Source: www.informationweek.com

Mark Botticelli has learned valuable lessons about China. For one, employees expect cash bonuses before important holidays, like the Chinese New Year. And horizontal organizations don’t work.

“Hierarchy is important,” says Botticelli, VP of engineering in the mobile solutions division at Trimble, which makes software for devices used by delivery people and other mobile workers. “The project manager needs to go home and tell his wife he has 14 people working for him.”

Trimble eased its way through these cultural challenges three years ago by hiring Chinese outsourcer Suzsoft to provide engineering services. This is a path more U.S. companies are likely to follow, making companies like Suzsoft–now DarwinSuzsoft since being acquired by Darwin Partners last year–increasingly popular.

As a measure of that popularity, private equity firm Francisco Partners last week said it would invest $48 million and take a majority stake in DarwinSuzsoft. The investment will be used for acquisitions and organic growth of the U.S. company, which employees 800 Chinese engineers. Also last week, Sierra Atlantic, a U.S. IT services firm with 1,100 developers in Hyderabad, India, said it’s acquiring ArrAy, a U.S. company with 200 engineers in Guangzhou and Shanghai.

It’s not just the small services providers gearing up: IBM, Tata Consultancy Services, and others have plans to hire thousands more engineers in China. Oracle late last month set up a second Chinese development center to support software partners and integrators, and introduced a computer science program for vocational schools in a deal with the Chinese government.

Companies doing offshore development in China say they’re paying salaries that are 25% to 40% lower than what they’d pay in India, without the high staff turnover rates in that country. Chet Gapinski,VP of engineering at Crossbeam Systems, a maker of security systems, steered his company to China last year after facing some of those problems in India. Crossbeam hired ArrAy for a “hybrid” approach that keeps project managers in the United States and engineers in China, with both sides making regular visits to the other country.

Crossbeam initially had difficulty getting U.S. visitors’ visas for Chinese engineers, a problem ArrAy smoothed over, Gapinski says. It also found that Chinese engineers can’t work on some security technologies deemed sensitive by the U.S. government. In China, experienced service providers also can prevent problems dealing with government, which is closely involved in business.

Trimble, which employs 30 of DarwinSuzsoft’s Chinese engineers, has expanded its relationship beyond developing custom apps for a Hong Kong customer to include maintenance for U.S. and Chinese customers and development work on Trimble products.

Botticelli initially was concerned about lax intellectual property protection in China but found Suzsoft’s security measures more than adequate. English skills aren’t nearly as good as in India, so Trimble requires its Chinese engineers to attend weekly English classes. One sign of success in China: Trimble plans to ramp up its team there to handle new products coming out next year.

Many small companies ignore the prospects of outsourcing due to the risks and time involved in setting up a beneficial relationship with another firm. The potential profits that would certainly make the risk worthwhile are often not considered.

Outsourcing is a business opportunity that enables a company to reap many kinds of benefits. It helps the company to grow at a high speed. Outsourcing is a cost effective way to increase your resources. The assurance of saving time and money by exploiting technology and inexpensive labor has driven companies to opt for outsourcing. Experts believe that millions of jobs will be outsourced to overseas destinations in the near future.

Small businesses can benefit from outsourcing in a great way. More and more of them are turning over parts of their operations to outside experts, allowing owners to focus on critical needs and growth. Following the trend of larger companies, small-business owners are outsourcing a range of services, from HR to finance and accounting to customer services. But the outsourcing process requires some time and investment to find the right vendor, build a working relationship, and allow your employees to adjust.

It is essential for a small business owner to know the strengths and weaknesses of his business before thinking about outsourcing. Making a selection of a perfect vendor is a big problem for the big companies as their budget tends to be very high. One option that can be explored for all kinds of business enterprise holders is by browsing through websites to find a reliable partner. It is really important for the other company or your partner company to have agreement in writing or an arbiter before disagreements crop up.

It is important that while drafting a contract, clarify not only the specific services you expect to receive, but also the quality of the delivery. It is essential to keep in mind that you have to pay only for what you need in order to remain on the safer side.