services outsourcing strategy for kunshan province, china

7/29/2019 Services Outsourcing Strategy for Kunshan Province, China

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Producer Service &Service Outsourcing Mode

Joe Valentine, MBA, PMP


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Countries by 2011 GDP (nominal)(Source: Wikipedia)


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GDP real growth rate 2010Source: Wikipedia


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Countries by 2011 GDP (nominal)per capita (Source: Wikipedia)


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Nominal GDP sector composition, 2011(in percentage and in millions of dollars)
http://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/GDP


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Nominal GDP sector composition, 2011 (inpercentage)


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Estimated GDP gap due to shortfall from servicessector in China, 2011


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Main types of Outsourcing Services

Information Technology Engineering services

Legal Services Business Process outsourcing - BPO Knowledge Process Outsourcing - KPO Financial Services

Tax and Accounting Services Life sciences and healthcare Research and educational services


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Information Technology Services

Types of IT Outsourcing:

There are several types of IT outsourcing, defined by where the outsourced work happens. Theseinclude:

offshoring; nearshoring;

homeshoring/onshoring; blended-shoring;

Examples of Frequently Outsourced IT Services:

application/software development; web development/hosting; application support or management; technical support/help desk; database development/management telecommunications infrastructure


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Engineering Services

Engineering services are those service functions that deal with or are related to core engineeringprocesses.

Examples are:

CAD / CAM (computer aided manufacturing / design) Auto design

Failure analysis of structural steel Thermal design Architectural drawings Balance of Plant Design & Detailing Engineering Analysis Manufacturing Engineering Technical Publications Sustenance Engineering Embedded Systems Special Services Plant & ProcessGlobal spend on engineering services is estimated at over $800 billion.


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BPO - Business Process OutsourcingKPO Knowledge Process Outsourcing

BPO is the process of hiring another company to handle business activities for you. Also calledITES -- information technology-enabled services.

Voice Processes

Call Centers Telemarketing

Market surveys

Non Voice Processes

Market Research Technical support Help Desk Data Entry Product support

KPO -- knowledge process outsourcing includes those activities that require greater skill,knowledge, education and expertise to handle. For example, whereas an insurance companymight outsource data entry of its claims forms as part of a BPO initiative, it may also choose touse a KPO service provider to evaluate new insurance applications based on a set of criteria orbusiness rules; this work would require the efforts of a more knowledgeable set of workers thanthe data entry would.

KPO involves moving up the value chain in offering services.


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LEGAL OUTSOURCING

Drafting Contracts/Agreements Document Review Litigation Support Medico-Legal Support Services Medical Malpractice Litigation Support

Litigation Document Management and eDiscovery Legal Pleadings & Documentation Legal Research Medical Malpractice Legal & Litigation Support Bankruptcy Filing, Pleadings & Documentation Paralegal Support Services

Patent drafting and prior art search Simple legal filings Legal Publications Proof reading Trademark/copyright/patent research


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Knowledge Process Outsourcing -

Financial services

Fundamental research

Corporate finance

Buy side research

Quantitative research Editorial and publishing

Data analytics

Business research

Customers include investment banks, retail banks,private equity, asset management firms, commercialbanks, insurance companies etc.


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KPO - Corporate and professionalservices

Market analysis and competitive intelligence Customer insight (market research and data

analytics) Business development and sales support Intellectual property searches and analytics Information services and knowledge

management Financial controlling and analytics Typical customers include law firms, consulting

firms, accounting and advisory firms, marketresearch firms, and human resources firms.


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KPO - Life sciences and healthcare Business analytics support Performance reporting

Data preparation (data extraction and cleansing) Performance trackers Sales and promotions trackers Market share trackers and trend analyzers

Performance analytics

Marketing planning Product lifecycle analysis and modeling Forecasting support Promotional spend analysis Data analytics service

Market research support

Market research analytics: Data cleaning and processing as well as analytics and reporting Rewind service: Creation of new insights from existing market data Competitive intelligence support

Intellectual property servicesR&D information solutionsPatent licensing and commercialization support

Procurement supportSupply chain solutionsRapid research service


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Success story of a small KPO services company inIndia


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Factors responsible for growth ofoutsourcing services in India

Large number of trained and qualified human resources with good quality of higher education Lower cost of operations Availability of qualified experienced managers Stable democracy with strong legal system and intellectual property protection Favorable Government policies including tax exemptions for export sector Free Trade Zones

English medium of education and common language Culturally cosmopolitan cities more akin to Western culture Liberalization of Indian economy promoting industrial and economic growth Good infrastructure in the cities Time zone difference of about 10 hours with the US EST Encouragement to entrepreneurship in the private sector and private business ownership Greater transparency in capital markets and rupee is freely convertible in the current account

