To stay competitive in the global economy, it¹s imperative that IT organisations implement a "Chindia" strategy, according to Gartner analysis of how China and India are altering the future of technology and innovation in the newly-released 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," says Jamie Popkin, group vice-president at Gartner and co-author of IT and The East. "Far from being simply a source of cheap labour, both countries soon will be able to compete favourably for global business as India's IT services firms have done not on price, but on competence and capability."
Partha Iyengar, vice-president & distinguished analyst at Gartner and co-author of 'IT and the East', adds: "The bilateral economy of China and India is in its infancy, but new momentum suggests a powerful relationship is building.
"China-India ("Chindia") enterprises will have access to complementary skills and resources and, in turn, will have the potential to lead many global markets."
By 2008, Gartner says it is highly likely that China will generate intellectual property at a rate comparable to developed countries and, in the same year, actually surpass the US as the population with the largest English language capacity (in terms of English language comprehension and proficiency, however, China will remain a challenger, not the global leader).
By 2010, Gartner anticipates that at least eight Chinese IT brands will be recognised internationally. The world will witness the birth of a real IT superpower if government restrictions are loosened and the Chinese instinctive talent for entrepreneurialism continues to be encouraged.
"Whether China emerges as a global leader in science and technology innovation relevant to the information and communications technology (ICT) industry is a pivotal issue for you as a business strategist or IT decision maker in a Western corporation," Popkin says. "The outcome will influence which global suppliers can establish a strong presence in China for the long haul and which of China¹s strongest domestic companies can compete in international markets."
Anyone doubting India's capacity to impact the future of technology need only consider the source of its IT industry. In 1995-1996, India's exports of IT services were worth around $1-million. In 2004, they were worth $13-billion.
In 2000, India's share of business process outsourcing (BPO) was worth $148-million. In 2004 it was worth $3.5-billion.
"This kind of growth rate points to disruptive, challenging forces that can unseat rivals and destroy business plans," says Iyengar.
With its challenging logistics, stifling bureaucracy, official corruption, and leftist political influences, Gartner hears its clients questioning whether India is worth the effort. These questions often come from CIOs, business strategists, and decision makers who doubt whether the benefits of an Indian connection can truly outweigh obvious risks and discomforts. The vast majority of the global Fortune 1 000 companies have agreed India is worth the effort.
"We also think India is worth the effort when the problems you are facing and opportunities you are chasing match what India can provide," says Iyengar. "We estimate that the largest IT services providers will add between 15 000 to 30 000 employees annually, on average, for the next several years in anticipation of continued rapid growth in global demand."
New joint ventures between Indian IT service firms and their Chinese counterparts are early illustrations of how a formidable Chindia economy could develop. Indian firms bring to the table world-class software expertise and leadership in global markets. Chinese partners have legions of capable, low-cost employees and greater know-how with clients in Japan, Korea and other Asian countries where English is less prevalent.
China and India hardly qualify today as trading partners by conventional standards for industrialised economies. Total bilateral trade amounted to $18.7-billion in 2005 – more than twice the 2003 level. This is only a small fraction of each country's foreign trade. China's foreign trade in 2005 was $1.4-trillion, rising 23% from 2004. India's foreign trade in the 2005-2006 fiscal year amounted to $241-billion, up 28%. Yet the annual growth rate of internal "Chindia" trade is outpacing those
high-stepping totals, at an estimated 30% to 40%.
"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," Iyengar says.