Thursday, September 16, 2004

[news/commentary] Building ISV Relationships: Targeting SMEs - Part I

Thursday, September 16, 2004
Dateline: China
New column on the AlwaysOn Network.  It's on the potential downside of offshoring (the downside for the States, that is).  For the next five days, see ; the permanent link is at .  It got the ire of a lot of readers and a lot of views (I'm projecting nearly 500 in less than one day).  The article which was the basis for my column is getting a lot of attention in the States.  Worth reading.
Building ISV Relationships: Targeting SMEs -- Part I
First, a bit of commentary.  One thing all smart SIs (systems integrators) do is develop partnerships and alliances with ISVs (independent software vendors, i.e., software publishers/software companies in a broad sense).  Of course, it's difficult to be the 1,000th entrant in the game and expect to get any traction/assistance from your ISV partner.
SIs in China ALWAYS use the approach of offering localization services and OFTEN offer to help push an ISV's product within the domestic market in China.  Frankly, this is what the (usually American) ISV wants, too.  Does this strategy work?  Well, sometimes.  However, even in the case of high profile alliances such as some of those Microsoft has in China (and I won't name names to protect the innocent), it's really nothing more than window dressing.  Everything looks good on paper, but the reality is something quite different.
Regardless, this does NOT address the need and desire for SIs in China to build their market in the States.  And when this issue becomes center stage, ISVs frequently respond with something bordering on contempt.  Some ISVs are getting clued that their American channel partners absolutely need partners in China and other low(er)-cost development areas in order to win bids.  Let's face it, it's all about closing deals.  And if an ISV's competitors have channel partners which can put together winning bids, perhaps in part (and perhaps in LARGE part) due to an offshoring component with their channel partner's SI partner(s) in China, then the ISV with an indirect link to China has a competitive advantage.  I don't view this as a sufficient condition to winning bids, but it's increasingly a necessary condition.
Clued ISVs want their American channel partners to have an offshoring option, but this requires that their channel partners have relationships with SIs in a country such as China.  But ISVs tend to focus their channel development efforts on their American partners and might develop a couple/few relationships in China, but usually NOT tied to their channel development efforts in the States.  Goofy and shortsighted, to say the least.
But how can SIs in China get traction with American ISVs, especially since they're almost always late to the game (in other words, the American ISV already has a well-developed channel)?  The answer (or, at least one answer):  Focus on servicing the needs of SMEs (small and medium enterprises, which is also referred to as "SMBs" -- small and medium businesses).
There's another reason this makes sense:  Most of the SIs in China are already focused on servicing SMEs/SMBs in China.  It might be nice to bag a large SOE (state-owned enterprise), but the reality is that most firms in China, especially the burgeoning number of privately-held firms, are SMEs by definition.  Hence, the experiences gained by SIs in China is already within the same market, although I'd be the first person to warn than company size and even similar domains does not necessarily equate to directly transferable skills.  Fact is, things in China are often quite different from the way they are in the States, especially in a "hot" ITO (IT outsourcing) market like financial services.  More about this in a forthcoming postingBottom line:  Give serious thought to targeting the SMB/SME market in the States.  (Part II of this commentary might be a while in coming.)
IT Tidbits
Lots of tidbits this week.
Controlling project costs.  My favorites:  Scope creep, not understanding project financing, "big-bang" projects, overtesting (although I'm not sure I agree with this one), poor estimating.  Good stuff, with recommended solutions.  See .
Challenges for China's SIs.  Adapted from a Forrester report.   For starters, how about:  Improving account management (are there really any account managers in China, or at least any who can manage accounts with U.S. clients?   ), moving away from technology-centric messages that often alienate business buyers (better yet, moving away from messages in Chinglish), investing in vertical-specific skills (how many times have I said this?) and becoming more multicultural organizations (yes, and let's start with learning English!).  See .
"Yee Haw" as an outsourcing option.  Forget India.  Forget China.  Forget the Philippines.  Let's go to Arkansas!!  See .
American start-ups go offshore.  Try Corio (is Corio really a start-up?), CollabNet, Aarohl, Infinera, and many others.  See .  Another good article with a BPO spin in Venture Capital Journal, .
Offshorings mixed results.  "Vietnam and Myanmar were also in demand ..."  Really?  See .
