China Makes List For World's Best Outsourcing Service Providers

April 30, 2007 -- IBM ranked number one on the list of the world's top outsourcing service providers, according the International Association of Outsourcing Professionals (IAOP). In their second annual Global Outsourcing 100 list, Neusoft of Shenyang, a Chinese firm, was among the leading 25 providers for the first time.

Indian companies on the list include Wipro, Infosys and Tech Mahindra. Their combined revenues hit $55 billion.

Capgemini, an IT outsourcing provider based in Paris, France, was ranked number two, rising three spots from last year, and other high ranking companies included Hewlett-Packard, France's Sodexho Alliance and Accenture.

Revenue among the best companies grew nearly 20% in 2006 to more than $170 billion. Companies on the list had on average $1 billion in annual sales. Employment by these firms was up 13% from the prior year to an average work force of 13,688. Productivity also rose to $83,000 per employee, according to the report.

Companies on the Rising Stars list with revenues of less than $60 million come from around the world and continue to be led by India and China. U.S.-based Summit HR Worldwide was ranked in the top spot in that section. Six firms that were rated Rising Stars last year made it to the Leaders category in this year's ranking. These companies include ExlService, HiSoft, KPIT Cummins, Concur Technologies, EPAM Systems and MindTree Consulting.

Newcomers on the list are targeting various niches -- from human resource management to engineering and design services -- reflecting that the industry has morphed into areas beyond contract manufacturing, information technology and back office operations.

"Outsourcing has grown beyond a way to cut costs to being used as an effective business strategy by all major companies in all industries to find the very best innovation and talent, wherever it is located in the world, to better serve their customers," said Michael Corbett, IAOP chairman. "Many of the top leaders, as well as rising stars, were recognized for their innovation."

Companies recognized for innovation included: Mastek, EDS, HCL Technologies, Cartus, Stream, Hexaware and Syntel, Summit HR Worldwide, Datrose, Objectiva Software Solutions, Intetics Co., Smart Sourcing and Sento.

Pharma offshoring will present a $7 billion opportunity by 2013

The pharma outsourcing business in India will grow to around $7 billion (Rs28,700 crore) by 2013, as global firms seek to leverage advantages related to cost and quality the country possesses, said a report by research firm Frost & Sullivan.

Another report, by Pune-based research firm Value Notes, forecasts a growth of 23.6% a year for the industry up to 2010.

India is a preferred destination for pharma outsourcing because of the low cost of research but manufacturing in the country and tapping opportunities in contract manufacturing and research is still a relatively new strategy for Indian firms that have traditionally focused on manufacturing and marketing drugs.

The Frost & Sullivan study, titled The Indian Contract Research and Manufacturing Services Market, said the pharma services outsourcing market in India (also known as contract research and manufacturing services or CRAMS) was valued at $895 million in 2006.

Making raw material for medicines (known as active pharma ingredients or APIs) and oral solid formulations (tablets and capsules) continue to be the major sources of revenue for India’s contract manufacturing industry. And of the various segments in contract research, outsourcing of drug discovery research is slated to show the highest growth of 26% a year, according to the Value Notes report, titled Contract Research Opportunity for the Indian Pharmaceuticals Industry.

“These estimates too are conservative, as several of the top Indian outsourcing vendors are pursuing some combination of international expansion and investment in new drug discovery programmes in the product patent regime,” said Suchita Chaudhari, an analyst at Value Notes and co-author of the report .

