Ann All spoke with Dean Stevens, U.S. general manager for Symbio, which leverages Chinese outsourcing teams to help companies become global leaders, providing software development, testing, localization, globalization support and more. Founded in 1994 by a group of engineers from IBM's international research and development labs in Asia, Symbio clients include AOL, BMC, CA, Citigroup, EMC, IBM, MasterCard, Mercedes Benz and Microsoft.

All: We hear a lot of general advice on the importance of good communication and fostering relationships when working with offshore teams. Based on your experience, can you offer any specific tips for offshoring to China?
Stevens: In terms of the cultural issues, you do need to special attention to certain things in China. Probably number one is monitoring. I think a lot of people assume that if they've done a good job of communicating and making objectives clear, then they're done. In all offshore development, but especially in China, you need to be very deliberate about how you ensure that the product that you think is being made is being made and that people are doing what you think they should be doing. Beyond the more mature offshore locations and certainly beyond the nearshore locations like Canada, monitoring is very important.

Another one that I think a lot of people forget about is escalation. Again, culturally, a lot of engineers in China are either uncomfortable or just haven't been trained to escalate issues. So there is often a case where it won't occur to them to escalate issues. So you'll see cases where a fellow will be working and then get stumped, or continue to beat his head against the wall on an issue, and it just never gets escalated. I advise my project managers in China to pay special attention to making sure that, down to the lowest level of people, they understand what the escalation path is and it's not just OK to use it, but it's a minimum expectation that you'll use it.

Another one that I would advise those doing offshore development to think about, but is maybe more important in China, is bringing core team members to the U.S. or your home base for training. That does a couple things. It helps with some of the cultural issues. It helps them understand what your expectations are at sort of a meta-level; they understand viscerally instead of just reading something. They get to know you and bond with you. Along with that, I think it's important to pay attention to really forming a team with your outsourcing vendor in China. If you engage them as part of a team and make them feel that they're part of your organization, you'll get a lot better results out of it. For example, we have some clients who have put their corporate posters, their product posters in the labs. It helps the people there identify more with the client and think more like the client.

There is no substitute for personal visits. One of the things I've seen be really successful is if the VP of engineering or the director of IT periodically visits the lab in China. Again, what you are doing is building a bond between those people and your management. That lends an important cohesion. One of the mistakes a lot of American managers make is, we tend to speak at a very high level and allow people to work it out for themselves. I don't think we appreciate the fact that Chinese engineers went through a different educational system, have grown up in a different business system — and they can't necessarily do it for themselves. So the more you can do explicitly, not just implicitly, the better off you will be.

The last one I will throw out, because a lot of people forget it and I end up reminding people about it: China has three national holidays. Their companies are typically closed down for five working days during the holidays. You can encourage, motivate and incent your teams to work through those holidays, but it probably doesn't breed a lot of goodwill. That's the time many of them travel to see their families. You have to build those three national holidays into your milestones and your product plans.

All: China has long been known as a destination for manufacturing and is beginning to build a reputation for IT work. Are there any particular types of work that you find seem to be especially well suited to China?
Stevens: Our corporate position is that anything can be done in China. But if I were thinking about things that make a lot of sense to do in China, I'd be thinking about modern technologies. One of the things that is easy to forget now, with all of the rush toward China, is that the technology industry is relatively new and immature. It's been growth industry in China for only about five years. So if you're looking for Fortran programmers, COBOL, that kind of stuff, there aren't very many of them in China. They tend to be old regime type people. If you want to find broad-based skill sets of young, modern people, you're going to be thinking about Java, Web development, .NET, those sorts of things.

The other thing that a lot of people sort of miss when they think about China is, for some reason, testing and quality assurance is considered to be a very good profession in China. Unlike in the U.S., where everybody who is a tester can't wait to become an engineer, in China people will devote their whole career to testing. In fact, our largest and most successful benefit focuses on quality assurance and testing. I know hundreds of people in China, just in our company, who don't aspire to be anything other than the best tester, the best QA professional they can be. In a weird way, they seem to have a higher tolerance for boredom. It's stuff that we just can't get people to do in the U.S. One of the things that I've found to be really effective is, when a company has a lot of tests that need to be run over and over again that don't lend themselves to automation — because the user interface is changing a lot or there are subtle changes — it's often more cost-effective to do the testing in China with a dedicated team of testers than it is to keep tweaking your automation scripts.

