According to the latest state figures in China, the number of IT-qualified graduates in China surpassed the equivalent figures in India in 2006 and that gap is getting larger each year.

There are some observers who caution that the overall numbers and the actual quality of the education the graduates are supposedly receiving may need to be questioned. But whatever the case, what is indisputable is that a focused movement by the government in China to better develop an IT services and software industry has had some incredible results.

Chinese software and IT services exports have risen exponentially from $325 million in 2002 to over $4billion. There are now 53 high-tech development parks and 29 specialized software parks around the country due in large part to a combination of government support and foreign investment.

Foreign investors very excited. According to Ernst & Young, initial public offerings by Chinese IT services and consulting companies listing on foreign markets raised $388.8 million in 2007 – ten times the previous year’s figure.

But it is the Chinese technological infrastructure that is attracting the most attention and new foreign business. The quality of the infrastructure is what is the biggest surprise. It has been seen as better than many areas of Europe. That is what is really turning heads.

1. Sometimes, companies can locate team members who may want to move back to the country to join the offshore team. These team members can be leveraged for knowledge transfer and to act as liaisons between the offshore and state-side teams.

2. Just hire part of the offshore team during the transition phase. The full team should be added only after the knowledge transfer to the core offshore team is complete. This can save up to 4% to 5% of the transition cost.

3. Take advantage of communication tools such as Webex, Microsoft Office Live Meeting, Windows NetMeeting and other video conferencing technologies to reduce the need for people to be physically present at the same location. These tools can be used to conduct training during and after the transition process.

4. Some of the core client team should be moved offshore for at least a year so that they can take ownership of the offshore projects and accelerate the knowledge transfer. The salary for the resources moving offshore should be structured competitively to the existing offshore salary, not to their on-site salary. If not, cost savings from going offshore will be reduced.

5. Offshore teams should be involved in projects that will provide corporate value-add from the first day and still help them in the knowledge transfer. Some examples are architecture review, bug fixing, and source code and functional documentation.

6. Using online tutorials or webinars, you can devise a mechanism for the offshore team to become certified based on the requirements (technology, product familiarity, etc). This certification process can speed up the transition cycle and address a possible skills gap with offshore resources.

7. Service providers usually want the client to pay the transition costs against actuals. However, it’s possible to negotiate the contract with the vendor to achieve some of the following:

- The transition cost should be added to the monthly billing rate and spread across the duration of the project.
– Initially, the service provider should absorb the transition costs. The transition cost can then be factored into the contract as an incentive to the vendor, depending on the schedule and quality of its deliverables.
- Some vendors that are keen on getting the project might be willing to absorb the entire transition expense.

These best practices can help reduce transition costs to 2% to 3% of the entire project cost and shrink the initial investment needed for those expenses.