Offshoring to China at
By Beth Ellyn Rosenthal, Editor
DuPont was in a bind. It outsourced the creation of an
online fabric database for retailers and apparel
manufacturers. Its first supplier failed. No wonder. The
project was daunting. It required data from 600 fabric mills
in 40 countries using eight different languages.
But the company couldn't delay its Online Fabric Library
because the CEO had sent letters to thousands of companies
announcing the system would go live by a certain date. "There
was a lot of internal pressure to deliver because this project
had a lot of visibility," says Mike Keating, Partner,
Freeborders, the supplier who saved the day by stepping in
and delivering the project three weeks early.
"Going from 'It's unlikely we'll meet our target date' to
'beating the target date' was a huge win for the CEO," says
Keating. "They worked week-ends and nights to make this happen
for us under very tight deadlines," adds Norman Beveridge,
Global Manager for Apparel for INVISTA. (In 2004 DuPont sold
its $7 billion fiber and textile arm to Koch Industries; the
division is now called INVISTA. Antron, Lycra, Stainmaster,
Thermolite, and Teflon are a few of its popular brands.)
Freeborders's secret: offshoring to China.
China's Future in Offshoring
Keating is bullish on China. "I believe China will become
No. 1 in IT outsourcing." He says the world sees China as "a
serious emerging player who everyone is afraid will become the
10,000-pound gorilla." China is the No. 1 country from
US-based investments, while India is No. 6, according to
Keating. Cisco, Intel, and DuPont are investing heavily in
China. "The message is: "Don't bet against China,'" says
Lance Travis, Vice President of Outsourcing Strategies at
AMR Research, takes a more tempered view. He believes China
"will eventually mature and become a significant offshore
locale." But he's "less optimistic" that China will produce a
supplier who can generate $1 billion in revenues like the
major suppliers in India.
The Indians enjoyed "a perfect storm of opportunity,"
according to the AMR executive. Y2K allowed them to get
started. There was no offshore competition in 1999. Travis
believes China won't be able to produce a $1 billion
company--even in 10 years--because it has to compete with
India. "The big advantage in labor arbitrage is over," he
Yet he says Chinese suppliers will prosper, especially the
ones who develop specific domain expertise. All the major
outsourcing players are investing in capabilities in China, he
reports. He mentions
IBM as well as the major Indian suppliers.
Ramsey Walker, Co-founder and Co-CEO of Freeborders, points
out China has the largest number of software engineering
graduates in the world. Last year China produced 21 percent of
these graduates; India produced 7 percent and the US just 5
percent. "Chinese universities produce 200,000 new software
graduates a year," he points out.
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