IAOP Chapter: Shanghai

Meeting held Tuesday, January 12, 2010

The Shanghai Chapter of the IAOP chaired by Eric Rongley of Bleum, Inc heldd a chapter meeting on Tuesday, January 12, 2010 at the Bleum offices, Cloud 9 Mansion, 19th Floor, 1118 West Yan’an Road, Shanghai, China.

At this meeting we welcomed Ning Wright, Partner in Charge, Sourcing Advisory, KPMG China to talk about "Next Steps in China Sourcing - Challenges and Opportunities."

Agenda

6:30 pm -7:00 pm: Meet and Greet

7:00 pm-7:15 pm: Introduction from Chapter Chair

Eric Rongley, CEO, Bleum, Inc

7:15 pm-8:00 pm: "Next Steps in China Sourcing - Challenges and Opportunities"

Ning Wright, Partner in Charge, Sourcing Advisory, KPMG China

8:00 pm-8:30 pm: Question & Answer session

8:30 pm: Drinks and Snacks

IAOP Members: To register for the upcoming meeting, please email our chapter coordinator at amanda.corbett@outsourcingprofessional.org.

If you are not as yet a member of IAOP and would like a guest pass for this meeting, please Request a Guest Pass.

IAOP Members:

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Meeting held Monday, October 26, 2009

The Shanghai Chapter of the IAOP chaired by Eric Rongley of Bleum, Inc held a chapter meeting on October 26, 2009 at the Bleum offices, Cloud 9 Mansion, 19th Floor, 1118 West Yan’an Road, Shanghai, China.

At this meeting we welcomed Geofrey Master, of the law firm Mayer Brown, who talked about “Contractual Issues Chinese Firms Encounter When Engaging with International Customers.” He also touched upon the different contracting vehicles used for ITO and BPO work and shared his suggestions for how firms in China can better position themselves to take advantage of the offshore market.

Meeting held Tuesday, April 7, 2009!

The Shanghai Chapter of the IAOP chaired by Eric Rongley of Bleum, Inc held a chapter meeting on April 7, 2009 at the Bleum Inc offices in Shanghai.

Eric welcomed Clas Neumann, Senior Vice President and Global Head of SAP Labs who spoke on the topic of “Distributed Software Engineering in a Virtual World: What Works and What Doesn’t.” Over the last fifteen years SAP has embarked in distributing software development for its core products around the globe.  About half of its solutions are meanwhile developed outside of its HQ in Germany, mainly in the big hubs in Bangalore, Palo Alto, Shanghai and Tel Aviv. Over the years different models were tried and adopted to make the development projects successful – from traditional software engineering management models like Agile dev, Rapid dev or SCRUM to models coming more from manufacturing like SixSigma or LEAN. On the organizational side, from pure “Black Box” organizations to deeply integrated virtual teams with complete transparency down to the individual developer many designs have been tested.

In this session, Clas Neumann explained why certain models have been more successful than others and which models worked specifically well across cultures, time zones and distance.

Meeting held January 20, 2009

Part of the IAOP China Chapter

The Governance and East China (Shanghai City) Chapter’s held a combined webinar, hosted by Vantage Partners and Bleum, Inc, on Tuesday, January 20, 2009.

At this value-packed meeting entitled “Managing Cultural Differences in Offshore Relationships.”  Danny Ertel, Governance Chapter Chair, opened with a few comments about outsourcing governance and then shared results from Vantage Partners’ new Offshore Relationship Management Survey which set up a discussion on the following questions: What are the most significant challenges that customers and providers face in managing their offshore relationships?  How do those challenges differ from challenges in onshore deals?  What cultural differences present significant challenges?  How do those challenges differ by geography?  What are the unique challenges in offshoring to China?  What are customers and providers doing to meet those challenges?  Eric Rongley, East China-Shanghai City Chapter Chair, followed with an update on his chapter.

Then Andy Wang, ODC Manager from Bleum Inc, and Joe Olson, vice President Product Development from Red Prairie, joined Danny and Eric for an exciting discussion.  Joe shared a customer’s perspective on the challenges in offshoring to China and some mechanisms for dealing with those challenges.  Further, Andy described how service providers can manage the unique challenges presented in offshore relationships.  The webinar concluded with a Q&A session.  It was a very informative and insightful session.  If you are an IAOP member and were not able to join us, you may visit our Knowledge Center and review the recording.

If you would like to participate in the survey, please visit:
www.surveymonkey.com/Vantageoffshoresurvey

Meeting held October 23, 2008

The IAOP East China Chapter meeting this month was well attended.  Speaking at the event was Elliot Papageorgiou, Managing Director for the Shanghai offices of the renowned IP law firm Rouse & Company. His speech was very insightful and of relevance not just for parties interested in outsourcing to China, but for creators of IP everywhere.  The slides from his speech will be posted on the IAOP website. It was perhaps auspicious that the meeting was held on the same day that Microsoft launched a new initiative to protect its ownership of Windows by creating black screens on the desktops of thousands of pirated copies throughout the World.

