NeuSoft Shares Its Global Growth Strategy

8/31/2009 - Part of TCBN's IT Series
Walter Fang is President of Neusoft America, and in this interview he talks about advantages and challenges of being an indigenous company in China.  Fang also describes how Neusoft is giving back to the community by creating IT universities and university exchange programs.

Interview Transcription

 TCBN: Hello, this is The China Business Network and I’m Michael McCune. Joining me today for an interview on our China Going Global channel is Walter Fang, President of Neusoft America and Vice President of Neusoft Group. On the front lines of Neusoft’s global advance, prior to being tapped to lead the expansion in the US market Walter served as the CTO for the entire group in China.

Walter, thank you very much for being with us today.

FANG: Good morning Michael, it is a great pleasure to be interviewed to talk to you this morning.

TCBN: Well, you know, I’d like to start by asking you about your own perspective on Neusoft’s growth over the last two decades. I know you are not from Mainland China, and for much of your career you worked at IBM on global assignments in North America and Asia. So I wanted to ask if you could share how do you think the industry perceived Neusoft as it evolved, especially during the 1990’s?

FANG: Yes, that is a good question. Neusoft actually started from Northeastern University [in China] so it has an academic, and started from kind of a kind of humble beginning back in 1991. But after close to two decades now, Neusoft has grown up to be the largest software and services company in China.

And, right now we employ 15,000 employees. Last year our revenue was a bit over half a billion US dollars. And that includes $182 Million from overseas income.

If I look back for the last 15 or 18 years or so, Neusoft has gone through this journey, started from building up the business in China and working with a number of very good international companies like Alpine and Toshiba - mostly in Japan. And only very recently, the last four or five years, Neusoft started to grow into North America and Europe. So we still have some way to go.

TCBN: Now even though it is a truly indigenous company, you noted that your Chairman from the beginning had initiated relationships with companies outside of China, and in fact has a few companies such as Alpine, and Intel, and SAP as strategic investors in the business. Where did that idea come from to reach out and bridge internationally so early in the company’s growth?

FANG: Well, if you talk to our Chairman and CEO, Dr. Liu, he always, he is [a] very humble person, he will always say it is pure luck. But I don’t think so. I think it is part of the company’s strategy. If you look at China in those days, twenty years ago, the market is definitely not very mature. 

So working with a very reputable and very strategic partner like Alpine to start with, and later on as you said, like Intel and SAP, give us an opportunity to leverage all this very advanced, very good companies, to grow together. And that seems to be a strategic partnership and growing together in a win/win partnership has been a very important strategy of Neusoft.

TCBN: Well, so, in the past five years as an insider, you’ve been sort of in the thick of the conversation about how Neusoft would create a strategy for growth outside of China. And by that I don’t just mean revenue, but actual operational growth. Can you talk a little bit about how those conversations developed internally in an indigenous company?

FANG: Yes. That, well, in terms of the expansion strategy in Japan or later in North America and Europe, [Neusoft] goes through a very similar pattern. We always take a three pronged strategy: first of all we recognized early on that to do so-called outsourcing or global sourcing, we must have very good on-the-ground team. So the first stage, most important, is organic growth to build our footprint, our presence, and our very good team on the ground. And use local people, local staff, in many cases those are the citizens in Japan or the American citizens in North America here or Canadian in Canada. The second strategy, and again I said since early on, we have recognized that we must partner with very good local companies, so the second strategy is to continue to build alliances and the strategic partnership with local suppliers, service providers.

And the third strategy is mergers and acquisitions. Of course organic growth will not give us the kind of leapfrog or explosive growth that we want.

TCBN: When you talk about acquisitions, it makes me think about perceptions that some Americans have, or politicians in America have, of Chinese expansion and growth. And sometimes they have some concerns. Has being from China had any impact on your ability to seek acquisitions in the US?

FANG: Well, coming to North America, we all face that kind of of perception issue. But perception is reality, so we try our best to explain that the mergers and acquisitions that we go through is not anything close to the very visible acquisitions like Lenovo acquiring IBM and so on. Our acquisitions are much, much smaller in terms of scale, but we do focus on companies, good targets, that they are established in North America with their good competence, core competence, or capabilities well established in certain niche or segment of the market and very good customer base. So this is the target we want to acquire.

TCBN: When you think about expanding in the US and continued growth here, although you are an indigenous company, you yourself of course have tremendous experience here, and your Chairman was educated, got his PhD here, does that familiarity help you move more quickly, or is there still sort of a wider group of executives at the company where it takes a longer to build consensus on how to move forward.

