Chasing the China Oursourcing Market

From: http://www.businessweek.com/blogs/eyeonasia/archives/2006/06/chasing_the_china_outsourcing_market.html

Is China ever going to be a threat in software? Building a software industry that can rival India’s has been a goal of Chinese leaders for a long time. So far, of course, the Indians don’t have much reason to worry. There’s no Chinese company that can even approach what Indian outsourcing powerhouses Infosys, Satyam, TCS, and Wipro have accomplished. One company that believes China has what it takes to be a force in software outsourcing is Freeborders, a San Francisco-based company that has a development center in Shenzhen. The city across the border from Hong Kong is best known in IT circles as the home of telecom equipment makers Huawei and ZTE, but Freeborders has been trying to make it a Chinese answer to Bangalore. Yesterday, Freeborders announced that it is expanding its headcount in Shenzhen, from 700 now to 2,000 by the end of next year.

That’s still puny compared to the tens of thousands of engineers the Indian biggies employ, though. China-focused companies like Freeborders are probably betting that China’s big home market provides them with an edge. Freeborders cites research by Analysys International, a Beijing research house, saying China’s software outsourcing services market reached $323 million in Q1 2006, 44% higher than Q1 2005, and a prediction by International Data Corp. that China will account for 24% of IT spending in Asia-Pacific by 2010, “making it the largest IT services market in the region.” And the other day Brian blogged here about how IBM, EDS and the Indians are looking to places like China for business. that’s not a secret to the Indians. That’s why the big Indian companies are aggressively pushing into China. (For instance, see this story in BusinessWeek about Satyam, TCS and Infosys from a few months ago.)

The Chinese pattern in other industries has been to invite in foreigners, learn from them and then build up local companies to compete with them. Chances are, that’s the game plan for software services too. I’m not sure where that leaves a company like Freeborders, though. For all of its focus on China, it’s still an American company. There are others in outsourcing that have more Chinese roots that probably have the edge.

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Outsourcing in China Today

Every week seems to bring news of another recall or safety issue involving a product manufactured in China (BusinessWeek, 8/17/07). But despite the highly publicized problems, U.S. companies will continue moving their production to China, says Peter Zapf, vice-president of community development for Global Sources (GSOL), a Hong Kong trade show producer and consultancy. The firm, founded 36 years ago, aims to assist business owners who want to find manufacturers and suppliers in Hong Kong, Taiwan, and mainland China. Zapf spoke recently to Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.

There's been so much negative publicity. Don't you think that importers are going to be scared off of manufacturing in China?

I think anybody that's looking to grow a long-term business has to look at China as a sourcing option, for two big reasons. One is the very competitive labor costs, and the other is the increasing number of new and innovative products that are coming out of that lower-cost labor market. In the past, 20 or 30 years ago, manufacturing was done in Japan, Taiwan, and Korea. In the future, who knows where it will move? But it's necessary for every company to evaluate the different sourcing options and understand the risks and benefits of each of them.

Frankly, China has lower labor costs, but it also has higher logistics costs, especially to manage a production line and have packaging done in English. Someone who wants to source in China needs to think about total landed cost, and whether they will get the product they need. It's not enough just to have something manufactured at low cost. It also has to meet all the company's specific product requirements and the country's regulatory requirements.

Your company does a lot of education for importers. How important is that now?

It's very important. We put on China sourcing fairs in Hong Kong at the AsiaWorld-Expo and in Shanghai and Dubai. The most popular of all our conference programs is "What new buyers need to know." It covers quality control processes, shipping logistics, payment and money transfer options, China business etiquette, cultural differences, and intellectual-property considerations. This is not to say you can't figure all this out for yourself, but it's tricky. And if you don't do it correctly, you may end up in the press.

And possibly not in a good way.

Absolutely.

Do you have small business owners and startup entrepreneurs attending these shows?

We have everyone from the top 200 global retailers down to eBay (EBAY) power sellers and everybody in between. There are tens of thousands of folks from almost every country in the world who are new to importing, and others who are already established and just want to hear about how other people do things, whether they're facing the same problems as everyone else, and how they can learn from other business owners.

Can you give us some highlights from the program?

