| China offers appealing business opportunities because | | | | assures budget control |
| of a highly skilled workforce, attractive wage levels, | | | | Ideal Fit for BPO |
| reliable IT and telecom infrastructure and government | | | | Unlike software or electronic product suppliers, who |
| support for foreign ventures. Most attractive of all, of | | | | use small technical teams to conduct R&D at offshore |
| course, is the world's largest and fastest-growing | | | | testing and development centers, BPO providers |
| market. | | | | typically rely on hundreds of multiple-shift employees to |
| Domestic demand for consumer products and | | | | enter data, process forms, convert records, verify |
| services expands annually in China, and did so even | | | | claims, perform coding and handle other back-office |
| during 2008-09 global economic slowdowns. In turn, | | | | services. |
| there's a strong need for Western expertise to design, | | | | BPO also has a critical need for absolutely reliable |
| market and administer insurance, banking, investment | | | | infrastructure -- power, telecommunications, high-speed |
| and credit services. | | | | Internet access -- to deliver deadline-sensitive work |
| North American and European companies that have | | | | without interruption. |
| business process, R&D or manufacturing operations in | | | | China's size and sophistication assure that it can meet |
| India or Southeast Asia increasingly recognize that | | | | all labor and infrastructure demands. |
| prudent risk management means diversifying with a | | | | Companies can achieve significant gains in costs, time |
| second location in a separate region with a large, | | | | and productivity through a BOT alliance with an |
| well-educated labor supply. | | | | established partner in China who has a working |
| China provides an inviting commercial arena that | | | | knowledge of Western business methods -- |
| meets all requirements to assure uninterrupted | | | | knowledge that is transferred swiftly and seamlessly. |
| operations, although it has entry hurdles for | | | | In addition to needing a large, skilled labor pool, BPO |
| foreign-based newcomers. They include: | | | | players depend on advanced, reliable infrastructure. |
| Extensive location choices: National and provincial | | | | broadband Internet access from redundant service |
| governments support numerous High-Technology | | | | providers, multiple international telecom lines, top-level |
| Industries Development Zones and software parks in | | | | data security and separate servers for each client. |
| regions with lower labor and facility costs than in the | | | | Moreover, the nature of project-driven BPO accounts |
| business centers of Beijing and Hong Kong. | | | | means that workflow can expand abruptly -- again |
| Navigating the bureaucracy: While China welcomes | | | | requiring readily available personnel with data |
| foreign enterprises and encourages private ventures, | | | | processing experience. Scalable growth may require |
| an elaborate series of permits, licenses and other | | | | facility expansion or secondary site setup. |
| paperwork are required by municipal, provincial and | | | | While IT Outsourcing may allow flexible project |
| central government agencies. | | | | schedules and adjustable delivery targets at times, |
| Site development: Leasing, remodeling, equipping | | | | BPO providers cannot afford delays or workflow |
| and maintaining workplaces for international business | | | | interruptions. Speed and dependability are essential for |
| requires prescreening local vendors, soliciting and | | | | back-office service providers, whose own clients rely |
| evaluating bids, negotiating contracts and overseeing | | | | on timeliness in the same way that automotive |
| installation of work stations, electronic networks, | | | | manufacturers in China, Japan and the United States |
| telecommunications, backup capabilities and other | | | | rely on Just-in-Time deliveries from parts suppliers. |
| logistics. | | | | Internal Perspective |
| Recruiting and training: Reliable, well-educated | | | | Providers with deep cultural and business roots in |
| managers and qualified production employees are | | | | China are well-positioned to pave an obstacle-free |
| widely available -- and in demand by Western firms. | | | | BOT path for newcomers who currently operate in |
| An experienced business process outsouricng (BPO) | | | | India or in their home bases of Europe or North |
| company can provide industry knowledge and local | | | | America. These indigenous Chinese entrepreneurs |
| contacts that are essential to recruit, hire, orient, train | | | | already have an inside perspective of Business |
| and retain skilled workers who can perform | | | | Process Outsourcing -- as well as of China itself. |
| back-office functions reliably -- services a general | | | | They have well-refined recruiting networks, training |
| employment agency clearly cannot provide. | | | | procedures, operating methods and quality standards. |
| This White Paper illustrates how the Build - Operate - | | | | Relationships with vendors, landlords, universities and |
| Transfer approach lets foreign-based providers in the | | | | government regulators all pay immediate dividends for |
| BPO industry or other fields develop an efficient | | | | their foreign BOT partners. As London-based |
| production center in China through a limited-time startup | | | | HSBC Bank says in advertisements: "Never |
