Outsourcing Lessons Learned in China

When Mike Tulloch took over as senior project manager for global plastics manufacturer Nypro’s outsourcer in China in 2005, he proudly proclaimed that he spoke not a syllable of Mandarin. (See “Outsourcing Is Cheaper In China.”) At the time, IT leaders at the $1 billion company were more concerned that Tulloch be able to coordinate the rigid project documentation that would have to take place at their headquarters in Clinton, Mass., before sending their Web development work to Beijing-based IT services provider Objectiva. And Tulloch, working part-time, was able to accomplish that for Nypro.

Fast-forward two years: Tulloch has been replaced with a Mandarin-speaking Chinese national embedded with the developers overseas. “We had been seeing a lot of back and forth on technical issues, specifically related to design,” explains Nypro CIO Jay Leader. “The number of review cycles we had to go through was a lot more than anticipated. We were losing a lot in the translation.” So the outsourcer, with Leader participating in the interviews, hired project manager Paula Yu last September.

Review cycle time is down 25 percent, and Leader credits Yu’s Western business background with helping developers see the bigger picture. “Often, the young people in China can’t put an issue in context. They’ll program directly to specifications, even if that may not be what the user really wants,” Leader says.

Yu costs Nypro more, and the in-house team now holds more responsibility for requirements definition.

Most companies that offshore development end up making similar cost or responsibility concessions, says Mary Lacity, professor of information systems at the University of Missouri-St. Louis, who has studied outsourcing best practices. “The initial push is for cost savings,” says Lacity. “But over time they realize that in order to make this work, they’ve got to start focusing on quality. And to get the quality up, they’re going to have to invest in things like developing good governance models and practices around knowledge transfer.”