Let's talk about logistics. Your first decision is whether to ship by air, which is expensive but fast, or by sea, which is slower but cheaper. The exception is if you have a shipment that's less than 2 cubic meters in size. In that case, the minimum fixed costs for ocean shipping are so high that it almost universally makes sense to air ship, unless your shipment is extremely heavy.

The next question is, should you take legal possession of your products at the factory, or at the port, or not until the goods get to your warehouse? If it is your supplier's responsibility to get your product to the port, the cost is higher than if you take possession at the factory and arrange transportation to the port yourself.

Of course, if you request "delivered duty paid," where the supplier manufactures the goods and gets them all the way to your warehouse for you, that's even less hassle for you, but the cost will be even higher. Often, many people find that China suppliers know the best way to get the goods to the ports. Then importers use third-party firms called "logistics service providers" to get the goods from the port, through customs, and eventually to their warehouses.

What about quality control? How do you put processes in place when your engineers and designers are so far removed from the manufacturing plant?

It's absolutely critical do to two things: get samples made up, with packaging, and review them thoroughly. Second, submit very precise and detailed requirements and instructions for manufacturing your product with the purchase order. The supplier may not have made this product for the U.S. market before, and it could be that the requirements for power cords are different than the supplier is used to. So the more specific you get, the better a job you're doing of avoiding problems late in the process. Because by the time you notice that a problem has occurred, it's too late. You're kind of in trouble!

What about inspections?

Many importers hire a third-party company to do inspections in China so that the mistakes are caught before the product arrives in the U.S. market. If you have the details written down up front, and there's an inspection that turns up a problem, you can show that you've clearly given instructions. Some of the recent problems that have occurred wouldn't have happened if some of these companies had more appropriate inspection processes in place. There's not enough of that happening.

What's different about Chinese business etiquette compared to American business etiquette?

The biggest point to realize is that Americans are very used to fixing a price, agreeing on it, and then that's the deal. Other cultures, including China, are coming from the perspective that when you agree to a price, that's the start of the negotiations. There may be requests for changes along the way, and Americans aren't used to that.

Again, one way to help manage that is to have everything clearly defined up front, in writing, as part of the purchase order. At that point, what may move is materials and deadlines, rather than price, which is still hard for American companies to accept. But I've had the opportunity to talk to a lot of the China suppliers, and I've heard the other side of the story, too. They complain about buyers who put 30% down when their company is in the middle of bankruptcy and then go out of business. So the supplier gets stuck with a huge inventory of manufactured goods that they can't sell. That'll bankrupt a supplier.

It sounds like importing is not for the faint of heart.

There are a lot of challenges on both sides. The key is to take things step by step. Start with having samples made. Then put in a small order. There are a lot of processes to learn, but none of them are rocket science. A lot of folks are doing it successfully, and it's accessible for folks with patience who are willing to learn. I think it's important for businesses to recognize what they're getting into, and to recognize that some product categories, like food and toys, require you to do more work than others. Folks in those categories will need to better understand the steps they need to take to avoid any particular problems, and use the recent incidents in the news as an example of how not to do it.

From: http://www.businessweek.com/smallbiz/content/oct2007/sb20071015_563438_page_2.htm

Is Outsourcing to China Over?

In business parks and along industrial corridors, mid-size U.S. contract manufacturers are successfully wooing new business by promising lower costs than the competition. The only thing surprising about their success is that the competition they're beating is China.

Matthew Davidson, CEO of Xten Industries in Kenosha, Wisconsin, ranked 3,134 on this year's Inc. 5000 and one of the manufacturers enjoying a flow of contracts coming back from China, says he knew it all along. "We were convinced to do this by management gurus and consultants," he says. "This has been the great boondoggle, that we must outsource to be competitive. Twenty percent of goods sent to China don't make sense."

Really? Manufacturing wages average 67 cents an hour in China, compared to $17.23 in the United States. One hundred Chinese cities have populations of more than one million people, compared to nine in the U.S. China's only labor union is controlled by the state and is largely considered useless. "China's labor force wants to work. They're happy working," says CEO Charles Colman, whose food service container company, San Jamar, sends 60 percent of its production overseas -- forty percent to China. A good slice of the 40 percent that stays in the U.S. goes to Xten. With China's sea of inexpensive non-union labor, why not outsource it all?