Development of capital market Inflow of foreign capital for investment Support from banking system for capital investment and working capital requirements Education is valued in India


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Issues affecting outsourcing servicesfrom China

Perception as a location for low cost manufacturing Difficulty in communication due to lack of English education Concern over protection of intellectual property Judicial system is perceived as weak Lack of enforceability of contracts Lack of transparency Lack of democracy and questions over human rights issues Export control laws and restrictions - EAR and ITAR Lack of modern management Restrictions on communication and internet access Need to identify areas to specialize and grow

Need to understand the market and position and market services Need to innovate and upgrade technology Need to use modern project management, pricing and strategic

management tools


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Advantages of developing servicebusiness

Lower investment required in plant and machinery No requirement of shipping of finished goods Quicker cash flow due to no time required for shipping No cash locked up in inventory of raw materials and finished goods Less variance in cost of materials Greater investment in development of human resources Ability to leverage human resources Better educated workforce and citizens contribute to national development Upgrades management practices and techniques Enables cross pollination of ideas and innovations Services industry is more nimble and able to change with requirements.

Provides employment to greater number of people and offers better payingjobs Can replace manufacturing jobs lost to other parts of the country Stimulates greater economic development and growth


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Kunshan(Source: Wikipedia)

One of the most economically successful county-level administrations in China. GDP has grown substantially from around 20 billion yuan in 2000 to 210.028 billion

yuan (approximately 31.958 billion in USD) in 2010. Ranked first in the "25 Best County-level Cities in China" study by Forbes China in

2010 Immigrant population larger than the number of its permanent residents Capital-intensive and export-oriented economy Known as "Little Taipei" due to the influx of businessmen from Taiwan Duke Kunshan University campus is under construction

Major manufacturing companies

AMI China, a subsidiary of American Megatrends Avery Dennison, a manufacturer of specialty tapes, engineering films, and other

items Compal has its major notebook manufacturing factories takes OEM orders from

Toshiba, Dell, Fujitsu, and Hewlett-Packard. Foxconn, a subsidiary of Hon Hai Precision Industry in the Mainland China and a

contract manufacturer that makes iPod, iPad and iPhone Giant Bicycles, the cycling equipment manufacturer, which bills itself as the world's

largest bicycle manufacturer Liftex Corporation, the lifting equipment manufacturer

Olivet International, a manufacturer of luggage Shimano, the Japanese cycling, fishing and rowing equipment manufacturer Snap-on tools Sunrider Wistron Corporation, the world's second laptop contractor and the manufacturing

arm of Acer Inc.


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Action Plan points for Kunshan for growth inservices business

SWOT Analysis - identify the areas of strengths, weaknesses, opportunities andthreats

Understand the global services outsourcing market Determine market positioning and value proposition Invest in developing and training human resources through short and long term

education and training strategies Invest in bringing teachers and trainers from outside Legal system has to be strengthened to provide fair justice expeditiously Ensure respect for intellectual property and contracts English language teaching Address attrition and how to attract and retain the best talent Government policies - taxation, free trade zones, employment policies Reduce corruption and streamline procedures for approvals and licenses to do

business Educate managers in modern management strategies Encourage a culture of innovation, risk taking and provide incentives for business Specialize in key areas and move up the value chain


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Basis for strategies for Kunshan - 1Type of service business Move up the value chain to more value added servicesEnvironmental factors

Fast changing global markets Competitive analysis Pricing analysis Quality control systems Communication, overcoming the cultural and language barriers

Government regulations Export control regulationsLegal factors Intellectual property protection Written contracts Judicial remedies in case of disputes Arbitration vs Litigation

Infrastructural issuesFacilities, broadband internet, educational and training institutionsGovernmentLicenses, procedures, clearances, taxation, policies


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Basis for strategies for Kunshan - 2

Understand the market and your customer Who is your customer, where are they located and how best to reach them What is your service position in the market and message

What are your customer's pain points and how do you meet them Why is Kunshan better than anyone else

Market positioning and strategies You cannot be everything to everyone - specialize and focus Be the best in the world at what you do Combination of offline, online and social media marketing Inbound Vs Outbound Marketing

Managerial factors Finance, marketing, strategic planning, project management, pricing strategies,

innovation, cross cultural issues, dispersed teams, address attrition and planincentives to attract the best resources.

Human resources Education and training facilities Availability of skilled professionals Ability to communicate well English language teaching Addressing cultural issues and attitudes


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Questions

Joe Valentine, MBA, PMP

[email protected]

services outsourcing strategy for kunshan province, china

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