In-Depth

Outsourcers Must Plan Their Chindia Strategy

Industry analysts at Gartner say forward-thinking companies must develop what they call a “Chindia” strategy

• By Stephen Swoyer
• 05/01/2007

If you’re considering outsourcing, be sure you have your "Chindia" strategy in place.

Gartner analysts Jamie Popkin and Partha Iyengar examined the impact China and India are having on technology and innovation in their new book, "IT and The East," published by Harvard Business School Press.

"Today China and India are producing some of the world’s best-trained computer science and electrical engineering graduates," said Gartner group vice-president Popkin, in a statement. "Far from being simply a source of cheap labor, both countries soon will be able to compete favorably for global business—as India’s IT services firms have done—not on price, but on competence and capability."

If Gartner’s projections are borne out, China will soon outstrip India. By 2008, Gartner forecasts, China is expected to start generating intellectual property at a rate comparable to that of developed countries. At the same time, Gartner projects, China will surpass the United States as the country whose population has the largest English language capacity. That’s capacity, however; in terms of actual comprehension and proficiency, Gartner concedes, China remain a challenger.

Currently, at least three Indian firms—Infosys Technologies Ltd., Tata Consultancy Services Ltd., and WiPro Ltd.—enjoy global prominence.

By 2010, Gartner believes that as many as eight Chinese IT brands will enjoy international recognition of some kind.

"Whether China emerges as a global leader in science and technology innovation relevant to the information and communications technology … industry is a pivotal issue for you as a business strategist or IT decision maker in Western corporations," Popkin said. "The outcome will influence which global suppliers can establish a strong presence in China for the long haul and which of China’s strongest domestic companies can compete in international markets."

With China in ascendance, some offshore handicappers might be tempted to write India off. That would be a mistake, Gartner notes—although corporations do seem to have concerns about a number of India’s political, economic, and cultural characteristics, especially with respect to its challenging logistics, bureaucracy, corruption, and leftist political orientation.

Interestingly, Gartner’s statement didn’t discuss the applicability of many of these same issues—with the addition of a comparatively blighted human rights record and a sporadically hard-line (and generally repressive) political regime—to China. In any event, Gartner projects, most Fortune 1,000 companies have agreed India is worth the effort.

"We also think India is worth the effort when the problems you are attacking and opportunities you are chasing match what India can provide," said Iyengar. "We estimate that the largest IT services providers will add between fifteen thousand and thirty thousand employees annually, on average, for the next several years in anticipation of continued rapid growth in global demand."

What of "Chindia?" According to Gartner, Indian and Chinese IT service firms have already entered into a number of joint partnerships; although such collaborations don’t amount to much at present, they do foreshadow just how a "formidable" Chindia economy might develop.

"As China and India increasingly redefine the future of technology and innovation, knowing how to map a course into that future will be a core competency of the most accomplished travelers," said Iyengar.