The key players in the Indian CRAMS space are Nicholas Piramal India Ltd, Divis Laboratories Ltd, Dishman Pharmaceuticals Ltd, Dr Reddy’s Laboratories Ltd, and Shasun Chemicals and Pharmaceuticals Ltd in the contract-manufacturing sector; Syngene (Pvt) Ltd, Jubilant Biosys Ltd, Suven Life Sciences Ltd, GVK Bio Ltd, Chembiotech (Pvt.) Ltd, Quintiles Transnational Corp.,Vimta Labs Ltd, Lamda Therapeutics Ltd, Lotus Labs Ltd, and Siro Clinpharm Pvt. Ltd are the majors players in contract research and clinical research space. And multinational companies such as Pfizer Inc., GSK Plc., Novartis AG, Eli Lilly and Co., Bristol-Meyer Squibb Co., Teva Pharmaceutical Industries Ltd, etc. have already tied up with Indian companies for both drug development and manufacturing services.

“While (traditional) contract manufacturing, consisting of (manufacturing) API and formulations, has been growing at a phenomenal pace of close to 35%, there are (other) emerging areas (in it) that are also picking up pace,” said Mahesh Sawant, programme manager, biotechnology and life sciences, healthcare practices, Frost & Sullivan.

According to the Value Notes report, global pharmaceutical companies are increasingly turning to Indian vendors offering drug discovery research using newer techniques at much lower costs. Major drug discovery companies are realizing that the question is no longer whether to outsource or not, but one of finding the right partners.

Drug discovery is the process by which molecules are identified for their therapeutic efficacy and can take up to several years. Companies are now finding that improving the hit-to-lead conversion and early identification of unsuccessful compounds can accelerate the process.

While India has enough expertise in areas such as chemistry and drug delivery systems, it doesn’t have enough expertise and enough trained manpower in biological services such as protein structural analysis or expression profiling. This is one of the main challenges facing Indian companies.

The Value Notes report said that Indian firms would enter into various strategic alliances and also acquire companies in India and abroad to build on capabilities to leverage the opportunity.

“There is an increasing trend among Indian contract research organizations to move up the value chain by becoming preferred vendors of a few global outsourcers rather than serving as jack-of-all trades. Preferred vendors often land up with high-margin contracts such as researching and/or developing proprietary technologies for the client,” said Chaudhari.

Pharma offshoring will present a $7 billion opportunity by 2013

The pharma outsourcing business in India will grow to around $7 billion (Rs28,700 crore) by 2013, as global firms seek to leverage advantages related to cost and quality the country possesses, said a report by research firm Frost & Sullivan.

Another report, by Pune-based research firm Value Notes, forecasts a growth of 23.6% a year for the industry up to 2010.

India is a preferred destination for pharma outsourcing because of the low cost of research but manufacturing in the country and tapping opportunities in contract manufacturing and research is still a relatively new strategy for Indian firms that have traditionally focused on manufacturing and marketing drugs.

The Frost & Sullivan study, titled The Indian Contract Research and Manufacturing Services Market, said the pharma services outsourcing market in India (also known as contract research and manufacturing services or CRAMS) was valued at $895 million in 2006.

Making raw material for medicines (known as active pharma ingredients or APIs) and oral solid formulations (tablets and capsules) continue to be the major sources of revenue for India’s contract manufacturing industry. And of the various segments in contract research, outsourcing of drug discovery research is slated to show the highest growth of 26% a year, according to the Value Notes report, titled Contract Research Opportunity for the Indian Pharmaceuticals Industry.

“These estimates too are conservative, as several of the top Indian outsourcing vendors are pursuing some combination of international expansion and investment in new drug discovery programmes in the product patent regime,” said Suchita Chaudhari, an analyst at Value Notes and co-author of the report .

The key players in the Indian CRAMS space are Nicholas Piramal India Ltd, Divis Laboratories Ltd, Dishman Pharmaceuticals Ltd, Dr Reddy’s Laboratories Ltd, and Shasun Chemicals and Pharmaceuticals Ltd in the contract-manufacturing sector; Syngene (Pvt) Ltd, Jubilant Biosys Ltd, Suven Life Sciences Ltd, GVK Bio Ltd, Chembiotech (Pvt.) Ltd, Quintiles Transnational Corp.,Vimta Labs Ltd, Lamda Therapeutics Ltd, Lotus Labs Ltd, and Siro Clinpharm Pvt. Ltd are the majors players in contract research and clinical research space. And multinational companies such as Pfizer Inc., GSK Plc., Novartis AG, Eli Lilly and Co., Bristol-Meyer Squibb Co., Teva Pharmaceutical Industries Ltd, etc. have already tied up with Indian companies for both drug development and manufacturing services.

