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.

Not yet ready for China

I love travel and visit new places, even if that’s on a business trip. Needless to say that living “5 to 7” lifestyle (by 5 am Monday you are on a plane to the client and ~7 pm on Friday are back on your way home) grows old quickly, but my engineering leadership role delivers travel in just the right amount. So I was quite excited when I got a chance to go to China to meet with a few promising offshore outsourcing companies. Impressed by meetings with vendors’ execs I was looking forward to starting with one of their teams in China.

Jumping ahead, I have to tell you that out of my top three impressions of China one was far above the expectations, one was at par, and one was way below. The first one was food – sorry Chef Chu, Dragon Well, and Yank Sing – there is no better place for Chinese food than China. The impression that was exactly at par with my expectations was my prospect resources’ command of English – it was dreadful. That was not a big deal for me though – English is a second language and work in progress for me as well, plus quoting Clarence Darrow, “Even if you do learn to speak correct English, whom are you going to speak it to?”. The thing that fall way below my expectations and to large degree ruined the trip was technical skills of engineers I saw.

Having spent the last 10 years of my life in Silicon Valley I’ve been conditioned to be surrounded by people much smarter than I. A great majority of them came from Asia. So I was expecting to see people like Bhaskar H, John B, Mark Dao, Shao Fang, Harshal Deo, Michelle Sue, Ashish Mangla… I was expecting maybe not the same level of intelligence, grasp on technology, and knowledge of foundations but at least somewhat close. Instead, my vendors paraded in front of me dozens of engineers who could not explain what a polymorphism is, project managers who did not know how to use MS Project, business analysts with nothing but a desire to be one. A few days into my interview process going through at rate of ~20 30-min interviews per day I met only one decent PM who did not speak English at all, one good yet quite junior business analyst (she was an IIT grad and just moved to China with her husband), and a handful of barely acceptable engineers. My interviewing stats were:

Project Managers – 1 out of 9
Business Analysts – 1 out of 11
Senior Developers – 0 out of 6
Mid Level Developers 2 out 14
Junior Developers – 4 out of 9
QA Leads – 1 out of 4
Blackbox Testers – 4 out of 6
Automation Testers – 0 out of 7

After visiting four companies my mind was set and I switched to enjoying tours to Forbidden City, Bird’s Nest and Summer Palace; I climbed the Great Wall, took many pictures, and bought a bunch of souvenirs. I knew that would be a while before I see China again.

Having spent some time thinking through the reasons behind my failure to find the vendor I could probably attest to those commonly known:

  • China is relatively new to the IT outsourcing, in particular for US projects. There is a great deal of skills, experience and understanding that has not yet been built up.
  • Language is a natural and serious obstacle which China outsourcing companies need to invest a great deal.
  • Chinese outsourcers need to learn how to deal with a large variety of cultural differences to successfully compete (and not only on cost). I believe that they need to find their own style. While a lot could be taken from success of Indian vendors, just “cut and paste” would not work.

On my trip to China I also discovered a few things that I had not heard of before:

  • In Chinese education system getting an English major ranks bottom low vs. engineering or CS degrees. Inevitably it attracts the least talented students. However, in a race to address language handicap outsourcing companies recruit English major students for key development positions – project managers, business analysts, etc. No wonder none ob the BA I interviewed heard of UML…
  • While checking out offices of many outsourcing companies I noticed one thing in common: developers’ desks were perfectly clean – not a single book anywhere. I guess one of the reasons is in lack of relevant literature in native tongue. Reading O’Reilly in English is an uphill battle for many of engineers.
  • Most of the engineers I talked with gained all their knowledge on the projects they worked on, which is a great way to learn when it is one of the methods, not the only. Result is extremely narrow scope of knowledge / expertise.

So I guess I am not ready to send my work to China yet, while I really do want to. Why? That would be a great topic for another post.