China becomes world's second-largest economy but it's far from being a leader

It has taken China only 30 years since it embraced capitalism to create the second largest economy, beating out Japan and positioning itself to surpass the US over the next two decades. The world should take care, however, in noting this achievement. China has yet to display a similar growth as a respected, responsible partner in either Asian or global affairs.
Its neighbors, from South Korea to Vietnam to India, have recently become anxious as China wields its new-found strength with reckless impatience, claiming territory, controlling markets, and expanding its Navy in provocative ways. It even defied much of the world in not condemning North Korea’s recent sinking of a South Korean warship.
The response by many Asian nations has been a renewed embrace of the region’s longtime protector, the United States.
That embrace, however, is not just because the US is a geopolitical power with a Navy and an economy that can counter China’s expansion. No, fundamentally it is because the US still displays values and leadership that far surpass those of China in attracting allies.
The new regional concerns about China confront the US with a dilemma: How much should it contain China in areas that appear threatening while also trying to engage it as a potential strategic partner?
That requires a tricky balance. Containment worked during the cold war to bring down the Soviet Union because the communist system collapsed under its own contradictions. US containment of China also helped force it to abandon a communist-oriented economy in 1979, but not its authoritarian rule.
Since the end of the cold war in 1991, the US has more often than not tried to engage China, most notably in letting it enter the World Trade Organization and in seeking its help on crises such as the nuclear ambitions of Iran and North Korea. But President Obama has begun to shift toward containing China, forcing the question of how far the US should go.
Washington has recently beefed up its military ties with Taiwan, Vietnam, and Indonesia, while threatening to conduct a massive sea exercise with South Korea near China’s coast on the Yellow Sea. Mr. Obama has asked Congress to approve a free-trade pact with South Korea, while seeking other such bilateral agreements in Asia that can measure up to similar pacts already won by China.
Most notably, the US stood shoulder to shoulder with many Southeast Asian nations last month. Washington told Beijing that its recent claims to many small islands in the South China Sea are essentially bogus and that it needs to resolve those claims peacefully with all the other nations around that sea.
This was a direct challenge to China’s presumed dominance of Asia. The US laid down a marker that it wants to remain the dominant power while also building up more alliances with other Asian nations to counter China.
That is not a light commitment by Obama. He must make sure the US military maintains a strong presence in Asia. He must stand up to Congress in winning approval of free-trade agreements. And he must encourage Asian nations to beef up their militaries to support the US in a regional defense.
On economic issues, the US is still engaging China, such as asking it to stop manipulating its currency in order to favor its exports. Here again, the US is standing up for the value of free markets, a value that China honors more for its self-interest than it does for other nations.
China’s lack of regard for the effects of its currency manipulation is straining Obama’s patience as he tries to revive the US economy. Congress certainly is becoming less patient as it moves closer to hindering imports of Chinese goods.
In making such moves, the US must remember that it stands for values such as liberty and openness which have enabled it to be a superpower. As China climbs toward becoming a superpower, it won't get too far unless it adopts those values.
Last year, Lee Kuan Yew, the former leader of Singapore, warned that “US core interest requires that it remains the superior power on the Pacific.” That power, however, doesn’t necessarily come out of the barrel of a gun. For America, it comes out of the power of its values.

The Successful Vendor Selection Process

The vendor selection process can be a very complicated and emotional undertaking if you don't know how to approach it from the very start. Here are five steps to help you select the right vendor for your business. This guide will show you how to analyze your business requirements, search for prospective vendors, lead the team in selecting the winning vendor and provide you with insight on contract negotiations and avoiding negotiation mistakes.