Many companies hesitate to outsource to a Chinese vendor because they are worried about their IP or data, but in fact they are already at risk.  In fact, their outsourcing initiative could be the catalyst for launching their IP protection initiative in China. In this way providers may turn this challenge into an opportunity.

Elliot suggests a quad strategy for international companies to not just register their patents and IP in the US, Europe and Japan, but also in China to prevent having their rights usurped. The Chinese are registering IP at a feverish pace positioning them to benefit from the country’s surging economy. This is most dangerous for companies around the world in the case of utility patents, which have seen surged more than 700% in China over the last 10 years.  One may not just have their rights infringed in China, but may actually get their rights crowded out by a Chinese party who has incrementally filed of utility patents in China that make it hard to sell their own products here. These utility patents are easier to get in China than invention patents so companies file them for everything. Elliot shared the story of the German company Schneider who decided not to file their patents in China, only to find after several years that a Chinese firm had filed numerous utility patents that encroached on their scope.  When they tried to begin selling their product in China, Schneider found themselves on the receiving end of IP litigation resulting in a monetary judgment against them for $4.5 million. Any company that doesn’t have a cohesive IP strategy in China, with or without outsourcing, is putting this critical future market at risk.

Here were some other interesting points from Elliot’s speech:

·     Recording a copyright is the best way to protect IP in China.  Protection of unregistered IP in China is extremely difficult

·     The first and last 30 pages of source code and manuals must be submitted for copyright, but be smart and do not put important bits in these parts.

·     There has been a huge increase in registering of patents in China, especially utility patents.  This poses a risk to companies who choose not to register their patents in china that they will be crowded out of their own inventions.  The same is also true for trademarks.

·     As always in China, choose your battles wisely.  In the west we believe the mighty Oak faces the wind, in China, the clever bamboo bends with the wind.  If you find an infringer, it is unlikely you will be able to drive them out of the market.  Be prepared to negotiate a licensing agreement to at least recoup something.

·     HR departments and strategies are critical to prevent IP leakage.  Be extremely careful choosing your HR personnel in China.  Have employment and IP contracts that are written in Chinese as well as your language and have that thoroughly reviewed by a foreign law firm who understands the Chinese environment.

·     Choosing the right court for your litigation is a major determinant of success.

Elliot ended by pointing out that outsourcing providers turn China’s IP reputation from a weakness into an opportunity.  Any company that ever hopes to sell their IP or brand in China had better come up with their strategies sooner rather than later due to the accelerating pace that the Chinese are recording their claims. In this way Chinese providers may be able to help their customers to actually better understand their risk regardless of their choice of outsourcing destination and are in a good position to help them craft their strategies. The good news is that if companies employ the right strategies in China they have as good of a chance of protecting their property as anywhere. That is preferable to being locked out of the Worlds fastest growing economy in the future.

Meeting held on June 16, 2008!

The latest meeting of the IAOP East China-Shanghai chapter was held on June 16, 2008 from 6:30 p.m. to 8:30 p.m. at Bleum, Inc., located at Cloud 9 Mansion, 8F, 1118 West Yan’an Road, Shanghai, China.  Chapter chair, Eric Rongley, CEO of Bleum Software Outsourcing, Michael Corbett, IAOP Chairman, and Gilles Langourieux, CEO of Virtuos, presented the following to the meeting’s participants!

Michael Corbett, IAOP Chairman and globally renowned expert in the field of outsourcing, opened the meeting by sharing the mission and vision of IAOP.  In addition, he shared his insights on what to expect, when, and how Chinese companies can flourish in the outsourcing industry.  Further, he explained IAOP’s vision for a global industry built on common professional standards, excellence, and ethics and how Chinese companies can catapult to a leadership position in this emerging new world of outsourcing.

The meeting continued with a presentation on the topic of “Game Outsourcing in China” presented by Gilles Langourieux, CEO of Virtuos.  As the game industry is maturing and facing new capacity and cost challenges, the use of offshore outsourcing is becoming a mainstream solution for game publishers and developers.  Specifically, Gilles addressed an overview of the games market and factors behind the growth of games outsourcing; opportunities and challenges for games outsourcing companies in China; and what makes China and Shanghai special for this industry.

Chairman’s Summary – October 23, 2007

IAOP East China Chapter Meeting Minutes October 23, 2007

The October 2007 IAOP East China Chapter meeting was well attended.  Due to a last minute family emergency the scheduled speaker, Paul Zanker of PWC, had to drop out so we moved forward the planned speaker for the December Chapter Meeting.  Paul’s speech on an Emerging Global Trends in Outsourcing report by PWC will be rescheduled for the December Chapter Meeting.

The topic for this Chapter Meeting became China’s New Labor Law and its Impact on the Outsourcing Industry.  Speaking was Bob Zhu, Asia Pacific HR Director for Electronic Arts.  Bob was previously the Asia-Pac HR Director for Capital One, Danone and Tektronix and he has a wealth of experience adapting HR practices of multinationals to the China environment.

