"Our outsourcing strategy has built a strong foundation for our expansion in China," said Lai. "It allows us to understand the strength and weaknesses of Chinese IT professionals and we can reapply the management methodology as we establish an IT shop in China."

Regulations

Despite entry into the WTO and the announcement of CEPA, China remains a highly regulated market. A strong and complicated regulatory framework often makes the CIO job much more difficult in China.

Choosing the right IT partner in China is also essential in dealing with the restricted telecommunications market. With more than 15 years of experience in running IT operations in China for foreign companies, Lam of Angel Tong Holdings said simply having the last-mile connection can be a nightmare.

"When I was with YongHe King, it used to take us three months just to set up telephone lines and obtain Internet access, if we applied to ISPs directly," said Lam. However, working with system integrators (SIs) that have partnerships with local ISPs has significantly helped business expansion.