Looking for SI partners?  Kennedy ranks the largest firms.  As I've said in the past, I like their reports.  (No, I don't get a cut.)  Satyam and TCS didn't make the grade, though.  See .
Another challenge to conventional outsourcing and offshoring "wisdom."   "Services-driven development models, such as the one at work in India, broaden the global competitive playing field.  As a result, new pressures are brought to bear on hiring and real wages in the developed world - pressures that are not inconsequential in shaping the jobless recoveries unfolding in high-cost wealthy nations.  For those in the developed world, successful services- and manufacturing-based development models in heavily populated countries such as India and China - pose the toughest question of all: what about us?"  For more, see .
Forget the Golden Triangle.  How about China + India vs. the world (or, sans the world)?  "Newspaper headlines portray China as the world's manufacturing base for low-cost goods, like clothing and shoes, and India as the global IT monopoly-to-be.  Unfortunately, media outside Asia have failed to acknowledge the growing partnership between the two giants."  "Given the complementary nature of their economies and the size of their markets (nearly 2.2 billion people in total), the nascent cooperation between the two holds the potential to dramatically alter the world trade balance.  A perusal of the Shanghai technology corridor reveals a hint of the countries' industrial interconnectedness.  Walk through one of the main complexes in Shanghai's Pudong Software Park, and you will see a prominently displayed sign for Infosys, one of India's most respected IT firms.  The same complex also holds Satyam, the first of India's software service companies to set up offices in Shanghai.  Nearby are the headquarters of the largest software services company in Asia, Tata Consultancy Services (TCS), which currently runs an outsourcing center for GE in the town of Hangzhou.  TCS is owned by the Tatas, one of India's most prominent business families.  Across the river is NIIT, the principal software training center in India's private sector.  NIIT, operating in China since 1998, now runs an extensive two-year course in 25 provinces, training around 20,000 students to be software professionals.  There is widespread speculation that Wipro, India's only giant IT firm without a presence in the city, will establish a Shanghai office very soon.  It is no surprise that Indian software companies are setting up in China. They, like everyone else, sense great opportunity in one of the largest, fastest-growing economies in the world."  (Bold is my emphasis.)  All true, and they even forget MphasiS.  See one of my must-read sources, YaleGlobal .
The partnering wave of the future.  I've talked about this many times in previous postings.  This time CTG dances with Polaris Software.  See .
CMMi:  The key to success.  A little simplistic and uses incorrect definitions, but still worth reading.  See .
How about Microsoft vs. China in an AO "Grudge Match"?  See a lengthy article in CFO titled, "Does Microsoft need China?"; link at .  China: The champion of open source!!
Business creativity 101.  "A new book from Wharton School Publishing, The Power of Impossible Thinking by Jerry Wind and Colin Crook prompts you to rethink your mental models and transform them to help you achieve new levels of creativity. In this book, the authors give a set of guidelines on how to see differently."  Examples:  Listen to the radicals; embark on journeys of discovery; look across disciplines.  See .
The innovator's battle plan.  "Great firms can be undone by disruptors who analyze and exploit an incumbent's strengths and motivations.  From Clayton Christensen's new book Seeing What's Next."  GREAT stuff (although John Dvorak won't like it).  What about asymmetric warfare theories applied to the realm of corporate innovation and creativity?  Just a thought ...  See .
Your next competitors?  Have you thought about Senegal, Uganda, Kenya, Sri Lanka and Bangladesh, especially in the BPO space?  See .
Message to product companies: go sell services!!  Interesting take from a VMI perspective.  See .
Don't know much about bloggin'?  Good take on the various types of corporate blogs.  See .
Urls as web services?  You have to read it to get it.  Might be a bit too much for the uninitiated ...  See .
Joel is back and blogging!!  Joel takes on Jakob Nielsen in "it's not just usability."  See .
How about open source software for HPC?  See Geek alert, geek alert!!
Saving the best for last: a piece on Woz.  See .
TTFN.  Expect a urls update before I go back to the States.
David Scott Lewis
President & Principal Analyst
IT E-Strategies, Inc.
Menlo Park, CA & Qingdao, China (current blog postings optimized for MSIE6.x) (access to blog content archives in China) (current blog postings for viewing in other browsers and for access to blog content archives in the US & ROW) (AvantGo channel)
To automatically subscribe click on .