“While (traditional) contract manufacturing, consisting of (manufacturing) API and formulations, has been growing at a phenomenal pace of close to 35%, there are (other) emerging areas (in it) that are also picking up pace,” said Mahesh Sawant, programme manager, biotechnology and life sciences, healthcare practices, Frost & Sullivan.

According to the Value Notes report, global pharmaceutical companies are increasingly turning to Indian vendors offering drug discovery research using newer techniques at much lower costs. Major drug discovery companies are realizing that the question is no longer whether to outsource or not, but one of finding the right partners.

Drug discovery is the process by which molecules are identified for their therapeutic efficacy and can take up to several years. Companies are now finding that improving the hit-to-lead conversion and early identification of unsuccessful compounds can accelerate the process.

While India has enough expertise in areas such as chemistry and drug delivery systems, it doesn’t have enough expertise and enough trained manpower in biological services such as protein structural analysis or expression profiling. This is one of the main challenges facing Indian companies.

The Value Notes report said that Indian firms would enter into various strategic alliances and also acquire companies in India and abroad to build on capabilities to leverage the opportunity.

“There is an increasing trend among Indian contract research organizations to move up the value chain by becoming preferred vendors of a few global outsourcers rather than serving as jack-of-all trades. Preferred vendors often land up with high-margin contracts such as researching and/or developing proprietary technologies for the client,” said Chaudhari.

Outsourcing's Next Wave

The next wave of outsourcing is about assessing all aspects of an organization's business activities to determine if and where there are opportunities to leverage outsourcers' capabilities, intellectual property, best practices, global infrastructure or geographic presence to access resources and capabilities around the globe.

Locate call center consulting and referral services to suit the customer service needs of your business.

Most companies have outsourced some portion of their business to lower costs and, over time, have achieved cost savings in the outsourced portion of the business.

Unless your efforts in outsourcing to lower costs are unusually good, you are not gaining a sustainable competitive advantage, since your competitors are outsourcing just like you are.

Leading companies are now using global resources to drive new forms of revenue and grow their top line. Companies are realizing new forms of business value through their global sourcing partnerships by accelerating new product development, shortening time-to-market and finding successful entrées into new markets.

Companies that are realizing these benefits from their global sourcing strategies are also creating new forms of value for their customers and sustainable competitive advantages for their businesses. This is the next wave of outsourcing.

Outsourcing's Next Wave

The next wave of outsourcing is about assessing all aspects of an organization's business activities to determine if and where there are opportunities to leverage outsourcers' capabilities, intellectual property, best practices, global infrastructure or geographic presence to access resources and capabilities around the globe that may not be available to your business today.

Outsourcers that provide this expanded set of services are referred to as global service providers (GSPs) to emphasize the differentiation between these firms and outsourcers, which provide only low-cost staff augmentation services.

These new capabilities are helping corporations operate business processes and develop products better, faster and at lower costs. Several recent examples demonstrate how outsourcing is evolving and how major outsourcers are helping their clients advance beyond the basic cost-saving benefits of global sourcing:

On Jan. 15, 2007, Banco Pichincha, Ecuador's largest private bank, announced the strategic outsourcing of its core banking solution, followed by its information technology (IT) and business operational processes to Indian outsourcer Tata Consultancy Services (TCS). The deal is valued at US$140 million over five years.

High-tech manufacturers are using Wipro Technologies's lean manufacturing expertise to shorten new product development cycle from 10 to 12 months to six to eight months, while lowering costs 30 percent, by using offshore resources.