| relationship with an experienced local partner. | | | | underestimate the importance of local knowledge." |
| The Build-Operate-Transfer Model | | | | --> Key points |
| As the name indicates, B-O-T is a three-stage | | | | - Local BPO veterans have significant host country |
| process that lets companies outsource the logistics of | | | | relationships |
| establishing offshore capacity to deliver services, | | | | - Established partner assures continuity of operations |
| develop products or perform manufacturing. To gain a | | | | at new site |
| secure foothold in China at minimal risk, software | | | | - Reliable recruiting and training from a large workforce |
| developers and other Information Technology | | | | shorten startup time |
| Outsourcing companies currently rely on this proven | | | | - Client avoids infrastructure investments during startup |
| business model -- which is especially well-suited to the | | | | - Client can focus on marketing and core business, not |
| BPO industry. | | | | support functions at new site |
| The business owner forms a strategic alliance with an | | | | - Strategic alliance maximizes ROI |
| experienced local partner already established in the | | | | Why a China Site Makes Sense |
| same industry who plans and manages every aspect | | | | China is widely recognized as one of the lowest-cost |
| of opening and running one or more work centers in | | | | producers in the world. But that's just one reason why |
| the first two stages -- Build and Operate. ("Build" refers | | | | it is the base for a growing share of BPO for clients |
| to constructing a client-dedicated operation, not a | | | | from North America, Europe and Asia. |
| physical location.) | | | | Equally important are government support, |
| The final stage -- which arrives after a contractually | | | | social-political stability, technical skills, a large and highly |
| specified time, productivity/quality level or a combination | | | | educated workforce, Internet and telecommunications |
| of factors -- brings a Transfer of all tangible and | | | | networks that meet international standards, cost |
| intangible business assets to the owner. | | | | advantages and entry into the World Trade |
| During each of the first two phases, the local partner's | | | | Organization. |
| industry experience and host country familiarity are | | | | Since joining the WTO in 2001, China has rapidly |
| applied to: | | | | become a global economic force. Thirty-seven |
| - Achieve the foreign owner's business objectives | | | | Chinese companies are on the latest Fortune 500 list. |
| - Transfer knowledge from the client to managers and | | | | As more multinational corporations participate in China's |
| workers it will inherit | | | | dramatic transformation, they and their local partners |
| - Uphold the owner's best practices, quality levels and | | | | adapt Western best practices to Chinese cultural and |
| other requirements | | | | economic conditions. |
| - Maximize short-term and long-range profitability for | | | | In addition to those attractions for BPO providers and |
| the owner | | | | other industries, a presence in China provides another |
| This model can be applied to a variety of industries | | | | huge opportunity -- access to a country with 1.3 billion |
| and to small, mid-size or large MNCs, and has proven | | | | people and rapidly expanding markets for business |
| to be effective in China. | | | | services, consumer services and consumer products. |
| BOT also provides powerful advantages for business | | | | China's GDP grew by 9 percent in 2008 and 7.7 |
| process service providers.Benefits for new and | | | | percent during the first three-quarters of 2009. |
| existing BPO companies expanding to China are | | | | Outsourcing can strategically assist expansion into |
| evident from the following look at services furnished | | | | Asian markets, product launches and development of |
| between the first steps and the final business transfer. | | | | new business models. |
| Services at Each Stage | | | | As more companies move into China to capitalize on |
| A detailed contract specifies the work production, | | | | growing demand for industrial and consumer products, |
| space, staffing, wage rates, English proficiency, | | | | firms with little or no experience in China and are |
| productivity, quality levels and other metrics that the | | | | vulnerable to various mistakes. |
| client wants in exchange for a management fee and | | | | Backup Capacity = Risk Management |
| reimbursement of actual costs. After this needs | | | | The same principles behind business insurance, |
| assessment and planning stage, the local partner then | | | | duplicate records storage, IT security safeguards and |
| assigns a setup team exclusively to the project. | | | | disaster recovery plans also apply to BPO operations |
| That team conducts a site selection review of real | | | | overseas. Because quick turnaround and continuity are |
| estate matching the client's requirements for size, | | | | critical, BPO providers with sites in India increasingly |
| location, cost, capabilities, amenities and other factors. | | | | recognize that maintaining backup capability at a |
| Reports, diagrams and photos are furnished so that | | | | second site within that country does not provide |
| the client's project team can analyze options and the | | | | sufficient safeguards. |
| local partner's recommendation. | | | | A study from AMR Research in Boston warns: |