In his speech Mr. Zhu highlighted several areas that will impact all companies operating in China as a result of the new labor law.  Noting that the new law was not negotiable he suggested that one’s time is best spent understanding the impact and creating strategies for dealing with the new labor landscape in China.

While the labor law will may make operations more difficult for vendors in China who provide offshore outsourcing services it will likely act as a catalyst to promote outsourcing within China.  Multinationals may choose to outsource more positions in their China operations to mitigate the increased risk and overhead the new law places on employers in China.

Mr Zhu pointed to six key impacts that the new labor law that goes into effect January 1, 2008 will have on employers. They are:

1.    The practice of making fixed term, (1 or 2 year employment contracts) will be phased out in China in favor of permanent employment contracts.  This will limit the current practice of being able to terminate employees by simply not renewing their labor contracts when they expire.  Going forward companies will have to prove cause in all cases when terminating staff.

2.    Probation, which is commonly used at the start of an employment relationship is effectively eliminated.  Previously companies could enjoy a 3 month probation period with new hires if they made the employment contracts for 1 year and 1 day.  During probation it was very easy for a company to terminate the employee if they found their performance or attitude was not good.  Now probation will be limited effectively to one month, and there will be no more termination without cause.  So employers will need to document and prove their case that the employee did not perform during probation, a very difficult hurdle, if they with to terminate.  One strategy Mr Zhu pointed to for this was to put a clause in employment contracts stipulating that it is conditional on a successful background check.  Then if the employee is found to have misrepresented anything even slightly, it could be grounds for dismissal.  However, the change in this new probation term will put much more burden on HR departments to do more due diligence on candidates before hiring them, since it will be significantly harder to terminate them during probation if they are found to not be a match with your company.

3.    One favorable change to the labor law is a change to the amount of severance a company must pay in the case of termination.  Previously the law required 1 month salary for each year of employment as severance, plus one month notice.  Under the new law 1 month notice is still required, but the compensation for time served will be based on the average salary in one’s city, not the employee’s actual salary.  So for highly paid IT workers whose salary is far above the city average salary, they will receive less.

4.    Companies will need to be much more careful that their employees all have valid labor contracts.  In the past, if an employee’s labor contract expired the company could make a new one at its leisure.  Under the new law, if a company lets more than 30 days lapse between the expiration of an old labor contract and a new one, significant penalties will be due to the employer.  So HR departments will need to be much more organized in their handling of labor contracts with employees.

5.    The penalty for wrongful termination is doubled.  If an employee is terminated and elects to take the employer to the labor bureau for arbitration and they win, whatever compensation they would have received as a result is doubled. This creates a dangerous situation for companies since employees win 80% of the time in labor court in China.  With the new policy of doubling the money the employee can get, it should be expected that employees will start to take far more cases to arbitration since they have nothing to lose and lots to gain.  However, Mr Zhu pointed out that companies should not be intimidated by this and that if handled right, a favorable settlement can be achieved by a skillful HR department.  What this means though is HR departments will need to be much more professional in the new regime.

6.    All companies will have to start a union.  Mr Zhu commented that one should not look at this measure from the Western point of view since unions are not as strong in China as in the West.  This is preferable to the alternative under the law which would require unanimous approval from the staff for any change of policies or firing decision.  So companies should be proactive in planning their union strategy to put in place a friendly organization rather than letting it happen organically or falling into the trap of needing unanimous consent for operational decisions.

The new labor law puts more power into the hands of employees, which may be needed in some industries like manufacturing where perhaps they are exploited today.  However, in the outsourcing industry it is already a candidates market and these new measures will further tip the balance in the favor of employees to the detriment of employers.  On the other hand these new laws will increase the incentive for companies to use contractors rather than full time permanent employees for their China operations and may reduce the appeal for overseas companies to build Captive centers in China and instead find a suitable outsourcing vendor.

Chairman’s Summary – April 12, 2007

The topic of the meeting was BPO in China and we had two speakers, one from the advisor side and one from the vendor side.

On the advisor side we heard from Vibhash Ranjan from Morgan Chambers. Vibhash gave a high level overview of the outsourcing industry, its critical success factors and reviewed the BPO landscape in China. Importantly, he found that the market in China is very nascent, with just a handful of players able to operate at the international level. One interesting take away though, was a large opportunity seen for servicing the China and Asia operations of multinationals from China. This could be a huge as-yet untapped market.

Following Vibhash’s industry overview we heard from one of China’s BPO success stories, ResourcePro. Matt Bruno, their CEO, discussed the motivations for setting up operations in China and how they service insurance customers in the US. With a more stable talent pool than India, it looks like China will grow in popularity as a BPO destination whether serving the local market, or the US and UK.

One other interesting take away was that of the 30 attendees at the meeting, eight reported being involved in BPO. This is clearly a growing trend in China. One attendee is also servicing the US market with local resources. They are providing graphics design work from China and have been experiencing strong growth. English language skills may be a challenge to doing BPO in China, but if one chooses the right service offering, language need not be an obstacle.