Shanghai Starts Up

The shanghai Pudong Software Park didn't exist a few years ago. Now about 20,000 programmers negotiate traffic jams every day to get there. Throngs of former school math champs file into boxy buildings to rabbit hutches and workstations, doing the high-tech programming jobs that used to belong to Americans--the jobs that weren't supposed to go offshore but are now commonly outsourced here or to India. The so-called good jobs.

But a few of the workers go to a somewhat different company, physically distinguished only by an impressive security system requiring electronic badges to move around the offices. The real difference in this start-up software company, called Augmentum, is in the nature of its work and its unique battle plan to jack up outsourcing to a new level. Augmentum doesn't focus on the low- and medium-level programming undertaken by the other residents of Shanghai Pudong Park. Instead, it takes on entire projects--complex tasks requiring not just technical competence but design savvy and sometimes honest-to-goodness innovation--for high-tech companies across the Pacific. Its message is that China is now ready to perform these jobs as well as or better than its customers would do on their own--even though the firms in question (Intel, Microsoft, Business Objects, Palmsource) are not exactly software slouches themselves. These are the great jobs.

Why this is attractive to American companies is simple. Augmentum's founder, a naturalized American named Leonard Liu, gleefully boasts that his company does all this at "China costs." Translation? "It doesn't work unless we come in at a third of the price it would cost our customers to do in-house," he says.

In only its third year, Liu's company is expanding from about 500 employees to more than 1,000, as it gains more customers. Some projects are relatively modest; a giant like Microsoft might test out Augmentum by asking it to create a kiosk-based multimedia presentation for a conference. But the job Intel had Augmentum do was more impressive: create an interface for its much-heralded "digital home" effort. Exactly the high-level task requiring design skills and bright ideas that Chinese programmers are not supposed to have mastered. "We have a very good working relationship with Augmentum," says Intel spokesperson Bill Kircos. "They have shown great zeal for the digital home effort, and meet or beat the deadlines we all aim for." Which may not be the best news for highly skilled software engineers in California.

Liu, 65, founded Augmentum three years ago after an illustrious career as an IBM executive and later a honcho at Acer and an Asian semiconductor company. China's development as a power in software led him to believe that it would be possible for homegrown talent to pull off the tough stuff--at those enticing China costs. Starting monthly salaries at Augmentum for the top college graduates he recruits are about 3,000 yuan (less than $400). It's maybe a tenth of what a U.S. engineer gets, but for many in China it's a dream wage. "When I went to high school, I would imagine that my job would pay 2,000 yuan [annually]," Augmentum software manager Alden Xu says. "Now I make many times more." Augmentum had 10,000 applicants for the 550 jobs it wanted to fill this year.

After a lifetime of jumping through hoops in the rigid Chinese educational system, Augmentum's engineers appreciate that Lui trains them to think creatively and collaboratively. With discipline, of course. Everyone at Augmentum is expected to arrive at 8:30 a.m., and it's common to stay until 11 p.m. The principles of protecting intellectual property are stressed, as Liu wants to be able to assure his customers that their trade secrets are safe.