Helping Chinese Software / IT Outsourcing firms present themselves to western clients is a key component of my consulting practice.  Unfortunately, I face a constant challenge in leading my clients to understand the importance of differentiating themselves from their competitors.  Years ago, just being a Chinese software outsourcing company was enough - not anymore!

The Guardian had a great article about the failure, to date, of any company in the industry to truly emerge as a leader.  They present an interesting analysis of some of the major players, so the article is well worth reading.  The key bit for this discussion, however, is their estimate for the size of the industry at “up to 3,000″ outsourcing firms.  It’s extraordinarily difficult to get accurate counts, especially if you include the Chinese equivalents of “garage shops” (more properly “apartment shops”, I guess).  However, I suspect that this number is low.  I’ve heard some people claim that there are more than 5K outsourcing operations distributed throughout China.  In any event, let’s assume that only 30% of the companies are interested in western business (the others are probably pursuing domestic opportunities, or working with Japan/Korea).  I believe that the actual percentage interested in western business is higher, but it’s easy to do the math in my head with this figure.  Such estimates would suggest that any individual Chinese software / IT outsourcing firm has at least a thousand competitors with varying degrees of competence and aggression.

Within this competitive milieu, most of these companies will probably either fail or get acquired.  The firms that are willing to do the hard work, make the investment to differentiate themselves, and seriously pursue western business will be able to rise above the swarm and truly lead the industry.

Sadly, many of the current crop of Chinese outsourcing companies simply do not believe that marketing is worthwhile.  Unfortunately, this conviction does not serve them well in the current hyper-competitive environment.  As the companies become more sophisticated, and raise more external money, we can look for a dramatic change, at least at the top of the leader board.

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