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Top 5 Tips for Making Sourcing from China Work

by ISG

By: Michael Rehkopf, Partner & Director, North Asia, TPI

 If you’re one of the many companies considering sourcing IT or business process services from China, here are five key considerations:

  1. Clarify why you are considering China. If it is because you want to gain experience doing business in China, that is very different from a company looking to balance the geopolitical risks in its sourcing portfolio by diversifying its country base. Different reasons have different solutions.

  2. Pick a service provider who has the right scale to meet your needs and whose geographical and industry focus are aligned to your business. There are thousands of Chinese service providers — not counting non-Chinese firms — with operations in China. Many are small. And many focus only on one or two key geographies/industries. There is nothing wrong with that, and they can be great firms; but as with many growing firms, claims of “we can do everything for everyone” abound. Confirm, either directly or with help from TPI, that their size and focus match your needs.

  3. Source from a government-designated “model city.” In many countries, the choice of city is well down the sourcing buyer’s list of priorities; but in China, there are significant differences in many aspects of government policy between designated model cities and the rest of the country. Source from service providers based outside the model cities at your own risk.

  4. Source from a model city that recognizes the importance of and promotes its soft infrastructure. Disclosure, audit and dispute handling are key elements of an outsourcing relationship, and some of the model cities will lead others in implementing and enforcing a supporting infrastructure for this — especially in relation to vital topics like intellectual property, data privacy, financial reporting, staffing reporting, etc. Give priority to those cities, and ask TPI if you need help finding them.

  5. Pay special attention to ongoing Service Management & Governance (SM&G). This is a key area in any outsourcing relationship and is doubly important in China. Not all firms have an overseas presence. English (or whatever language you prefer) skills may not be that strong across the entire workforce. And direct travel connections to the service provider’s office (even in a model city) may not exist. None of these are insurmountable, but you should pay attention in advance to how to manage and govern your service provider relationship over time in order to increase your chances of success.

Sourcing in China presents great opportunities along with a level of complexity that comes with any vast emerging sourcing geography. Interesting in investigating the sourcing landscape in China? TPI’s China sourcing specialists can guide you through evaluating you options. Contact us today to begin the dialogue.