The Rational Outsourcing Blog

Tuesday, March 20, 2007

Interesting perspective on the Chinese BPO industry

William Dodson has a very interesting post entitled The Buddha and China Business Process Outsourcing on his “This Is China! Weblog.” Here are a few select quotes, but I would recommend you read the complete post.
The VC’s remote research had lead them to conclude there were still no pack leaders in the BPO market, no companies breaking away from the others and distinguishing themselves; especially for the North American and European marketplaces. They knew the Indians were coming to China, and that the Chinese government was promoting cities in China to become IT/BPO centers of excellence. They were confident and vested in the development of the China BPO market; but how long would it take to see an industry grow up that was as formidable as India’s?

China has no Y2K to finance or to educate its armies of fresh-eyed programmers in the hard-as-nails realities of Western business practices and operational processes. It does not have the troops of English-speaking, customer-focused go-getters that India does to kick-start an industry into the stars. Instead, China is going to have to boot-strap itself to become a world-beater in both the IT/BPO realms.

Certainly, the Chinese government has its heart in the right place and its intentions firmly set. Newly fielded economic development zones throughout China are flush with cash, already investing in platoons of engineers and hi-tech infra-structures. One partner in a venture to work with a local government to build its IT/BPO service base told me the governments are using the same approach they had in developing their manufacturing prowess: if you build it, they – the foreign companies - will come.

Problem is, the Chinese have no credibility when it comes to understanding and articulating the kinds of back-office applications that matter to knowledge-driven Western companies. Most Chinese IT companies cater to domestic customers; the vast majority support Japanese and Korean companies with relatively unsophiscticated programming that has been passed to them through highly detailed specifications; and the few BPO resources there are have made it this far performing rote activities that do not require much in the way of analysis or creativity: insurance claims processing, data entry and the like.

This is all not to say the Chinese will not develop a successful BPO industry, for I firmly believe they will, I told the VC on the conference call. And the VC, for their part, reiterated their long-term commitment to developing the BPO industry in China. However, we all agreed, it’s just going to take years longer than we would all prefer. And the industry will likely go through many incarnations before it makes as large an impact on the world scene as the Indian model has. But it would happen in this lifetime, we were confident.

I agree with several of the points raised by Mr. Dodson. I have previously expressed my concerns about China’s “build it and they will come” attitude in my China planning its way into Business Process Outsourcing? post. However, I have had similar concerns in the past, and have been proven wrong. When I first visited Shanghai, the Pudong area was full of beautiful new buildings, most of which were empty. The wide roads to the airport had so few cars that I was struck by the infrastructure overcapacity. China was clearly building ahead of demand and I felt it was a very risky gamble. However, today the buildings in Pudong are full and the roads are crammed. The gamble paid off for China. Will the BPO gamble pay off? Only time will tell.

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Saturday, March 17, 2007

Bangalore nee Boston Globe: why the privacy red herring may come back to haunt the Boston Globe union

If you haven’t heard about the union objections to the Boston Globe outsourcing 50 positions to India, then you should see the or Times of India or the Outsourcing Weblog sites. You can also see the actual ad here (as a pdf).

The union says: “Further, billing and account information will now be shipped overseas to Bangalore, India, putting customers’ most vital information at risk.” As I have written several times before, this is a red herring. Outsourcing these task to India may actually improve information security. Remember, just last year Boston Globe saw one of the most absurd privacy breaches I have ever heard of. If you have forgotten, here is a quick reminder from a story.
Credit and bank card numbers of as many as 240,000 subscribers of The Boston Globe and Worcester Telegram & Gazette were inadvertently distributed with bundles of T&G newspapers on Sunday, officials of the newspapers said yesterday.

The confidential information was on the back of paper used in wrapping newspaper bundles for distribution to carriers and retailers. As many as 9,000 bundles of the T&G, wrapped in paper containing subscribers' names and their confidential information, were distributed Sunday to 2,000 retailers and 390 carriers in the Worcester area, said Alfred S. Larkin Jr., spokesman for the Globe.

In addition, routing information for personal checks of 1,100 T&G subscribers also may have been inadvertently released.
The Globe and T&G financial information was inadvertently released when print-outs with the confidential information were recycled for use as so-called "toppers" for newspaper bundles. A topper, placed on top of abundle of newspapers, is inscribed with the quantity of papers in each bundle and the carrier’s route number.

Oh, the irony! Before using privacy as a Fear Uncertainty and Doubt (FUD) attack against outsourcing, the union should have remembered that those who live in glass houses should not throw stones.

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Sunday, March 04, 2007

Single source for outsourcing news and opinion

I recently created a new Rational Outsourcing site on Ning. I have been looking for a single site where I can get a quick update on outsourcing related news and opinion. I am trying to make this new site fulfill that role. It already includes the 3 to 5 most recent outsourcing related posts/articles from about 25 blogs and newspapers. I also included an open discussion board. Please take a look and let me know what you think.

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