Another one that hasn't really become that big of a factor yet is BPO. For a lot of the same reasons, people are willing to do repetitive tasks and pay a lot of attention to detail. So forms processing, that kind of stuff, is really rising in China. The last one, for some reason, nobody seems to think of is support for Asia. We do a lot of this; it's our fastest-growing business. We have call centers that support Japan, Taiwan, Korea. You can get all of those languages in Beijing or Shanghai. You can set up a really cost-effective support center, especially for Western clients that want to grow their business in northern Asia but aren't sure how to support it.

All: What about the recent product recalls? Has that had a negative impact on your business?
Stevens: To be honest, when this stuff started breaking, I was terrified. I really expected it to have a negative effect. But it's actually had the opposite effect for the software outsourcing business. We don't manufacture or build anything, we do software. I think part of what happened is that, because of the sensitivity of IP issues, we've had to be extra-sensitive to security, and to the protection of intellectual property, and to making sure that our procedures and processes were world-class. We're a certified offshore facility for Microsoft and IBM. We carry a multimillion-dollar insurance policy with Lloyd's of London. We've done everything humanly possible to ensure that we are protecting intellectual property, and many of the other vendors have taken similar steps.

So instead of the backlash I was expecting (from the recalls), it helped us. It brought China to the attention of a lot of people. They started reading about why China is so integral to the U.S. economy and started realizing that "Hey, maybe I should be looking at (China) as a software outsourcing destination." So just in terms of unsolicited inquiries or attention coming from the Web site, I think it helped us. It certainly didn't hurt us. We work with both IT organizations and independent software vendors. For companies like mid-sized ISVs, who maybe hadn't really thought much about China, in a sense it's almost like free publicity with those companies. Instead of shying away like I thought they would be, they are thinking they need to at least ask questions about it. Strangely enough, the questions that come in now are "Can you do this reliably?" or "How do your costs compare on a global scale?" IP issues just don't come up that much anymore.

All: In India, we had big Western companies coming in after homegrown service providers had already established the market. In China, it seems to be the opposite dynamic, with Western companies proving the market. Are domestic service providers much of a force in China?
Stevens: The problem is, those companies are not good at publicizing themselves. There are thousands of domestic outsourcing companies in China, ranging from the proverbial three guys in an apartment to 10,000 people. For a number of reasons, including a lack of understanding about how to do it, they just don't do a good job of public relations and marketing to the West. Westerners have this idea that they'll go to China and find the vendors. In India, those companies when they were coming up realized they had to get into Western minds. Chinese companies just expect people to look them up and rely on word-of-mouth. There is also a lot of domestic business, providing services within China.

I don't know the raw numbers, but a lot of the work is multinationals in China doing business with local companies that doesn't really show up on the radar screen. Our whole industry has done a relatively bad job of getting the word out. We don't have an equivalent of Nasscom (India's National Association of Software and Services Companies). We don't have a group that speaks for our industry. It's every company for themselves. Every company is focused on their revenue that quarter. Every company markets to its own segments. I was talking to one of our competitors, who is quite a bit bigger than us, and their serious question to me was "We're growing 50 percent a year. Why do we need marketing?"

The other dynamic that is different in China — and maybe it was this way in India 20 years ago — is that nobody in China has emerged as a leader. There is no China Infosys or China Wipro. There are lots of companies all roughly the same size, going after roughly the same customers. Nobody is so dominant that they can be the bellwether of the industry.

Because there are so many companies that are similar, it ends up that if you go to China and say "I want to get a handle on the software outsourcing industry" and you talk to five or six companies, you think you've got it all — when you've really gotten just a tiny insight. I had a long briefing with an analyst who took his first trip to China and had talked to five of the leading vendors. He had a very skewed perspective because he'd only talked to those few vendors. It's tough, because there isn't the equivalent of one authority you can go to to get a fuller story. The Chinese industry is really growing fast. It's starting from a very small base, but I think you are going to see it become a very significant force in the world outsourcing market within three to five years.