Building An Outsourcing Company In China: Bleum CEO Eric Rongley (Part 4)

Sramana: What was the situation in China in 2001–2002, and how has it evolved?

Eric Rongley: When I resigned from Capital One, I had to decide if I wanted to do the business in India or China. I knew that if I did the business in India, it would be accepted by the market easier. Today I still have to explain ‘why China’ to customers. However, I was very impressed by the talent that I was able to access in the Chinese marketplace.

Anyone who has ever had a software team before knows that typically a software team is average, and if you are lucky you will have one or two superstars who really make everything happen. What I experienced here is that the talent pool in China is so large that you can systematically and scientifically fill teams where every single member on that team is a superstar. You can get results in software that I have never seen anywhere else.

In India the situation has changed over time. In 2000 and 2001, both countries graduated 40,000 to 50,000 computer science graduates a year. Right at that point China decided to make a big investment in the knowledge industry, which dramatically increased the number of graduates to more than 350,000 a year. A baby boom entered the marketplace in 2004 to 2006.

We were able to hire from the top of the talent pool in China; however, because China’s workforce was so new, they typically had less experience than the Indian companies. The strategy to mitigate that was to hire geniuses. The first step of our hiring process is an IQ test. We continue interviews with people who score in the top 2% of the IQ test.

We discovered that very smart people mitigate the experience disadvantage. As they have three to six years of experience now, things are evening out. India still leads the outsourcing market by five to 10 years. If you step back from outsourcing and look at the IT industry and the engineering capabilities, I think they are at the same point. Long term, China has the advantage because they are producing more graduates.

Sramana: This begs a very serious question. One of the problems India has had in terms of producing skilled people is that the potential faculties to teach computer science are too busy making serious money working for multinational corporations. How will China mitigate this problem?

Eric Rongley: I am not sure, but they have built a lot of universities and they do not have a problem bringing in professors from other places. McKinsey looks at the quality of the candidates coming out of different countries. A number of years ago they said that only 10% to 15% of Chinese graduates were prepared to work in a multinational corporation. I don’t know what the rate is for India.

However, the size of the ocean is much bigger. The top talent is systematically brought to the large cities. The same nationalized high school tests are given everywhere. Those who score the highest are brought to Beijing and Shanghai. It is much easier to higher extremely intelligent people in China than in India. Someone coming out of IIT in India has a job offer their freshman year. I can’t compete against Microsoft in India. In China, I have a 60% success rate hiring the top graduates.

This segment is part 4 in the series : Building An Outsourcing Company In China: Bleum CEO Eric Rongley
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