A global IP-PBX network equipment and solution provider filed a U.S. patent for the innovation involved in a product that Infosys Technologies designed and developed. The Web-based software tool was delivered in 40 percent less time and at a 40 percent reduced cost.

Moving beyond the basic skills needed to perform IT services , quality assurance, testing and software development, GSPs now have product design, product architecture and lean manufacturing skills.

Similar to the Japanese auto manufacturers, which started building lower-value cars for the U.S. market more than 20 years ago (and who now produce some of the highest value vehicles in the U.S. market), outsourcers that started 10 to 20 years ago by providing lower-value IT services have worked their way up the product development /manufacturing process.

They are now providing higher-value services, such as R&D and engineering services for new product development initiatives. They are also taking on core business processes for new revenue opportunities for corporations around the world.

What Has Changed?

This new value of outsourcing is possible because GSPs have invested in significantly increasing staff knowledge. As they have gained experience, these GSPs have developed industry-specific expertise and business process outsourcing solutions.

In addition, the leading GSPs have expanded their onshore capabilities in developed markets and have established development and support centers in lower-cost geographies, such as China and Eastern Europe. This allows GSPs to continue providing both a cost advantage and a "best-shoring" delivery capability.

Finally, current advancements in technology solutions allow GSPs to seamlessly integrate remote business processing solutions and product development capabilities into their clients' business operations and infrastructures.

For example, many of the most successful high-tech vendors have been vanguards in the current globalization trend. They have taken advantage of the ubiquitous availability of high-bandwidth connections around the world to shorten their product development lifecycles by utilizing distributed, multilocation product development engineering teams.

Tying this all together, GSPs have made significant investments to develop state-of-the-art technology infrastructure to support 24x7 product development and support services.

The Next Wave: Financial Benefits

Companies are obtaining new forms of financial and business value by partnering with GSPs that go significantly beyond the cost savings achieved by the first wave of outsourcing.

Some of the business and financial benefits of this next wave of global sourcing include significantly lowering R&D costs and shortening time-to-market for new product development processes. Many companies are lowering their relevant R&D and engineering costs by 20 to 40 percent, while also shortening their time to market for new product development initiatives.

Several companies are teaming with GSPs to share up-front product R&D costs, thus reducing their overall capital investments. The quid pro quo for global partners is that their investment in R&D will be rewarded with a guarantee that their products or services will be included in the product when it is sold.

Outsourcers tend to be risk-averse and want to be paid as work effort is expended. However, this is changing. Global service providers are now often willing to accept penalty or incentive clauses. Rather than paying for outsourced resources on an hourly or even fixed-price basis, some organizations have negotiated for lower offshore development costs by providing a percent of the product sales.

Business Value Benefits

Compared to outsourcing, where lower costs are often the only benefit, the new wave of global sourcing is providing significant non-financial business value. Among those are the following:

• Faster time-to-market -- Global partners often have business process or quality expertise to improve the product development process. Companies are achieving time-to-market savings of 25 percent to 50 percent, dramatically improving a company's market position.
• Ancillary/additional revenue streams -- Companies are teaming with global partners to develop products specific to new markets. Rather than invest time and effort to create a product for profitable but lower value markets, some companies are outsourcing the development or support for these lower-value markets.

  One software company was going to sunset its consumer product line, forgoing potentially hundreds of millions of dollars in revenue. Its goal was to concentrate resources on its enterprise market opportunities, which were viewed as much more strategic and lucrative over the long term.

  Instead, the company negotiated with its global sourcing partner to create an innovative arrangement in which the partner took on primary responsibility for ongoing development of its consumer product lines for a portion of this otherwise lost revenue stream.

  Companies are using the expertise of global partners to enter new geographies. For example, one client wanted to open three sales offices in China to better address growing business opportunities in that region. For its client's Chinese subsidiaries, Wipro created the financial business process and technical infrastructure that allowed a sales and distribution network to be created across three provinces and four companies.