1. Analyze the Business Requirements

Before you begin to gather data or perform interviews, assemble a team of people who have a vested interest in this particular vendor selection process. The first task that the vendor selection team needs accomplish is to define, in writing, the product, material or service that you are searching for a vendor. Next define the technical and business requirements. Also, define the vendor requirements. Finally, publish your document to the areas relevant to this vendor selection process and seek their input. Have the team analyze the comments and create a final document. In summary:

1. Assemble an Evaluation Team
2. Define the Product, Material or Service
3. Define the Technical and Business Requirements
4. Define the Vendor Requirements
5. Publish a Requirements Document for Approval

2. Vendor Search

Now that you have agreement on the business and vendor requirements, the team now must start to search for possible vendors that will be able to deliver the material, product or service. The larger the scope of the vendor selection process the more vendors you should put on the table. Of course, not all vendors will meet your minimum requirements and the team will have to decide which vendors you will seek more information from. Next write a Request for Information (RFI) and send it to the selected vendors. Finally, evaluate their responses and select a small number of vendors that will make the "Short List" and move on to the next round. In summary:

1. Compile a List of Possible Vendors
2. Select Vendors to Request More Information From
3. Write a Request for Information (RFI)
4. Evaluate Responses and Create a "Short List" of Vendors

3. Request for Proposal (RFP) and Request for Quotation (RFQ)

The business requirements are defined and you have a short list of vendors that you want to evaluate. It is now time to write a Request for Proposal or Request for Quotation. Which ever format you decide, your RFP or RFQ should contain the following sections:

1. Submission Details
2. Introduction and Executive Summary
3. Business Overview & Background
4. Detailed Specifications
5. Assumptions & Constraints
6. Terms and Conditions
7. Selection Criteria

4. Proposal Evaluation and Vendor Selection

The main objective of this phase is to minimize human emotion and political positioning in order to arrive at a decision that is in the best interest of the company. Be thorough in your investigation, seek input from all stakeholders and use the following methodology to lead the team to a unified vendor selection decision:

1. Preliminary Review of All Vendor Proposals
2. Record Business Requirements and Vendor Requirements
3. Assign Importance Value for Each Requirement
4. Assign a Performance Value for Each Requirement
5. Calculate a Total Performance Score
6. Select a the Winning Vendor

5. Contract Negotiation Strategies

The final stage in the vendor selection process is developing a contract negotiation strategy. Remember, you want to "partner" with your vendor and not "take them to the cleaners." Review your objectives for your contract negotiation and plan for the negotiations be covering the following items:

1. List Rank Your Priorities Along With Alternatives
2. Know the Difference Between What You Need and What You Want
3. Know Your Bottom Line So You Know When to Walk Away
4. Define Any Time Constraints and Benchmarks
5. Assess Potential Liabilities and Risks
6. Confidentiality, non-compete, dispute resolution, changes in requirements
7. Do the Same for Your Vendor (i.e. Walk a Mile in Their Shoes)

6. Contract Negotiation Mistakes

The smallest mistake can kill an otherwise productive contract negotiation process. Avoid these ten contract negotiation mistakes and avoid jeopardizing an otherwise productive contract negotiation process.

Outsourcing vs insourcing

The decision to outsource or insource enterprise-wide activities related to the acquisition, deployment, and management of IT represents one of the more complex choices facing a firm’s managers. On the one hand, insourcing requires management to commit significant resources to a course of action, the effects of which may be costly to reverse, while forgoing numerous advantages associated with the marketplace. On the other hand, insourcing may be required for a firm to accumulate resources necessary to generate or maintain a competitive advantage.
While the increasing rapidity of technological change and the increasing dispersion of knowledge suggest an increased role for outsourcing in the economy, the relationship between governance choice and performance is dependent on the distribution of relevant capabilities and the degree to which performance is driven by autonomous or systemic innovation.
Empirical evidence suggests that carefully crafted outsourcing strategies increase the overall performance of the firm. Outsourcing is generally considered as a very powerful tool to cut costs and improve performance. Through outsourcing, firms can take advantage of the best outside vendors and restructure entrenched departments that are reluctant to change. Outsourcing can also help focus on the core business.
Since building core competencies and serving customer needs are critical to firm success, anything that detracts from this focus may be considered for outsourcing.

How to Get Outsourcing Clients?

Outsourcing is generally referred to hiring adequate work force on a per-head-count hourly rate. Today’s outsourcing model has embraced a global delivery application that is dependent on risk management/government contingencies and long-term service level agreements (SLAs). The definition and scope for outsourcing services has evolved over the past decade. Historically, IT executives have been the primary buyers of outsourcing services. However, companies are now driving the need for more business process-focused outsourcing solutions.