"That's hooey," says Davidson. Xten is an ISO 9000:2001 certified contract manufacturer of toilet paper dispensers, napkin dispensers, medical waste and other containers -- bulky, low value containers that, as it happens, are not ideal for offshore manufacturing. Some of Xten's customers learned this only after outsourcing their production, closing their U.S. plants, and watching their manufacturing cost rise instead of fall. "This whole move to China was driven by [large corporations]," Davidson says. "They can set up plants in China, have full control of their workforce, and take full advantage of labor and material cost."

Small and mid-size companies, however, cannot always justify the expense of shipping to China. The price for sending a 40-foot shipping container from Shanghai to the West Coast is $6,000. Only 2,000 toilet paper dispensers fit on a container. "Our products are mostly air," Davidson says. "They don't stack well." With China's export tax (up to 20 percent of the value of the goods) plus land transport in China and the U.S., the total shipping price tag runs closer to $8,000 -- four dollars each on a toilet paper dispenser that retails for less than fifteen dollars.

"If you're a Tyco and you know your annual usage of fire alarms, you can make a deal with the shipping company with a very attractive annual rate. They know your product is there every month, filling 50 percent of their ship." Smaller orders are the first to get bumped on an overbooked ship. To offset the unpredictability of shipping schedules, Xten is forced to buffer with extra inventory in both the U.S. and in China. "Tyco can keep a 10-day inventory instead of a 30-day inventory. The rest of us have to look at our costs very carefully."

Bill Strauss, Chief Economist at the Federal Reserve Bank of Chicago, agrees. "If you're going to be selling in a country, there are a lot of benefits in producing in that country."

Xten also has an unusual business approach. "We never say no," says Davidson. Today's companies, for example, require finished parts boxed and shipped direct to retail stores. "If a customer wants us to ship to three different outlets, we'll do it," Davidson says. "Factories are now distribution houses."

China's manufacturing strength lies in what Ted Fishman, author of China, Inc., calls "a cookie-cutter approach," leaving U.S. manufacturers like Austin-based Formaspace with a lucrative niche in customized products. Formaspace -- 1,314 on the Inc. 5000 -- builds custom heavy-duty furniture for laboratories, clean rooms, and industrial settings. Formaspace's products must meet critical application specifications for cleanliness and chemical and electrical resistance. "Mass customization is a source of strength for American manufacturing," says CEO Jeff Turk. Not only does Formaspace not outsource production to China, it exports its furniture to China. "Quality is a difficult thing to come by," Turk says. "Local companies often claim to meet standard engineering specifications they don't actually meet. It's easy to hide a quality flaw in furniture."

Formaspace did try to outsource parts of its IT work to China and Tawain, without success. Part of the problem, Turk found, was a cultural divide. "It's not in their culture to say no or to say something will be delayed, so they just say yes. When you have critical needs, you can't have that."

The weak dollar has helped both Xten and Formaspace. "With the weak dollar, the U.S. is actually a more attractive place to do business," says Strauss. Turk agrees: "America has a big For Sale sign on it, which is great for manufacturers in the U.S." In the end however, Xten's and Formaspace's core capabilities remain customer service and customization. "I've never believed in a permanent competitive advantage," says Turk. "You always have to provide the best product and the best cost."

This interesting article comes from http://www.inc.com/inc5000/2008/articles/insourcing.html

How to Outsource Your Manufacturing to China

When it comes to manufacturing, few regions can compete with China’s labor costs. Companies that rely on outsourced products, however, have lots of new hurdles to clear — just ask the firms that wound up selling lead-laced toys made in China. So, is setting up shop in China still worth the risk? Our sources say yes: Companies can maintain product quality and safety while reducing costs. Here’s what you’ll need to manage the process and keep your brand — and your customers — safe.

