freeborders.gifSooner rather than later, China will emerge as a serious contender to India in the software outsourcing industry.

So thinks John Cestar, CEO of Chinese outsourcing firm Freeborders, which has just announced plans to quadruple the size of its Shenzhen facility to hold up to 2,000 workers.

He
would say that, of course. But anyone who has been writing on the IT
industry as long as I have, cant help but notice the sea-change in the
software industry's perception of China. Once, it was only the hardware
industry that worried about China.

Software vendors, if they
mentioned the country at all, saw it purely as a potential market, but
one that was immature and fraught with pitfalls.

But today many
ISVs and also ITOs — IT-using organisations — are starting to take
China seriously as an offshore software development centre.

Historically,
India's Bangalore region was the place to go for cheap software
development. But Bangalore risks become a victim of its own success: infrastructure is creaking, salaries are rising and the region's cost advantage is being eroded.

That
has turned the spotlight on China, where firms such as Freeborders
claim they can deliver savings of 30% to 40% over Indian rivals.

According
to research firm Analysys, China's software outsourcing services market
reached $323m in Q1 2006, up almost 44% over the year-earlier period.

Of
course, western concerns about IPR and project management issues still
weigh heavily. But the combination of mainland China's seemingly
limitless supply of cheap skilled engineers and a growing Chinese
diaspora clutching MBAs from US business schools and tuned into the
latest IT trends seems unbeatable, in my opinion.

One nagging
concern for potential customers is the quality of Chinese software. The
churn-them-out-cheap image of much of China's manufacturing sector has
done its software industry no favours and “Made in China” is rarely
synonymous with quality to western eyes.

But China's nascent
software development industry claims it is more than a match for
better-known Indian rivals, not just on price but also on quality.

Freeborders,
for example, stresses its CMMI Level 5 certification, saying it is one
of the first Chinese software developers to achieve this
universally-recognised symbol of quality. (The CMMI model,
developed by the Software Engineering Institute in the US, measures the
sophistication of software development processes – “5” is the best you
can get — and Indian outsourcers take pride in their CMMI
certifications.)

Earlier this month, Freeborders won the “Outsourcing Excellence” award for developing an online sales platform, Fastextile,
for Invista, the US fibre manufacturer best-known for Lycra. This is
the first time an outsourcer from China has received the award and
previous winners have typically been western heavyweights like
Accenture and Hewlett Packard.

By combining onshore project
management in Europe and the US with offshore development in Shenzhen,
Freeborders was able to complete this project three weeks ahead of
schedule. Western software developers take note.

More on Freeborders and its history here.

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