It is not easy to find outsourcing clients. It is a challenging task and requires proper strategy and implementation. First of all, it is necessary to seek objective analyst opinions. Industry analysts, who cover outsourcing industry, can provide detailed information on this matter. Analysts may be in a better position to validate marketing approach by serving as third party, neutral advisers.

Another important task is to participate in industry or educational forums. Outsourcing conferences enable companies to display their clients' success stories and achievements. This interactive, peer-to-peer format allows business prospects in a similar industry to address common challenges.

Hosting seminars may also help in wooing outsourcing clients. In the competitive environment, companies target programs that demonstrate solutions geared to business challenges within a specific industry. Web conferences also serve the purpose, as they are cost-effective and require no travel. Making a research in media also helps in getting more outsourcing clients. The media is powerful and influential source for educating potential customers on outsourcing trends and solutions.

Outsourcing to China

What Companies are Benefiting from Outsourcing to China   

• Microsoft, Dell, SAP, Nokia, General Electric, Alcatel-Lucent, and Unilever (UL) have meaningful engineering and IT offshoring operations in China.

• Accounting and consulting firms like Accenture (ACN), BearingPoint and Infosys Technologies (INFY) are well-positioned to benefit from China's highly-educated, lower cost workforce.

• Wal-Mart Stores (WMT) and other big box retailers benefit from low cost manufacturing in China.

• Newell Rubbermaid (NWL) and other manufacturers have shifted much of their production to China; Newell Rubbermaid outsourced 75% of its manufacturing to China in 2007. 

What Companies are Not Benefiting from Outsourcing to China?

• Lockheed Martin (LMT), Raytheon Company (RTN) are examples of prime defense contractors which would have difficulty offshoring their support or technology functions overseas.

• Pfizer (PFE) would not readily offshore production of their more profitable drugs (i.e. Viagra).

•  IP dependent industries would not likely outsource their most cutting edge R&D to China, unless their business is so capital-intensive that competitors would be hard-pressed to follow. Intel might fall into this category.

• Companies dependent on Western language customer service workers, such as telecom operators and Internet Service Providers like SBC, AOL, and Qwest are less likely to benefit from Chinese outsourcing because many workers there lack sufficient English language skills to provide real-time assistance to Western customers. 

Certain Occupations are Easier to Outsource

Engineering, finance and accounting occupations, for example, do not require much interaction with others and can often be broken down into discrete, well-defined projects and problems to be solved. This translates into more outsourcing risk for this employed in industries heavily reliant on such talents, such as software development and document processing. According to a presentation by Holly Muscolino, the Director of InfoTrends/CAP Ventures, at a meeting of the International Association of Outsourcing Professionals, Document Process Outsourcing will grow at a 17.9 percent CAGR from 2003 through 2008 – reaching a market size of more than $1.5 billion dollars in the U.S. alone. Already, Microsoft, Dell, SAP, Nokia, General Electric, Alcatel-Lucent and Unilever offshore, except perhaps the reading of x-rays and other data that can be conveyed electronically. The testing of physical samples, such as by a pathologist, by comparison, may be too time-sensitive to ship offshore for testing. 

Based on the aforementioned distinctions between occupations, it is not a surprise that outsourcing is most likely to impact information technology (IT) and routinized business processes, such as customer service. At present, China lags in these areas. In 2005, McKinsey reported that China accounted for $3.4 billion of the world’s total business process (BPO) and information technology (IT) outsourcing, a pittance compared to $8.6 billion in Ireland and $12.2 billion in India. 

Some Industries are Better Suited for Outsourcing Than Others

Service businesses with low margins are more likely to benefit from offshore outsourcing than those still commanding a high margin. Thus, a move of customer service abroad for a high-touch, high-margin business may save a few dollars, but dramatically reduce a company’s market share among competitors. By comparison, a business in a oligopolistic industry, such as utilities and telecom, can provide lower-touch customer service without dashing as many customer expectations. 

China’s poor intellectual property protection may limit its share of service outsourcing - To the extent that businesses rely on proprietary technology and processes to provide services to their customers, Western companies may shy away from locating those aspects of their business in China. While China has joined with the World Trade Organization and acceded to the related TRIPS treaty protecting intellectual property rights, in practice China’s record is still poor. Counterfeit merchandise in China abounds, reportedly accounting for 20% of all consumer products there, and the United States recently filed two intellectual property protection cases against China through the WTO dispute resolution organization. 