| Next, lease terms are negotiated and site preparation | | | | "Companies with offshore experience should mitigate |
| begins. Work spaces are configured, furnishings and | | | | offshore outsourcing risk by moving beyond India. High |
| production equipment are procured, and services are | | | | worker attrition rates, the danger of natural disasters, a |
| arranged (telecommunications, high-speed Internet with | | | | hostile relationship with Pakistan and religious strains as |
| backup, etc.) In this Build stage, the local partner also | | | | reasons why many companies are looking to non-India |
| secures required permits, licenses and other | | | | locations in order to minimize the risk of geo-political |
| registrations from the Ministry of Commerce and | | | | destabilization." |
| regional government departments. | | | | Climbing wages, rising worker turnover rates, labor |
| While workplace development is under way, the | | | | shortage forecasts and sometimes-unreliable |
| Operate phase starts with staffing (labor arbitrage). | | | | infrastructure are among reasons why Western |
| Qualified personnel are invited to apply, are | | | | companies with support operations in India now also |
| pre-screened, are interviewed and are hired for work | | | | have partnerships with service providers in China. |
| only on the client's business. | | | | Corporations such as Whirlpool, United Technologies, |
| Knowledge transfer is the next step -- and one that | | | | Danaher and Sweetheart Consumer Products have |
| continues throughout the Operate stage. Managers, | | | | diversified this way. |
| supervisors and employees are given orientation and | | | | Even Indian-owned companies such as Infosys and |
| training to become well-prepared for handling the | | | | Wipro now develop software in China, where labor |
| client's work processes at an expected pace. | | | | costs are lower and a well-trained workforce is much |
| Maintaining and expanding skills is a vital part of the | | | | more plentiful. |
| operating agreement. Clients should look for a service | | | | Government Addresses Concerns |
| partner who recognizes the importance of continuous, | | | | Chinese leaders, eager to solidify and extend their |
| adaptable training to prepare employees for: | | | | republic's major role in international commerce, are |
| - Progressive advancement | | | | responding to concerns about legal protections, |
| - New client projects | | | | financial safeguards and communication skills. The |
| - Next-generation software and hardware | | | | government is committed to enhancing trust and |
| Continuing education -- combined with on-site | | | | confidence in China's market economy, which has |
| English-improvement classes, if wanted -- helps | | | | evolved significantly since reformsbegan during the |
| increase staff reliability, retention and value to the client. | | | | 1980s. |
| Human resources groomed by the local partner, after | | | | As part of the current Five-Year Plan, the State |
| all, are among assets the client inherits at Transfer. | | | | Council Information Office has drafted legislation |
| The Operate portion involves work supervision, quality | | | | regulating governing digital signatures and is working on |
| assurance, record-keeping, purchasing, facility | | | | methods to improve the security of information and |
| maintenance, government liaison and administrative | | | | communications systems. It prepared China's first |
| support services (invoicing, payment processing and | | | | personal data protection law in 2005. |
| other accounting tasks, if requested). | | | | New privacy and intellectual property safeguards |
| At the Transfer to client ownership and management, | | | | emerged from a year-long study into best practices in |
| after perhaps one to three years (based on a | | | | Europe, North America and Australasia. The legislation |
| pre-determined scale), the local partner arranges a | | | | is seen as essential in the furtherance of both the ITO |
| transition of leases, vendor contracts, utilities, personnel, | | | | and BPO industries. |
| administrative services and other functions during an | | | | Education improvements to expand technical |
| orderly process of joint supervision. | | | | proficiency and English language abilities also are a |
| The client inherits all training and procedure manuals, | | | | priority. |
| proprietary software, work product templates, | | | | --> Key Points |
| business records and other intellectual property | | | | Outsourcing to China diversifies risks for |
| generated on its behalf. | | | | India-based operators |
| --> Key points | | | | China presence provides foothold in world's |
| - Client-stipulated quality assured from the start and at | | | | fastest-growing market |
| each step of growth | | | | Government is responding effectively to legal |
| - New operation is a seamless extension of client's | | | | protection and language education needs |
| work environment | | | | For all reasons outlined, BPO providers with operations |
| - Client inherits a smoothly functioning team familiar | | | | in India or Southeast Asia increasingly recognize that |
| with its processes | | | | prudent risk management to assure continuity means |
| - Client captures valuable support documents and | | | | diversifying with a location in a separate region that |
| proprietary software | | | | offers a large, well-educated labor supply with |
| - Fixed-fee arrangement eliminates startup risks and | | | | attractive costs. |