Outsourcing IT to China:Perceptions, Realities and Best Practices

China is becoming the number two countrybehind India for offshoring of IT services

– Strong government support

– Inexpensive IT Talent

– Highly skilled population

– Superior infrastructure

– Adopting quality standards

– Education system producing results

– Diversification from India

China Overview

21

Today’s Market Dynamics

Challenges facing the Offshore IT services market

Increased geographicdependence

Significant wageinflation

Very highturnover rates

Strained relationshipmanagement capability

Skills scarcity

Freeborders Profile

Freeborders is a leading provider of Technology Outsourcing Servicesfrom China to major global corporations

Global Delivery Model• US-based company founded in 1999• 10 global locations• Delivery center in Shenzhen, China

San FranciscoGlobal HQ

CMMI Level 5 certifiedand US standards for IPand security

New YorkEast Coast HQ

LondonEMEA HQ

ShenzhenDelivery Center

English languagecapability globally

China Outsourcing Competitive Landscape

5300+5000+

CompaniesOutsourcing to US

and EU-based clients

CompaniesOutsourcing to

Japan-based clients

“Localization”Companies

(re-packaging forPRC marketing)

Domestic (PRC) ITOutsourcingCompanies

Business Model

ManagementScale

QualityFocus

ProcessMaturity

InternationalTrack Record

EnglishSpeaking

Number ofViable Companies

1-2

Why Global Clients Turn to Freeborders

Global Track RecordProven ability to execute for major global companies

Vertical Market ExpertiseFinancial Services, Software & High Tech,Retail & Manufacturing

Process MaturityCMMI Level 5; Proven Project Management Process

Strong ManagementU.S. – based SME’s & China-based team includingChinese nationals with U.S. experience

Infrastructure & SecurityWorld class tech facility – communicationsinfrastructure, h/w & s/w, physical & info security

Sustainable Cost-Advantage• 5:1 vs. the U.S.• 40-50% lower than India and stable wage climate• Diversification vs. India = Risk mitigation

Recent Project – Global Investment Bank

Global investment bank requires post merger integration of new sales force –client relationship management platform

• The objective was to migrate sales functions of the investment bank from aheritage platform to the new, core CRM architecture

Success Metrics:

• Freeborders program manager defines project governance processes, programcontrols, and risk and issues management processes

• Program manager succeeded in integrating the investment bank and consumerbank software development processes and cultures with on and offshoreresources located in Chicago, Houston, Mumbai, and New York

• Project delivered on time and under budget by 15%

The project had a duration of 12 months and a staff of more than 100individuals, was conducted over multiple locations, and had a budget of morethan $15M

Client

Challenge

Solution

Result

Proven Management Solutions

CommonConcerns

OurSolutions

FreebordersAdvantage

English Language

Infrastructure

IP Security

Technology Talent

Wage Inflation and Turnover

English is our core value in hiring, compensation & promotion

Freeborders facility is world-class

Relentless focus on securitybest-practices – ISO 27001:2005(in process)

Rigorous HR focus: superior hiring, training, retaining

Superior compensation system; no wage inflation, 3% turnover

Management Scale

• Western-quality HR practicesand scale

• Recruit, train, review, retain,exceptional senior management

Process Maturity

• High quality outcomes assured &repeatable – CMMI Level 5

• Proven application developmentprocess between US and China

• Focus on zero communicationerror

Final Thoughts

Sustainable Cost Advantage5:1 savings vs. the U.S.40-50% more cost effective than India

Diversification Versus IndiaRisk Mitigation

Mature Development ProcessProven process and methodology

Global Track RecordProven ability to execute for global companies

Vertical Market ExpertiseManufacturing, Retail, Financial Services,Software / High-Tech, Transportation

India outsourcers lackoperating expertise in ChinaVast cultural and operating differences

Chinese entrepreneurs aremarket-blind to the WestLack know-how and reach to serviceFortune 1000