The Commodification Collision and How to Avoid It
The IT outsourcing sector is the biggest contributor to revenue in the IT Services market, with US$412 billion in 2022, and is projected to reach US$778 billion by 2028. China has one of the fastest-growing IT infrastructures in the words, with the IT services market size worth $286bn. But looking for a trustworthy IT company in China could be compared to
the iceberg analogy. What all icebergs have in common is this: what is visible above is tiny compared to what is hidden below, which is a much larger beast. This is especially accurate when you outsource a task or a project to a hired IT company, where the whole tech infrastructure and regulations are very different from the rest of the world. Operations affected by this include ICP licensing, inland servers, laws, payments, APIs and clearances.
Both companies with an internal IT department and those who outsource projects to hired IT companies in China have found that it is the much larger, hidden part of the iceberg that causes problems. Non-IT stakeholders tend to view the whole gang of computer nerds as out of touch and unapproachable, which causes obvious problems when the two sides need to talk. The IT crowd is also not the best at communicating issues, especially with people who are not familiar with the tech jargon they speak in. On top of that, if you are just starting to operate in China, you may face extra challenges regarding the whole new China-specific IT infrastructure and language barrier.
You may notice something wrong about your own company’s tech side or a partner’s organization. In either case, it’s a good idea to pay attention and take action. When IT is not achieving the right results, it may be that under the surface, more serious problems are lurking.
Check out the IT Iceberg image above for the warning signs, both above the water and below. If you notice a basic problem, how would you go about solving it? If you notice the initial symptoms, the next step may be to organize an IT Audit, whether via internal resources or an external vendor.
There are conditions that can contribute to a flawed IT performance. Let’s focus on some here.
The Commodification Syndrome of an outsourced IT company inChina
What exactly is a commoditized mindset in IT? Simply put, it’s a mindset that sees tech products as working a bit like primary agricultural products or raw materials. Crude oil and coffee work in similar ways and can be chopped up and moved around without their value changing excessively. When it comes to the products and services supported by tech, the final value has to come through more long-term, holistic thinking.
In China, very often when choosing an IT company as a service provider, both parties may favour quantity over quality and seek short-term solutions that actually bring about more problems later on.
What are the warning signs that suggest your IT provider in China has fallen into this trap? Well, here are a few red flags to watch out for:
Overemphasis on cost-cutting: Commoditization is a mindset that prioritizes cutting costs over guaranteeing quality. Multiple aspects of the chain may suffer. Cost-cutting in China could involve using the pirated software, leading to numerous problems for both the outsourced IT company in China, and their clients. These issues may include risks of hacking, lack of professional SOPs, and inadequate documentation. The mindset to watch out for is the “know-it-all” attitude, often relying on personal connections for services, while dismissing the experience of global IT under the guise of “local knowledge”.
Lack of adequate training and communication/language issues: Commoditization can work against the business relationship, turning your outsourced IT company in China into an expendable resource rather than a valuable asset. If the service beneficiary doesn’t fully understand the infrastructure and the limitations of the given field in a specific country, it may be hard to train the IT service provider. Some IT companies would then understand this, and not give enough feedback on the problems encountered. The human factors of adaptability and cooperation then start to diminish. This is then followed by poor performance. In addition, the multinational teams tend to develop miscommunication based on cultural backgrounds and working habits.
Resistance to change and innovation: A widespread attitude is, “if it ain’t broke, don’t try to fix it.” This means that a detached attitude sets in within your outsourced IT company in China, with both a reluctance to audit for problems and an obsession for maintaining the status quo. Here it is important to strike a balance and keep up an education pipeline for techies in the outside market for the product. Disruption is never far away, so are you sure that everyone is aware of changes that might be coming at them fast in the future?
Failure to advocate for the right solution: When working with Chinese employees or partners, it’s very obvious to see the difference in cultural mindsets. Chinese IT professionals (as well as professionals in other fields) would probably suggest the “right” solution at the beginning but they won’t challenge the authority of the “boss”. If “the boss” is set in his (wrong/outdated) ways, the IT crew will follow him right to the end.
Losing valued staff: One of the most annoying and costly problems most companies in China (or anywhere else in the world) have to deal with is that of staff turnover. Think about the mindset of an IT guy who is surrounded by that work culture, but feels frustrated by it? He may quickly want to move away and all that training and nurturing built up over time will end up counting for nothing.
Avoiding the Collision with your Outsourced IT company inChina
Simply staying away from these chronic issues can be a little trickier than it may appear. It requires a sharp eye for detail and a desire to include multiple forms of added value.
First, an audit from a trusted source will help pin down what the symptoms may be.
Then, strategies like this may help:
Pivot from cost-cutting to value creation: There are ways to get the most out of what you have that do not rely on slashing costs. The existing technology, staff and other resources can often be streamlined for a better performance without reaching for the razor.
Learn to recognise potential: A good IT team will have a strong tech set up (licensed software, robust project management processes set up, a clear ticketing system, detailed SOPs & SLAs etc.). Knowledge sharing and detailed briefing would do wo perfectly for saving time and money on your IT projects in China.
Set an innovation culture: Within China’s highly innovative tech space, encourage your team to experiment within reasonable limits. Create a safe space for them to look into something totally new and wild, even if it’s never implemented. The culture where informed conversations are happening about movements in tech and every other side of a product are the ones that can take the lead in the race and maintain it. As Steve Jobs said, “Innovation distinguishes between a leader and a follower.”
So, steer clear of the Iceberg of the commoditized mindset in IT. Outsource to an IT company in China that is fully dedicated, flexible, experienced in managing multicultural projects and knowledgeable about the local tech infrastructure.