• Be prepared to pay obligatory legal fees and agent commissions, which can range from a few hundred dollars to tens of thousands, depending on the type of business you’re setting up.
• At least three months to set up a pilot program. After you’ve tested the results and confirmed the product is up to snuff, a project typically can move forward very quickly, perhaps within a matter of weeks.
• A Local Rep: You’ll need a person who lives and works in your targeted region to act as your negotiator and translator as you meet with Chinese executives and regulators.
• A Product-Testing Service: Every product shipment must be independently tested to ensure that it complies with your requirements. Failure to test each batch is asking for substandard products or an expensive recall.
• Cultural Flexibility: You can’t get along in China if you’re convinced that the way business is done in the West is the “right” way.

Understand That Traditional Rules of Business Don’t Apply

Goal: Eliminate dangerous misconceptions about doing business in China

When confronted with the skyscrapers of Shanghai, it’s easy to assume that doing business in China will be similar to doing business in New York City or London. Nothing could be further from the truth, according to Usha Haley, author of the best-selling book “The Chinese Tao of Business: the Logic of Successful Business Strategy” (Wiley, 2004). “Professionals from the U.S. think they’re dealing with a modern society, when in fact they’re dealing with a business culture with roots that are centuries deep,” Haley explains.

For example, because the Chinese have a cultural preference for family-run businesses, 90 percent of all privately owned firms in China employ fewer than eight people. As a result, the supply chain — even for a simple product like a child’s toy engine — can involve dozens of interlocking firms and a network of formal and informal relationships that would boggle the mind of the typical western executive.

Then there’s the omnipresent Chinese government. “The Communist Party is more powerful than it’s ever been, which has an enormous impact on everything, even the kind of information that you can gather while researching a potential partner,” Haley says. Sometimes that’s good — like when you’re trying to get China to enforce its copyright laws — but there are downsides, too. China’s government is full of locally and regionally deployed bureaucrats, many of whom may need to be convinced, cajoled, or bribed. “There are entire consultancies whose sole purpose is to help other companies avoid compliance with government regulation,” Haley warns. Because of this, it’s hard to know whether your business partners are operating legally or just getting around the regulations, so you'll need to independently test products to ensure that they meet specifications.

In order to outsource to China without running into product safety or quality problems, you’ll need to scrap your preconceptions of how business should be conducted. The rules are different, and you’re not going to understand the full range of those differences until you’ve been deployed in Chinese firms for years, maybe decades. “It can take a lot of time for western executives to learn how to work effectively in China, but the benefits are worth the extra effort,” says Frank Liang, general manager in Asia for the Greater China branch of semiconductor manufacturer Broadcom. For example, chip-design engineers who earn six-figure starting salaries in the United States earn less than a tenth that in China — a cost-savings that an electronics firm can pass along to price-conscious consumers.

From: http://www.bnet.com/article/how-to-outsource-your-manufacturing-to-china/204805

Outsourcing Trends to Watch in 2011 (Part III)

Last past from http://www.networkworld.com/news/2010/122010-11-outsourcing-trends-to-watch.html?page=2

9. Protectionism Will Continue...With Limited Effect

It's practically inevitable with continued high U.S. unemployment levels that the new year will bring with it more proposals by American politicians that appear to limit the use of offshoring.

But any proposed protectionist legislation will be marked mostly by sound and fury. "Most of these measures will fail to gain traction and pass into law, and those that do will be difficult to implement and audit," says Bendor-Samuel.

The attention that such measures, successful or not, draw could put pressure on offshore companies to increase their onshore capabilities, Bendor-Samuel says. But they hardly need more impetus to do that (see prediction #7 above). Concerns about a tax on offshore call centers specifically could be an incentive to reduce call volumes through the use of more self-service and automation tools, says Compass's Mathers. But they hardly need more incentive to take more labor costs out of the outsourcing equation (see prediction #TK below).

10. Providers Embrace Mass Automation...

"It continues to become harder to turn a good profit as a third party service provider," notes EquaTerra's Lepeak. Pressure to keep costs down and rive performance up, outsourcers will rely more heavily on automation, says Rutchik of Pace Harmon, from optical character recognition to whole lights-out, employee-free delivery centers.

Providers will increasingly be slinging such automation tools as well. "Applications that reduce the labor a client is required to perform the services will be offered at lower implementation and running costs than they have in the past," says EquaTerra's Brown. "This will continue to create demand for additional opportunities and reduce the staff necessary to support critical business applications."