Government Restrictions Limit Outsourcing

For national security reasons, it is unlikely that defense contractors or even manufacturers of high-end dual use services will be able to move significant portions of their operations abroad. The May 2006 flap over the U.S. State Department’s purchase of $13 million of computers and related equipment from Chinese-owned Lenovo, despite the routing of the purchase through U.S. government contractor CDW Corp, highlights this issue. One can only guess how large of an uproar would be created by Lenovo also providing after-sales service and support… 

Other arms of the U.S. government may not restrict overseas activities, but they still regulate them. For example, the FDA must approve all drug clinical trials before such drugs can be marketed in the U.S. Trial represent a huge expense for pharmaceutical manufacturers – and perfect opportunity to lower costs by shifting overseas. On average, drug companies spend about 37% of their overall R&D budgets on clinical affairs. USA Today reports that 21% of drug industry spending for human drug testing was outside of the United States in 2004, up from 18% in 2000; however the number of U.S.-based clinical trials is not declining as "much as foreign ones are increasing." According to GlaxoSmithKline’s head of development, companies can reduce human testing costs by 10% to 50% by conducting trials in Eastern Europe, Asia, and Central and South America because clinical and hospital costs are lower outside of the United States, and patient recruitment is less time consuming. Merck concurs, as it now conducts approximately 35% of all its clinical trials overseas. 

Language

One of China’s largest impediments to success in gathering outsourcing business is its low degree of English literacy compared to other developing countries, like India and the Philippines. 

Management Skills

India has spent more than a decade developing its project management skills, as demonstrated by worldwide outsourcing players like Wipro and Infosys. By comparison, until recently, many Chinese worked for state-owned enterprises where management skills were either inessential or not well-honed. In order to scale an outsourcing business, China needs more trained managers whom foreign companies can trust from afar.

Information technology in China

New industrial technology revolution has turned information industry into supporting industry of almost every nation, as well as penetrated information technology widely into every aspect of national economy and social life. The diffusing of information technology is a gradualprocess, which experienced the development process from passive to active, spontaneity to consciousness, part to whole.
After 2000, China put forward the strategy of driving the development of industry by informatization during the period of the tenth "Five- Year Plan", and established strategy program for the development of national informatizaion. It also brought forward"putting national economic and social informatization to the priority position","enhanced promoting national economic and social informatizaion is the strategy measure covered the whole modernization process". Under the promotion of government, information technology is widely applied in every aspect of national economy and social life, China's informationizaton has achieved new development.
1. Application of information technology in Government
From central to local government was all regard Government Online as a very important project in 1999, E-governing project is underway. The rapid development of information technology is promoting E-governing changing from traditional OA, MIS system to virtual E-governing. Government-Online Project has greatly boosted the efficiency and enhanced the transparency of government work, and has provided strong technologic and consulting support for improving information management and service of government. Until 2001, 50% government institutions have established their own websites. 12 ministries and commissions of State Department has already have online service, more than 90% of the ministries and commissions have information bulletins or database inquiry, To the end of 2001, there are 5864 English domain names ending with gov.cn. Government-Online Project, as a key part of the process of E-Governing, has been greatly pushing our government to make a big step toward network age.
2. Banking
After 10 years’ hard work, Golden Card project of bank , as a crucial part of government promoting informatization, has gained great achievement: 88 national commercial banks, postalsaving banks, part of cities’ commercial banks, and country credit societies have bank cards business and establish bank card information centers in 18 cities nationwide, 100 cities basically realized cross-bank use of bank card and sharing of infrastructures in local cities. To the end of 2002, issuing volume of bankcards has reached 497 million. At the same time, commercial bank made full use of network resources, established telephone bank, network bank, enterprise bank, self-help bank, client bank center, basically realized online financial business.
3. Transportation
Application level of electronic information technology in our transportation systems of railway, highway, aviation, and shipping increases continuously. The scale of information system booking disposition of China Civil Aviation has list top 10 in world, distributing network covers all around the world that has produced sound economic and social benefit. The most complicated and huge railway ticket-selling system in world has put in to full-scale application, electronic information technology has become the key tool to boost railway management efficiency; Main ports and Ocean transportation companies have widely used EDI system, realized main business paperless handling.
4. Education
On the basis of CERNET and Satellite Video Frequency system, the modern education
network platform has been formed basically, connected to 160 cities, 895 units, and above 100 universities connected with 100M speed, host computer 0.8million, user 7million. CERNET has become the second largest public Internet in China. 70% universities have built up different levels and scales campus networks. Until 1999 30 million primitive and middle school students have received information technology education, 2.04 million people have their own PC and 4600 high schools have set up campus networks. China Education Research NET, China Science and Technology NET have had the ability to provide the network which covers most of our universities, research institutes、academic institutes and part of primitive and high school.
From above several aspects, we can draw a conclusion that information technology is widely applied in China and will be developed quickly than before, and it will play more important role in our life.

