In China, and in India, everyone knows someone who’s a techie capable of taking on IT ‘projects’. If a project comes their way, it will most likely find its way to the cousin’s office (or home office). Everyone’s happy-there’s enough work to go round. The Chinese domestic IT outsourcing market, after all, according to McKinsey is 90 per cent of the total IT outsourcing market.

Says an offshoring consultant working in China, “It’s easier to farm out work to your cousin rather than go through the rigmarole of finding a vendor.”

Cousins, friends, and references usually work for smaller-time businesses; not for MNCs with their well-defined (often bureaucratic) processes.

So, what do MNCs in China look for when choosing a vendor? Mithras Consulting, a Shanghai-based IT outsourcing consulting firm, spoke to CXOs of MNCs in China with a global turnover of between $16.5 billion and $97 billion to find out. Here are some findings.

Captive’s the Way

Every single CXO that Mithras spoke to said that selecting a vendor was the biggest concern when outsourcing within China-closely followed by other predictable concerns such as IPR, data security, and regulations issues.

Fifty seven per cent of CXOs said that they have or would want to set up their own captive centers. Says the CEO of a logistics company who was interviewed for the survey, “We chose the captive option due to the lack of a reliable provider.”

Indeed, there are very few established players in China. Of the biggies only IBM, HP, Accenture, BearingPoint, Atos Origin, CapGemini, and Fujitsu have delivery centers in China. Another choice is the large Indian IT companies present in China-Infosys, Wipro, TCS, Satyam, and Mphasis. Amongst the Chinese companies, on the other hand, there is no clear market leader. You’ve got foreign-managed Chinese companies such as Bleum, Achievo, and IT United; large IT services companies such as Kingdee, UFSoft, and Baosight; numerous small startups; and many more cousins and friends.

Move Over, Cousins

But, in the minds of the MNCs there is little space for the cousins; it is the global vendors they prefer to outsource to. Forty two per cent CXOs said that they would prefer to outsource to a global vendor (IBM, BearingPoint, etc), while 28 per cent said that they would consider a small Chinese vendor.

In some cases, though, it is a mixed strategy. Says the CIO of a courier and transportation company whom Mithras interviewed, “We chose three different vendors for our pilot projects. A tier one global vendor, a tier two global vendor, and a small local Chinese provider.”

Though this CIO’s had a good experience with all his vendors, the small Chinese vendor wins over the global one on one aspect-that of responsiveness. This is not a new complain; it is one that you often hear about large companies. Says Paul Schwefer, Vice President and CIO of Continental Group, Germany’s $17 billion tire company, “Small vendors are entrepreneurial. Large vendors come with 12-15 people. I sit on one side of the table and they on the other, and we are not able to decide anything.”

Local Flavors

When in China, look for Chinese experience. That’s the message that the CXOs of MNCs in China seem to be giving. Seventy one per cent of them cited local experience as the top criteria when evaluating a vendor. Technical skills come surprisingly low in the minds of CXOx with only 15 per cent CXOs citing that as an evaluation criteria.