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Outsource to China

Carlyle Group LP bets to outsource in China

US company Carlyle Group LP which has long been associated with India, now chooses to outsource in China. Carlyle has reached a deal to buy 70% of VXI Global Solutions LLC – a China-focused outsourcing business. This deal values VXI at around $1 billion.

Compared to the outsourcing industry in India and the Philippines, China still has a relatively small industry. Its industry continues to grow and continues to look out to find networks. China’s edge over India and the Philippines is their more competitive pool of talents good in customer interactions through email and social media.

Currently, VXI Global has 17,000 employees around the world. In 2015, it purchased Symbio, a softare developer, to expand range of outsourcing services it provides.

Outsource to China

In July 2016, Forbes contributor, Harold Sirkin, published an article about outsourcing being a ‘new concern’ in China.

Chinese officials have a new concern: outsourcing. So they’re“encouraging” companies in the southern and eastern parts of China, where wages and other production costs are highest – Guangdong, Jiangsu, Shanghai and Zhejiang, in particular – to move their production facilities inland, where costs are lower, rather than outsourcing to countries such as Vietnam.

The new reality confronting China is the world Jim Hemerling, Arindam Bhattacharya and I described in our 2008 book Globality. It’s a world, as China is perhaps unexpectedly now realizing, where everyone from everywhere is competing for everything. Outsourcing in this world, the Chinese are learning, is not a one-way street.

In the same article, Sirkin states that the current pace of manufacturing in China moves from low-end to high-end quality. This happens as Chinese manufacturers try to keep up with the quality of good from neighboring countries like Bangladesh, Botswana, Brazil, Ethiopia, the Philippines or Vietnam.

According to Forbes.com, China’s outsourcing market is growing by 30 percent annually. Like Carlyle, many companies have already relocated to China.

In terms of product manufacturing, China allows businesses to create a higher volume of product for reasonable cost.

The most important lesson: there is no shortcut to success in working with Chinese business partners. China is a country where anything is possible — but nothing is easy.


Sources:

http://www.wsj.com/articles/carlyle-bets-on-outsourcing-in-china-with-vxi-global-deal-1470295544

http://www.forbes.com/sites/haroldsirkin/2016/07/07/chinas-new-worry-outsourcing/#3ec07e8131c2

http://www.forbes.com/sites/allbusiness/2014/02/07/manufacturing-in-china-can-give-your-business-the-competitive-advantage/#2bef0bf19869

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