Employee attitudes and involvement to technology changes

Organizations continuously experience changes in technology.The adoption of technology changes by individuals is largely based on their perceptions of how the technology will impact their jobs. Consequently, it appears that individuals who perceive that technology changes will improve their ability to perform their job tasks may be more willing to adopt the technology.

Employee reactions to change, in part, impact the success of change initiatives.It is easier to implement change that is viewed positively by employees than that which is viewed negatively. Therefore it is recommended that managing employee reactions to change when managing the overall process of change.

It is common that employees experience changes in job duties or other functions that were planned and implemented solely by leaders or managers that are not directly impacted by the changes. However, allowing employees to participate in making decisions related to a change initiative has a positive impact on the overall success of the change.In regard to technology, it is known that user involvement and participation in technology decisions is of paramount importance in the successful adoption of new technology. Failure to include employees in the process, however, can have numerous deleterious implications for organizations. These implications can range from resistance to outright sabotage. Further, numerous attitudinal implications are associated with employee participation or lack of participation. Specifically, failing to include employees in the process can lead to cynicism. Cynicism, in turn, is linked negatively to job satisfaction and commitment.

Whether or not to inverst in IT

Not Every Organization Should Invest in IT

It is fair to say that there are many, many organizations that get by just fine with undifferentiated IT capabilities.  Although they need certain IT services, there's nothing about their business model that suggest that they ought to invest in unique and/or special capabilities.

These are the organizations that tend to outsource, or use a preponderance of external contractors, for example.  Before too long, I think they'll be using a preponderance of external cloud-like IT services, simply because that's the cheapest way to deliver what's needed.

The future of these IT organizations are clear: a pronounced focus on external vendor and provider management.  And very little internal IT capabilities, if any.
 
Some Organizations Should Invest in IT


Conversely, many organizations that should -- and do -- invest in differentiated IT capabilities. 

It's clear from looking at their business models -- at least, from the outside -- that there are ample opportunities to deliver proportionally outsized rewards for their shareholders through a coordinated IT investment pattern.

In some cases, you can actually point at the specific capabilities that they'll likely need to get good at, and what types of external vendors and internal skills they'll need to work with to achieve those results. 

The future of these IT organization are very clear as well: a pronounced focus on delivering unique and differentiate capabilities that can't easily be found elsewhere, and a strong link between these IT capabilities and the overall business model.

Most Organizations Are A Mix Of Both

In larger organizations, IT portfolios can be fairly broad.  So, generally speaking, you'll find a mix of areas where IT should spend (vs. invest) and invest (vs. spend).  But, what does that picture look like?

1.  Places where IT spend was a necessary evil. 
It had to be done -- and done well -- but there was no unique advantage to be gained by being the best at it.  For these categories, he was open to cost reduction, outsourcing, external service providers -- you name it.

2.  Places where an IT investment strategy made sense.
These were the areas where the business could get unique value by being better than what was generally available.  He was looking to make a series of investments in these capabilities as a result -- with a payoff horizon that wasn't measured in 90 days :-)

3.  Places where the game plan was still an open debate.
In a few areas, there wasn't a consistent view as to whether IT should look at it as an expense to be minimized, or an area to be invested in.  Fair enough -- the world is an imprecise place, and things can change quickly.