  In this case, addressing differing legal requirements in each province, creating multi-language documentation and the use of bi-lingual staff were critical to the successful rollout.

• Process improvement. For a large U.S.-based mortgage processor, Infosys re-engineered the entire loan servicing process. The number of transactions processed each day doubled, and there was a 70 percent improvement in rate confirmation turnaround.

Challenges in Realizing the Benefits

As companies begin to rely on partners to take on significant responsibilities for business processes that directly touch core product development activities, customer interactions or operations of core systems, much more carefully synchronized coordination and governance is needed.

In many cases, companies are still hesitant to entrust a partner with the primary responsibility for processes and operations that are either core to their business or directly impact their top-line growth.

Those companies that have been successful in embracing the next wave of global sourcing are setting the course of best practices for success. One success factor is having an organizationwide strategy. Companies that develop outsourcing strategies on a department-by-department basis do not realize the same benefits as companies that develop an organization-wide strategy and share learning across departments.

From an operational perspective, best practices include putting in place weekly and monthly management reviews. Senior management should be involved in these reviews, and both quantitative (how many tasks are completed vs. planned?) and qualitative (how confident does management feel that the offshore team will succeed?) measures should be included.

Risk management is also important from numerous perspectives. For example, from a structural perspective, companies can either start small and gain experience in running and managing these projects or ensure that their partner has specific expertise in their industry and/or the technologies that are being used.

From a financial perspective, risk management can include defining detailed service-level agreements, with both financial incentives and penalties written into these contracts. A risk assessment and management plan should be created as part of an organization's outsourcing strategy.

Outsourcing for Competitive Advantage

The strategic value of outsourcing is changing from cost reduction to revenue generation, and over time, this change will affect most industries. What should senior finance management do?

The most important point is to have a global outsourcing strategy. An organization's outsourcing strategy should consider its own business strategy, how its competition is approaching outsourcing and what capabilities are or will be available from global service providers over the next one to three years.

Weak areas in a company's revenue-producing activities are opportunities for partnering with a global service provider. Consider, for example: Is our R&D cost higher than our competitors'? Does it take us longer to bring a product to market? Do we have the knowledge to enter new markets?

The benefits of partnering should be balanced against an organization's risk tolerance for outsourcing and experience, A company with a lot of outsourcing experience should approach this new wave differently than a company with little experience.

As with the first wave of outsourcing, this next wave of global sourcing will become pervasive over time. Companies that start now to assess the opportunities, value and risks of this next wave can develop an approach to obtain the business value best suited to the company's potential, risk profile and overall business strategy.

Gartner Says Companies Must Have a ''Chindia'' Strategy

Analysts Highlight Findings From Latest Book “IT and The East” During Gartner Symposium/ITxpo 2007 Emerging Trends

Gartner Symposium/ITxpo 2007

SAN FRANCISCO--(BUSINESS WIRE)--To stay competitive in the global economy, it’s imperative that IT organizations implement a “Chindia” strategy, according to Gartner, Inc. Gartner examined 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.

Gartner analysts are discussing the latest findings from the book during Gartner Symposium/ITxpo 2007: Emerging Trends, being held here through April 26. The “Chindia” framework is offered as a means to examine how these two countries may soon re-assert their collective influence on the international stage.

“Today China and India are producing some of the world’s best-trained computer science and electrical engineering graduates,” said Jamie Popkin, group vice president at Gartner and co-author of IT and The East. “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.”

“The bilateral economy of China and India is in its infancy, but new momentum suggests a powerful relationship is building," said Partha Iyengar, vice president and distinguished analyst at Gartner and co-author of IT and the East. “China-India – ‘Chindia’ – enterprises will have access to complementary skills and resources and, in turn, will have the potential to lead many global markets."

China’s IT Landscape

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 United States 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 anticipate at least eight Chinese IT brands will be recognized 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 Western corporations,” Mr. 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.”

