1. Why was Xin convinced he should set up a software outsourcing business in China?
Xin decided to outsource his business to China because the country offered financial benefits to all members of the software park that Xin was a member. The benefits included tax holiday on the profits of the first three years, followed by a reduction in taxes by 50% in the subsequent five years (Carmel, 2003). Xin also considered the Chinese work culture where programmers preferred to work directly with customers to solve problems as a better fit to his firm’s strategy of employing “lightweight methodologies.” He cited this as a way of offering something different in a bid to beat CMM Level 5 Indian firms that use “heavy methodology” that were China’s main competitor in software outsourcing.
2. What are the drawbacks to setting up a software outsourcing company in China?
The disadvantages involved in setting up a software outsourcing company in China include; language barriers, finding office space to lease in favorable parts of the country could be a challenge, and the cost of doing business in China, especially in Shanghai, is getting more expensive every day.
3. Do you think the headline “China’s software outsourcing industry is expected to shorten its gap with India in about 3 years” will come true?
The above statement is true because the Chinese software market has been expanding faster than the Indian industry. This is because various big corporate like Microsoft and Webex have set up some of their operations in China with other firms such as ADP-Asia and Seimens also showing interest (Carmel, 2003). China’s economy has also been growing steadily with the software industry enjoying high demand domestically.
4. What risks are involved for Sheen?
Sheen’s cost of doing business would increase; this is because expenses such as leasing of office space, transport cost of products and developers, and cost of hiring of translators to facilitate communication between developers and clients would have to be catered for by the company. On the other hand if Sheen were to partner up with another firm in China to sublet some of its workers to Sheen then the profit margins would reduce as they would have to share the profits.
5. Risk to Sheen’s customers
Sheen’s clients in the United States, who wish to have the Sheen team of developers on site for a longer period, will have to spend a lot more than the previous amount when Sheen was still located in the Los Angeles. This is because costs such as accommodation and travel expenses will be added on top of the usual costs.
6. Do you think Sheen’s strategy to use their version of “Agile” technology will succeed?
Sheen’s Agile methodologies technique would not work; this is because of the distance that will be created between clients and programmers. The only thing that would have made it possible would be communication that is also a problem since people in China speak Mandarin while people in America speak English.
Reference
Carmel, P. E. (2003). The Giant Awakens:Sheen Software Systems Considers China for I.T Offshore Outsourcing.