11. ...And Mass (Offshore) Migration

The internal corporate IT job isn't the only one expected to go the way of the dodo in coming years. IT enterprise customers arent the only Expect more vendors to make like HP and attack labor costs through layoffs and offshoring in 2011. "[HP] has emerged leaner and dramatically more price competitive, " says Bendor Samuel. "This increased competitiveness has already set off a chain reaction as competitors increasingly recognize the new competitive realities and move, in turn, to cut cost and match price." The easiest way to do that it to move large swaths of delivery personnel to lower cost locations. "This mass migration of work is and will further stretch offshore delivery capabilities, resulting in decreasing quality and communication problems," Bendor-Samuel predicts.

Outsourcing Trends to Watch in 2011 (Part II)

Continue...http://www.networkworld.com/news/2010/122010-11-outsourcing-trends-to-watch.html?page=2

5. The End of Customization

"Clients will be increasingly open to changing their internal processes and accepting standard 'vanilla' services in 2011," predicts Bob Mathers, principal consultant for Compass Management Consulting. "Service providers will put renewed emphasis on internal initiatives to standardize their own offerings to leverage economies of scale and stabilize profit margins." It's the stuff of benchmarking dreams, but economic conditions may turn it into a reality. Stan Lepeak, managing director of global research for outsourcing consultancy EquaTerra, also predicts more process, technology, and location standardization including platform-based solutions.

6. Prices Get Firm

Remember when you could persuade (read: bully) your provider into lower pricing? Days of auld lang syne, my friends. "Outsourcing providers have filled up their prior excess capacity and will be driving to secure higher price points," says David Rutchik, partner with outsourcing consultancy Pace Harmon. "Pounding on the table for price reduction is unlikely to be effective this year."

Customers seeking savings will have to bone up on delivery models, deal structures, and value drivers instead. And vendors will have to woo clients with performance rather than a low bid, says Peter Bendor-Samuel, CEO of outsourcing consultancy Everest Group. "As a result, we will see select players grow disproportionately, taking clients away from others."

Cloud-computing prices could also become less--well, cloudy. Pricing models will mature, predicts Dave Brown, managing director of EquaTerra's IT advisory, and buyers will better understand the specific offerings.

7. M&A: East Meets West

A merger between a major Indian IT service provider and a U.S.-based outsourcer? It could happen next year, say some industry watchers, and an Indian company may be on the buying end. Western providers have adopted the process and cost initiatives first embraced by their Eastern counterparts. Indian providers are skilling up to try to win more consulting and integration work. "The cultures are moving closer together," says Fersht of HfS Research. "2011 will see the first mega-merger between a major Indian services provider and one of the Western incumbents."

"It has long been talked about," says Joseph King, Chief Marketing Officer at MindTree. "There is no longer [cost] that CIOs can squeeze from their India partners. So for differentiation, India providers will be forced to move up the value chain."

8. China, Brazil, and Egypt Take Center Stage

"Buyers are growing more interested in offshore services delivered from locations other than India," says EquaTerra's Lepeak. And service providers will continue to shift their delivery centers to markets such as China, Brazil, and Egypt, and not simply to address issues such as wage inflation or staff attrition. They want a piece of the business in hot emerging markets. "Strong sourcing market growth will be in geographies with strong economies, led by Brazil, China, India and the Middle East," says Bendor-Samuel of Everest. "Countries with strong economies represent big markets with big demand for transformational and discretionary spend activity."

Outsourcing Trends to Watch in 2011 (Part I)

I found this interesting article from http://www.networkworld.com/news/2010/122010-11-outsourcing-trends-to-watch.html?hpg1=bn

Outsourcing activity is expected to creep back in 2011, but things are hardly getting back to normal in the IT services space. The new year will be marked largely by upheaval--smaller contracts, cloud-related chaos, increased offshoring and decreased quality, for a start.

Read on for more. It's not all bad, we promise.

