The Buddha and China Business Process Outsourcing

The Guan Ji Temple in Wuhu, Anhui Province, is a beautiful compact temple plaza atop a small hill in the diffused center of town. It was the perfect spot to which to take a dawn walk from the hotel at which I was staying during my team’s site selection survey. The morning was cool, crisp and clear, cloudless, fresh. I could think of no better place from which to receive a call from a California venture capital company interested in investing in the Business Process Outsourcing (BPO) scene in China.

The compound’s three terraces are easily accessible, starting with the ground level plaza in which a three meter tall statue of the Boddhisatva Guan Yin greets visitors and pilgrims. At the base of the first temple early risers were already burning incense and planting the fragrant stalks in a large bell-shaped cistern filled with the ashes of previous incarnations of incense since burnt. I had already bought some incense sticks on the plaza outside the temple area, and set the tips of my bundle to candle flame. It seemed to take forever for the cinamon color to become the charcoal gray that signalled the sticks were ready to plant. I kept watching the time on my mobile phone, anxious the phone would ring with my hands full of half-burnt incense. Does the Buddha still bless you if you haven’t burnt all your incense?

The incense finally lit, I pressed the bundles between my clasped hands and gave three bows in the direction of the temple. The phone rang. I quickly made off to a stone bench in a quiet corner of the compound to take the call. An American woman on speaker phone asked if I was me. I said I was. She was tying me in to their New York Office, to talk with a Vice President charged with developing their BPO investment portfolio.

The venture capitalists’ problem was this: they were land-locked, had no one on the ground floor in China to research and qualify potential BPO targets. They knew I came in contact with both IT outsourcing (ITO) companies and BPO companies in China. Their focus was exclusively on BPO operators and providing second and third rounds of seed capital to expand operations.

The VC’s remote research had lead them to conclude there were still no pack leaders in the BPO market, no companies breaking away from the others and distinguishing themselves; especially for the North American and European marketplaces. They knew the Indians were coming to China, and that the Chinese government was promoting cities in China to become IT/BPO centers of excellence. They were confident and vested in the development of the China BPO market; but how long would it take to see an industry grow up that was as formidable as India’s? They asked for my views.

I remarked the Year 2000 (Y2K, as we in the IT industry back then called it) software re-engineering effort was a gift to the Indians. The West had millions of lines of programming code that needed to be reviewed and re-figured to take into account the change-over from the year 1999 to the year 2000, when computers would record a “00” for the new year’s dates instead of “2000”. Calculations, of course, would no longer be accurate: bills would be wrong, payments wildly out of wack with reality, airplanes would crash, the world as we knew it would end. India, though, saved the West; or rather, its armies of software engineers updated the software that ran the financial record-keeping computer applications of the West.

India also learned about Western computer systems, Western systems development methodologies, Western back office business processes. I was a project management consultant to a very large financial services organization directly after Y2K. I was charged with packaging up one of the first back office applications in the States that was going to be developed and maintained in India. Management figured that if the Indians had doneY2K right, they could cut their teeth on this application, and perhaps on further applications.

And so the Indian ITO industry as we know it today was born from this and many other projects “thrown over the wall” to the Indians after Y2K.

Of course, the Indian education system with its emphasis on English language skills also encouraged growth of the ITO business, and facilitated entry into the BPO space. Credit card processing, insurance claims processing, call centers and more were natural extensions of the knowlegde base and experience the Indians were gaining through their business analyses and IT implementations.

China, though, is different. China has no Y2K to finance or to educate its armies of fresh-eyed programmers in the hard-as-nails realities of Western business practices and operational processes. It does not have the troops of English-speaking, customer-focused go-getters that India does to kick-start an industry into the stars. Instead, China is going to have to boot-strap itself to become a world-beater in both the IT/BPO realms.

Certainly, the Chinese government has its heart in the right place and its intentions firmly set. Newly fielded economic development zones throughout China are flush with cash, already investing in platoons of engineers and hi-tech infra-structures. One partner in a venture to work with a local government to build its IT/BPO service base told me the governments are using the same approach they had in developing their manufacturing prowess: if you build it, they – the foreign companies - will come.

Problem is, the Chinese have no credibility when it comes to understanding and articulating the kinds of back-office applications that matter to knowledge-driven Western companies. Most Chinese IT companies cater to domestic customers; the vast majority support Japanese and Korean companies with relatively unsophiscticated programming that has been passed to them through highly detailed specifications; and the few BPO resources there are have made it this far performing rote activities that do not require much in the way of analysis or creativity: insurance claims processing, data entry and the like.

Another learning curve, I explained to the VC on the other side of the world, is the one the West will need to go through about China. I told the VC I call it the “Fear of the Yellow Peril”. The West has all kinds of cultural preconceptions and historical baggage related to China that will take years to dispel.

The problem will take longer to resolve than it has with manufacturing because the people who are making the decisions about whether to set up BPO operations in China know nothing about China and don’t want to know much about China, leave alone pick up their families and move to China to deepen and accelerate development platforms. We’re talking about the CFOs and CIOs and other business-line Vice Presidents who are comfortable enough in their American suburban homes with the driving wheel of their SUVs in one hand and their lattes in the other. These folks are not going to move to China to oversee development of their China IT/BPO portofolios; not like the manufacturing types that have already transplanted their lives in China.

This is all not to say the Chinese will not develop a successful BPO industry, for I firmly believe they will, I told the VC on the conference call. And the VC, for their part, reiterated their long-term commitment to developing the BPO industry in China. However, we all agreed, it’s just going to take years longer than we would all prefer. And the industry will likely go through many incarnations before it makes as large an impact on the world scene as the Indian model has. But it would happen in this lifetime, we were confident.

Phone conference concluded, I watched the monks that lived in the compound moving about their daily rituals, sweeping the courtyard, neatening the worshipping halls. Behind me the terrible screech of a buzz saw ripping through timbers forced me from the shelter of the tree under which I was sitting. It was time to return to the real world. And to the dawn of a new era in China’s industrial development.