India’s IT Landscape

Anyone doubting India’s capacity to impact the future of technology, only needs to consider the source of its IT industry. In 1995-1996, India’s exports of IT services were worth about $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. “Those kinds of growth rates mean: disruptive, challenging forces that can unseat rivals and destroy business plans,” Mr. Iyengar said.

With its challenging logistics, stifling bureaucracy, official corruption, and leftist political influences, Gartner hears from its clients that question if 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 attacking and opportunities you are chasing match what India can provide,” Mr. Iyengar said. “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.”

Emergence of “Chindia”

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 industrialized 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 percent from 2004. India's foreign trade in the 2005-2006 fiscal year amounted to $241 billion, up 28 percent. Yet the annual growth rate of internal “Chindia” trade is outpacing those high-stepping totals, at an estimated 30 percent to 40 percent.

“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,” Mr. Iyengar said.

Copies of IT and The East are available at Gartner Symposium/ITxpo on the third floor of Moscone West. The book is also available online at the Harvard Business School Press Web site at http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detai l.jhtml;jsessionid=OVYSSBUX1A4HEAKRGWDR5VQBKE0YIISW?id=3145. (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)

About Gartner Symposium/ITxpo

Gartner Symposium/ITxpo: Emerging Trends is Gartner’s premier event focused on the emerging trends, technologies, business models and new management thinking poised to have a dramatic impact on business, the economy and society. More than 2,000 IT professionals from the world's leading enterprises, rely on Gartner's Symposium/ITxpo: Emerging Trends event to gain insight into how their organizations can use technology to address business challenges and improve operational efficiency.

In San Francisco, an integral part of Gartner Symposium is the ITxpo show floor, where the latest cutting-edge solutions will be showcased by more than 80 best-of-breed providers and up-and-comers. There are 11 ITxpo marketplaces, including Application Development & Integration, BI & Data Warehousing, BPM, Data Center/IT Operations, Portals, Content & Collaboration, Outsourcing & IT Services, and Security & Compliance. ITxpo marketplaces are focused areas designed to aggregate solution providers into a specific market and link conference topics to market solutions. Attendees can attend technology company presentations and schedule face to face meetings with exhibitors of their choice. For more information, please visit www.gartner.com/us/symposiumwest.

About Gartner

Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for our clients to make the right decisions, every day. Gartner serves 10,000 client organizations worldwide, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,800 associates, including 1,200 research analysts and consultants in 75 countries. For more information, visit www.gartner.com.

Contacts

Gartner
Christy Pettey, 408-468-8312
christy.pettey@gartner.com

China's Top 10 Software Outsourcing Companies

Achievo, Appson, Augmentum, Bleum, BroadenGate, Cathay, FreeBorders, I.T. United, Neusoft, SoftStone IT

Editorial Summary

As ranked by outsourcing consultants Brown-Wilson. The consultant's fourth quarter 2006 report pegs China's software outsourcing revenue at 2.97 billion Yuan, up 17 percent on the fourth quarter in 2005 and up 6.8 percent on the third quarter in 2006.

Neusoft
Achievo
FreeBorders
BroadenGate
Augmentum
Cathay
SoftStone IT
Bleum
Appson
I.T. United

Objectiva Featured in Recent CIO Magazine Article: Outsourcing Lessons Learned in China

CARLSBAD, Calif., April 23 /PRNewswire/ -- Objectiva Software Solutions today announced its inclusion in a recent CIO Magazine article entitled Outsourcing Lessons Learned in China. This article is a follow-up article to an article which appeared in the September 30, 2005 issue of the publication entitled It's Cheaper in China. The article addresses how the initial push for offshore outsourcing is for cost savings, yet over time organizations realize that in order to make the engagement successful, they've got to focus on quality.