1. Progressive Outsourcing

The year will be marked by the inking of smaller IT services deals, many of them by first-time buyers who sat on the sidelines in 2010, say industry watchers. Providers, happy to have a foothold, will push such customers to expand the scope of their relationships over time--the old "penetrate and radiate" approach. Contract activity will "creep back throughout 2011, as the recover stutters and buyers pull the trigger on sourcing activity," says Phil Fersht, founder of outsourcing analyst firm HfS Research.

2. Diving for Dollars

Facing a slow economic recovery, IT leaders will continue to scour their existing outsourcing arrangements for savings. "There's a pot of gold in every contract, and in some cases we have found a pot worth millions," says Mark Ruckman, an independent outsourcing consulting working in conjunction with Sanda Partners. IT services customers may reconcile their invoices with their original contracts with an eye toward under-delivery or over-payment, for example, or replace contractors from large sourcing providers with IT professionals from local temp agencies.

3. Outsourcing, Meet Cloudsourcing

Even if some of the discussion of cloud-based offerings from IT service providers is largely hot air, it will continue to be a hot topic in the industry. "The emerging cloud sourcing market will cause the destruction of the outsourcing market as we know it today," predicts Ben Trowbridge, CEO of outsourcing consultancy Alsbridge. "The two markets will merge and cloud sourcing will drive the rebirth of outsourcing."

Cloud players like Amazon, Google, and Rackspace are hitting traditional service providers like IBM and HP where it hurts. "An executive of one of the current low cost leaders recently told me they're forecasting the need to be able to remain profitable while seeing the price of some of their services drop by 70 percent over the coming year," says Trowbridge.

Look for mergers and acquisitions as legacy providers fumble their way forward. Customers, too, will need help stitching together old and new. "IT is going to be coordinating an increasing portfolio of third -party applications hosted externally," says Brian Walker, managing director of EquaTerra's information technology advisory. "The theme in 2011: SaaS-to-SaaS integration."

4. Back-Door Deals Put CIOs at Risk

Many of the discussions and decisions about cloud-based offerings will be handled by business unit or function owners rather than IT, says Kamran Ozair, executive vice president and CTO at offshore outsourcer MindTree. That could pose problems down the road. "CIOs must get ahead of business users reasonable zeal for the power of focused SaaS applications that could back the enterprise into stealth architecture decisions that could be expensive to undo," says Trowbridge. "Business stakeholders want cloud, and they know smart CIOs can mitigate its risks," adds Fersht. "However, IT professionals must tool-up to deliver cloud to their business stakeholders, otherwise they risk a gap growing between business demand and IT supply."

Outsourcing Works, So India Is Exporting Jobs

MYSORE, India — Thousands of Indians report to Infosys Technologies’ campus here to learn the finer points of programming. Lately, though, packs of foreigners have been roaming the manicured lawns, too.

Many of them are recent American college graduates, and some have even turned down job offers from coveted employers like Google. Instead, they accepted a novel assignment from Infosys, the Indian technology giant: fly here for six months of training, then return home to work in the company’s American back offices.

India is outsourcing outsourcing.

One of the constants of the global economy has been companies moving their tasks — and jobs — to India. But rising wages and a stronger currency here, demands for workers who speak languages other than English, and competition from countries looking to emulate India’s success as a back office — including China, Morocco and Mexico — are challenging that model.

Many executives here acknowledge that outsourcing, having rained most heavily on India, will increasingly sprinkle tasks around the globe. Or, as Ashok Vemuri, an Infosys senior vice president, put it, the future of outsourcing is “to take the work from any part of the world and do it in any part of the world.”

To fight on the shifting terrain, and to beat back emerging rivals, Indian companies are hiring workers and opening offices in developing countries themselves, before their clients do.

In May, Tata Consultancy Service, Infosys’s Indian rival, announced a new back office in Guadalajara, Mexico; Tata already has 5,000 workers in Brazil, Chile and Uruguay. Cognizant Technology Solutions, with most of its operations in India, has now opened back offices in Phoenix and Shanghai.

Wipro, another Indian technology services company, has outsourcing offices in Canada, China, Portugal, Romania and Saudi Arabia, among other locations.

And last month, Wipro said it was opening a software development center in Atlanta that would hire 500 programmers in three years.

