • Limited access to resources in several key areas (e.g. business analysis, architecture)

For most outsourcing initiatives that I managed and consulted on Cons outweighed the Pros. Yet I hope that sooner or later I find the right project and a team in China to match, more so I believe that the balance of Pros and Cons is changing as we speak; in particular

  • Poor English skills – Chinese government and outsourcing companies are making very significant investments in English training.
  • Weak grasp on western communications style, wide cultural gap – A large number of expatriates returning to China with their families after living in the USA and other countries is reshaping culture of Chinese outsourcing.
  • Poor theoretical knowledge in many key areas – I am not seeing notable changes there; possibly due to the fact that majority of service buyers are not concerned with that issue.
  • Weak technical skills in comparison to the mainstream Silicon Valley resources – Using an old joke as a metaphor – Chinese vendors do not need to outrun Silicon Valley they just need to outrun Indian vendors.
  • Limited access to resources in several key areas (e.g. business analysis, architecture) – Influx of expatriates and attention to the issue should eventually take care of it.
Of course as Cons are being addressed China may lose some of its competitive advantage in Pros category – attrition rates, cost, etc. That remains to be seen.

I always thought that China was destined to win, and if I ever had any doubts they were eliminated after my trip to Shenzhen. When you see what a combination of strong hand of the government and grass root entrepreneurship can do to transform a small fishing village into a megapolis in just 35 years you start to believe that there is nothing that China can not achieve.

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3 thoughts on “Pros and Cons of doing business in China

  1. Alex Robbio

    Hi Nick,
    Great blog! I have been to China a few times and we ended up deciding to open a Delivery Center there. I’d say that I agree with most of the cons that you have listed here but we believe China has huge potential mainly because people are so eager to learn, improve and work hard and also because the government has the right mindset and is commited to the long-term success of the IT industry. We have received more government help in China than in our country!

    We also believe that many of the cons you mention can be cost-effectively circunvented by leveraging near-shore resources to manage many of the front-end tasks. This is what we call blended-shore solutions and we are seeing a lot of excitement about this idea.

    Thanks again for a great blog!

    Alex Robbio
    http://www.belatrixf.com
    Agile IT Outsourcing from Argentina and China

  2. Nick Krym Post author

    Congratulation Alex, great move! I agree that multi-coast operations can be exceptionally effective. Best of luck! I will follow with you via email later. Nick

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