"This has been a three year process for us -- we started with a very US centric operation, with China back office resources and have now migrated to a 100% China solution, including requirements gathering for mission critical technical programs", explains Jay Leader, CIO, Nypro. Nypro emphasized building quality from the beginning of the product and relied on internal US staff like Jim Sugarman, Manager Web Applications, Nypro, teamed with Objectiva US resources to achieve critical technical advances in custom software development for the Nypro contract manufacturing operations.

"We have built long-term relationships with our clients because of our unique onshore/offshore business model," says Douglas Winter, Objectiva's CEO. Winter further says "It is the very foundation of Objectiva -- we began our business developing sophisticated enterprise-level software applications -- from discovery to delivery, our iterative life cycles and simultaneous QA ensure the delivery of high quality results to our clients."

About Nypro, Inc.:

Nypro, Inc. is a global precision molder, providing world-class services to a variety of markets needing precision plastics molding including electronics, telecommunications, packaging, healthcare, automotive, industrial, and contract manufacturing industries. Nypro operates 52 separate businesses in 17 countries that design plastic products, build molds used to mold plastics, and perform the plastics injection molding. For further information visit Nypro, Inc. at http://www.nypro.com/.

About Objectiva Software Solutions:

Objectiva Software Solutions, a division of Document Sciences Corporation is a leading provider of software outsourcing services. With offices in San Diego, San Francisco, Boston, Toronto, Frankfurt, Paris, Beijing, and Xi'an, Objectiva helps its clients develop customized enterprise software solutions (J2EE, COM+ and MS.NET), web-based and client-server applications and software for the wireless Internet. Objectiva's teams are run by US-based technical leaders with years of experience managing global software development efforts to take the burden off the client. Objectiva reduces the cost of software services without sacrificing quality, on-time delivery and time-to-market.

For further information, visit us at http://www.objectivasoftware.com/ or contact us at information@objectivasoftware.com.

Statements included herein that state the Company's or Management's intentions, hopes, beliefs, expectations or predictions of the future are "forward-looking" statements that involve known and unknown risks and uncertainties. The Company's actual results, performance or achievements could differ materially from those expressed as implied by such statements.

Objectiva Software Solutions

CONTACT: Beverly Waite of Objectiva Software, +1-760-602-1747,
bwaite@objectivasoftware.com

Web site: http://www.objectivasoftware.com/
http://www.nypro.com/
http://www.docscience.com/

Is China eating into India's software business share?

The world leader in hardware, China now gets 30 % of its IT business from software and the Chinese government is going full throttle to build on this. This has got the Indian tech companies a bit worried reports CNBC-TV.

After hardware, China is now fuelling its software industry. Though 70% of china's IT business still comes from hardware manufacturing, you cannot ignore the 40% year on year growth, which its software industry is witnessing. The Chinese government is pumping in billions of dollars annually to mobilise growth. Infact, it has set up Hi-tech and industrial parks focusing on software development.

Suzhou, on the outskirts of Shanghai is one such industrial park. This Region has 50 software companies, exporting software worth 12 billion dollars annually. The Local government here looks after administration and policy-making, with central government only being the guiding power. Provincial governments in China are eager to build relations with Indian software giants to help their regions grow faster.

“Suzhou municipal govt would like to invite Indian IT companies here. We would like to extend our support to them to set up their base here,” says Zhou Wie Qiang, VC Mayor, Suzhou

English being a handicap, many local companies here are currently developing software for Japanese companies and also catering to domestic demand. Apart from encouraging their employees to learn Japanese, companies are recruiting fresh English speaking talent. Local companies here strongly believe that setting up BPOs is the next natural progression for them and they would like to learn from the India story.

We want to learn about outsourcing from India. But instead of them setting up a base in China, we would want to establish JVs and business relations with Indian companies” feels Xie Jin Ming, Director, SDS-IT Corp

China has over 15000 software companies and it is now aiming to build its outsourcing skills and invest significantly in research and development. This has led the govt to set up incubators to help small and new software companies

Companies that operate in incubators are judged on their performance and the best ones are given financial support, like reduced rentals, subsidies and at times the govt may provide with some capital. Indian software companies are growing at scorching 40%, however the hardware market lags behind at about 25-30%.