In a poetic reflection of outsourcing’s new face, Wipro’s chairman, Azim Premji, told Wall Street analysts this year that he was considering hubs in Idaho and Virginia, in addition to Georgia, to take advantage of American “states which are less developed.” (India’s per capita income is less than $1,000 a year.)

For its part, Infosys is building a whole archipelago of back offices — in Mexico, the Czech Republic, Thailand and China, as well as low-cost regions of the United States.

The company seeks to become a global matchmaker for outsourcing: any time a company wants work done somewhere else, even just down the street, Infosys wants to get the call.

It is a peculiar ambition for a company that symbolizes the flow of tasks from the West to India.

Most of Infosys’s 75,000 employees are Indians, in India. They account for most of the company’s $3.1 billion in sales in the year that ended March 31, from work for clients like Bank of America and Goldman Sachs.

“India continues to be the No. 1 location for outsourcing,” S. Gopalakrishnan, the company’s chief executive, said in a telephone interview.

And yet the company opened a Philippines office in August and, a month earlier, bought back offices in Thailand and Poland from Royal Philips Electronics, the Dutch company. In each outsourcing hub, local employees work with little help from Indian managers.

Infosys says its outsourcing experience in India has taught it to carve up a project, apportion each slice to suitable workers, double-check quality and then export a final, reassembled product to clients. The company argues it can clone its Indian back offices in other nations and groom Chinese, Mexican or Czech employees to be more productive than local outsourcing companies could make them.

“We have pioneered this movement of work,” Mr. Gopalakrishnan said. “These new countries don’t have experience and maturity in doing that, and that’s what we’re taking to these countries.”

Some analysts compare the strategy to Japanese penetration of auto manufacturing in the United States in the 1970s. Just as the Japanese learned to make cars in America without Japanese workers, Indian vendors are learning to outsource without Indians, said Dennis McGuire, chairman of TPI, a Texas-based outsourcing consultancy.

Though work that bypasses India remains a small part of the Infosys business, it is growing. The company can be highly secretive, but executives agreed to describe some of the new projects on the condition that clients not be identified.

In one project, an American bank wanted a computer system to handle a loan program for Hispanic customers. The system had to work in Spanish. It also had to take into account variables particular to Hispanic clients: many, for instance, remit money to families abroad, which can affect their bank balances. The bank thought a Mexican team would have the right language skills and grasp of cultural nuances.

But instead of going to a Mexican vendor, or to an American vendor with Mexican operations, the bank retained three dozen engineers at Infosys, which had recently opened shop in Monterrey, Mexico.

Such is the new outsourcing: A company in the United States pays an Indian vendor 7,000 miles away to supply it with Mexican engineers working 150 miles south of the United States border.

In Europe, too, companies now hire Infosys to manage back offices in their own backyards. When an American manufacturer, for instance, needed a system to handle bills from multiple vendors supplying its factories in different European countries, it turned to the Indian company. The manufacturer’s different locations scan the invoices and send them to an office of Infosys, where each bill is passed to the right language team. The teams verify the orders and send the payment to the suppliers while logged in to the client’s computer system.

More than a dozen languages are spoken at the Infosys office, which is in Brno, Czech Republic.

The American program here in Mysore is meant to keep open that pipeline of diversity.

Most trainees here have no software knowledge. By teaching novices, Infosys saves money and hopes to attract workers who will turn down better-known companies for the chance to learn a new skill.

“It’s the equivalent of a bachelor’s in computer science in six months,” said Melissa Adams, a 22-year-old trainee. Ms. Adams graduated last spring from the University of Washington with a business degree, and rejected Google for Infosys.

And yet, even as outsourcing takes on new directions, old perceptions linger.

For instance, when Jeff Rand, a 23-year-old American trainee, told his grandmother he was moving to India to work as a software engineer for six months, “she said, ‘Maybe I’ll get to talk to you when I have a problem with my credit card.’ ”

Said Mr. Rand with a rueful chuckle, “It took me about two or three weeks to explain to my grandma that I was not going to be working in a call center.”

I found this article from www.outsourcing.com, and it is linked to http://www.nytimes.com/2007/09/25/business/worldbusiness/25outsource.html