Conversation on outsourcing 2
The conversation between Don McPherson a senior executive and students from the Chinese Students Association at CMU continues:
Student explained: “We have recognized that English is very important for global business. Today many Chinese are learning English and I believe that few years from now we will have many IT workers who could communicate well in English. However I want to confirm that it is still possible to start our own outsourcing business since some of us will graduate soon.”
Don: “Certainly, with the shortage of skilled IT workers all over the world, now and the next few years would be an excellent opportunity to do IT outsourcing business. If China can improve its education system and develop more skilled IT workers, it could capture a good portion of the IT outsourcing market. If their companies know how to focus on the industry trends instead of just coding and testing, they can quickly capture new areas and compete with India on an equal basis. If they keep staying on the low cost programming and testing than they will never catch up. In global market, you need to have an aggressive global strategy to succeed.”
Student asked: “I agree with you but it would take time to develop new skills for the new areas, it would take several years …”
Don laughed: “Normally it will take several years to develop enough skilled workers but it could also be accelerated by government's direction is it not? If your government considers IT industry as the driver for economic growth, they must set the direction and provide support. My question is does your government track global industry trends? Do they understand global market needs? If they spent billion dollars each year to improve the education system, they must have certain expectation else the opportunity would go somewhere. Today everybody know the biggest trend is cloud computing. How many companies in China can provide this type of service? How many “Cloud computing” experts do they have? How many universities are teaching Information System Management (ISM)? How many students are enrolling in this program? How many of them have service management skills? How many students understand software is becoming a service? If you believe this is a good opportunity, you should be prepared for it as the demand is high and the supply is limited. Another good opportunity is the smart phone application area. In the next few years, smart-phones and tablets will dominate the IT market. This trend is obvious and as companies strive to reach customers on smart phones, tablets and other mobile devices, they need skilled workers who can develop applications for the small screen. The shortage of these workers already pushed the starting salaries for mobile applications developers to a range of $95,000 to $130,000 in the U.S and Europe. Many mobile app. companies are looking for outsourcing suppliers in this technology and this is a good opportunity too. To do business globally, you must look at the trend and catch it when it starts, if you wait until others already did that and follow than it is too late.”
Student asked: “Beside cloud computing and mobile application, what are other areas that you think would be good opportunity?
Don: “There are many good areas that are wide open for outsourcing services. Today, every company must deal with the overwhelming of data. Maintaining data has become an increasingly complex task, which is why companies need professionals who can collect, analyze and mine these stored data, as well as offer effective storage strategies. Database administration and database designer could be a good opportunity. With the fast growth of e-commerce and e-government, so many things will happen online, many companies are looking for skilled workers who understand “human-computing-interaction” (HCI) who can create positive user experiences by making it easy to navigate and use computer for business transaction. There are limited numbers of skilled workers who specialize in this area so this would be another fast growth area too. Of course, with more computing usage, more online businesses, it is important to ensure that these information systems are secured. Security threats are constantly changing, and companies need skilled security professionals who can analyze risk and develop solutions. As more companies are doing business online, search engine optimization (SEO) is another skill that is growing fast. Many companies need SEO specialists who can develop strategies to optimize Web projects for search and increase online visibility. Since companies' networks are more complex than ever, network specialist who can ensure the efficient and secure transfer of data and information is another skill with high demand. Today, many companies would outsource these works to offshore companies with these expertise or hire skilled workers and bring them to their countries with salaries from $80,000 to $140,000 depending on experience. The market is wide open for those who understand these trends. The globalization has opening many opportunities for those who know how to catch them. The shortage of skilled worker is so severe, even large software companies like Microsoft have to move their workers who maintain IT systems to develop software for Window 8 and outsource most IT works to Infosys. Infosys will provide help-desk, desk service and database support in 450 locations across 104 countries. In the past year, Microsoft, Google, Oracle, HP and Facebook had to open developing centers in China, India, and Eastern Europe and hired thousand software workers there. Even with that many workers, there is still a shortage because the demand is so great and the supply is so low. I believe many companies would have to go where skilled workers live so it is possible that more developing centers would be built around the world. I also think IT outsourcing business would continue to grow in the next ten or twenty years and the potential is good if you know how to catch the opportunity”
Student asked: “There are many cities in China but most U.S companies are opening center in Beijing and Shanghai. We want to start our company in our hometown, do you have any suggestion?"
Don: “The reason company like Microsoft, Google, and Oracle open their developing centers in Beijing and Shanghai because most of the top universities are there. Companies would do business where most skilled workers live. If you start a company somewhere else then where do you find good workers? Does your hometown have good universities with good training programs? How fast can you grow your company? Is it possible to start with a thousand skilled workers? As I mentioned, size is important, if you do not have a reasonable size it would be difficult to do business with global companies. How do you convince large companies like Microsoft, Oracle, and IBM to outsource to you? How do you approach large enterprises with hundred thousand workers like City Bank, General Motors, and General Electric to do business with a small unknown company? You are educated in one of the best university in the U.S but where do your workers come from? Most global companies would look at capability and size as conditions to do business. Low cost is not because it can be negotiated during contract bidding. To get the business, you will have to compete with others. How do you compete with established companies in your country? How do you compete with established companies in India or in other countries?
A student seemed disappointed: “You are discouraging us rather than encouraging us to start our own company.”
Don shook his head: “On the contrary, I share my thought with you so you can avoid the mistakes that other people have made. To start a company today, you must know your strength; you must have something that others do not. You know the market trend and what customers need and could provide services in these areas and that is your advantage. You could train your workers in that specialized areas so at least you have something others may not have. As small startup company, you will need few customers so you can grow therefore you must focus on quality and customer satisfaction. You must have strong business analysis skilled workers to identify customer's requirements. You must also have strong project managers to manage projects accordingly. You need to develop a strong marketing strategy to attract customers to your hometown. You need to work with your local universities to establish special training programs in the area that you want to go into. You need to assure customers that you can grow your company quickly to meet their demand. Even your company may have few hundred workers today but with several thousand students in local universities enrolling in Information System Management and Software Engineering as potential employees, you can convince your customers that when their needs increase, your company can also grow quickly to handle that. That is why it is very important to establish relationship with local universities to ensure that your company has the potential to grow. You must work closely with local universities to ensure that the training is flexible enough to adjust quickly to market needs. Customers may want to know more about the curriculum and the future potential. Since you do not establish company in Beijing or Shanghai, you do not have the “Brand names” of Tsinghua, BeijingUniversity or Shanghai Jiao-tong so it is important to find a good local university to affiliate with where you can influence the training program. I wish you are successful in achieving your dream.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