FANG: If you look at Neusoft, I think the core management team, even though the majority of them have grown up from China, they are pretty outward looking. And the good news is that they are young, energetic, enthusiastic, and eager to learn, eager to explore new opportunities. 

We do have the recognition that we need to bring in more management team from outside, so as a good example, I am one of those. You call it in Chinese “Hai Gui” or the returnees from oversees, but if you look at our European president, my peer, my colleague, Klaus Zima, he is from SAP and he is a German person. 

And we do have a number of so-called foreigners, starting to join our company. So as we go international, as we go global, it is reasonable to assume to that more international experienced management would join the team.

TCBN: Now, of course you mentioned Klaus, and he has an incredibly deep experience in Asia and in China in particular - somebody who has known Neusoft for a long time. And I can see him being a very trusted hire. For individuals that maybe come into the Neusoft family from Europe or from America, is that understanding of China something that you help them acquire as they look at their own future and their own opportunities within the company?

FANG: Yes, that again is a very important point. A lot of talent here [in China exists] with very good international and Western experiences, but the other side of the coin is to understand China. And people like you, I understand that you spent some time in China, have a very good understanding of China. That is very, very, helpful because it takes two to tango. So people with a very good understanding, or an oriental culture background, or cross-cultural understanding, that helps a lot for indigenous companies like ours to kind of bridge the gap.

TCBN: When you look at the opportunities in the North American market, of course Neusoft has a sector approach and a vertical approach for different specializations and services. How do you, would you say, is there one or two that are key priorities for the company here where [Neusoft] is really pushing for the main growth to come from?

FANG: Ah, yes. First of all if you look at Neusoft, and today many potential buyers or clients will look at China vs. India, so I will start by saying that China is very good at certain sectors. For example, product engineering and product R & D. So Neusoft is no exception. If you look at our overseas income, over half of that income came from doing product engineering and product R&D for our overseas clients.

The other way to look at [Neusoft] is as very specialized, very good at, building software within products - such as mobile phones, car navigation, car audio and video, smart devices. So product engineering and product R&D is one of the very special core competencies that we have. And we intend to focus on that to continue to grow on our stronghold. 

But on the other hand, building up, building from our very good industry solutions in China, especially telecom, healthcare, manufacturing and some government sectors, finance, those are the industries that we will continue to focus on in North America to expand into those industries to provide industry solutions and services to those clients in North America.

TCBN: Now, Neusoft is somewhat of a pioneer in how rapidly they have been able to expand global operations. Certainly other Chinese companies must look to Neusoft for advice or learning. Is there a proactive sharing of information and experience from Neusoft to other Chinese companies that have yet to have an aggressive expansion overseas?

FANG: As I said, we are still early on in our journey, but still we can of course share some of our views and experiences with our colleagues in China or overseas. 

First, as I said, when we expand into a global market we must recognize that [in China] as an indigenous company we have to be patient and we have to recognize the cultural differences and get the very good talent with international and global experiences to work for us [there]. 

On the other hand, we need to recognize that we cannot do it all together. We need to continue to partner with very good companies here [in America]. And last, but not least, it is the people, or the staff, that will make it happen. So to continue to recruit good people, retain good people, and re-train and train all these people in the company is very, very important. 

Neusoft early on recognized that in the software services business it is all about people, and that is why Neusoft built three private IT universities of our own. We have three campuses in China: in Dalian, in Chengdu, and near the Guangzhou area. We have over 25,000 students in those three campuses, and we go through a very pragmatic and very up to date curriculum, and use the leading technologies such as e-learning, to train these students so that when they graduate they will be able to be put into use in the IT industry. I mean if you look at the 25,000 students in those three campuses, they all majored in IT or content design, so together this is probably the largest IT university in the world.

Today, the Neusoft IT Institutes, our three private IT universities, have sister relationships with many good universities overseas: in US, Australia, Japan and the UK. In addition to that, yes, you’re right, I think there are many very good universities here [in the US]. They want to set up a kind of internship, student exchange, or professor exchange programs. And we, I , are – I am in constant discussions with them to send their students, senior students, or students who are about to graduate, to go to China. And likewise we also encourage some of our students to come here to get some experience, exposure, before they go back to work in China.

TCBN: I’ve been speaking today with Walter Fang, President of Neusoft America, where he is responsible for managing and expanding their international outsourcing business across the continent. His prior experience includes over 28 years with IBM, where he held many management, technical, and consulting positions across Canada, the US, and Asia-Pacific. 

FANG: Thank you very much, Michael. It is a great pleasure to talk to you, and I look forward to future opportunities to continue our dialogue and share our views and share your experiences and help us go global. Thank you very much.

TCBN: This is Michael McCune for the China Business network. Thank you for listening.