China on the other hand is sharpening its skills to corner hardware, software and process outsourcing as well. India will need to increase R&D spends, and has favourable policies to build bilateral relation with China to tame the emerging software giant.

Augmentum at Forefront of China Offshoring Trend; Duke University Report Confirms China's Competitive Ability to Innovate

Duke University Study Reports China Well-Positioned for Future Science and Technology

SHANGHAI, China and FOSTER CITY, Calif., April 23 /Xinhua-PRNewswire/ -- According to the report recently released in National Academy of Sciences Magazine, based on a Duke University study (http://www.issues.org/23.3/wadhwa.html), China is unique in its rates of graduating engineering and technology Ph.D.s and its ability to perform critical research and development.

Augmentum, a leading provider of value-added software development services, headquartered in Shanghai, China and Foster City, California with additional facilities in Beijing, is living proof of the China success story described in this study. With the ability to select the best and brightest candidates from a huge Chinese talent pool, Augmentum delivers superior business value to enterprise customers. Augmentum's Fortune 500 and rapidly growing startup clients experience higher quality and faster delivery at the lowest realized total costs. Augmentum offers the entire scope of outsourced software services, ranging from full cycle software development and business application development, to complex system integration and solution implementation. Augmentum is committed to becoming the best software services provider in the world. Fortune 500 companies, including Intel, Motorola, and Microsoft, have relied on Augmentum to develop and test their complex software. Augmentum was recently acknowledged for outsourcing leadership in the Booz Allen Hamilton book, Outsourcing Thought Leaders: Managing Business without Borders (http://www.strategy-business.com/oasreader).

"Given the wealth of talented programmers in China, Augmentum has created a Silicon Valley start-up culture that allows employees to embrace projects requiring technical know-how coupled with creativity and innovation," said Frank Yu, President and COO of Augmentum. "Throughout 2006, more than 10,000 people applied for the 500 positions at Augmentum, giving us the chance to choose the most innovative talents for our worldwide developer team. Built on differentiating factors including managerial style, problem-solving skills, customer focus, and an extremely disciplined culture and development process, Augmentum's success is evident in the company's rapid growth and world class customer list."

Augmentum is a sponsor of the Gartner Symposium/ITxpo: Emerging Trends, in San Francisco, CA, April 23-25, located in booth #421.

About Augmentum

Augmentum provides Outsourcing Leadership for Innovation. Augmentum engineers augment their clients' teams as an extension, utilizing leading edge development tools and technologies, as well as proven processes, to create commercial-quality software. The management team has decades of collective experience outsourcing commercial software and solutions. Augmentum, Inc. is headquartered in Shanghai and Beijing in China and in Foster City, California. The company has grown to 800 people in China out of 850 worldwide in three years since its founding and won the inaugural Red Herring Asia Top 100 award in 2005, and the Risk Management award at the China Outsourcing Summit in 2006. For more information, please visit http://www.augmentum.com/ or call (650) 578-9221 x104.

About Gartner Symposium/ITxpo

Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more than 10,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts. Attendees rely on Gartner Symposium/ITxpo to gain insight into how their organizations can use technology to address business challenges and improve operational efficiency. For more information, please visit http://www.gartner.com/us/symposiumwest.com

Augmentum

CONTACT: Melisa GlasbergTerpin of Communications Group 1-310-821-6100,
Ext. 116, melisa@terpin.com, for Augmentum

Web site: http://www.augmentum.com/
http://www.issues.org/23.3/wadhwa.html
http://www.strategy-business.com/oasreader
http://www.gartner.com/us/symposiumwest.com

Innovative Outsourcing Model Saves Company Millions

Manufacturing process outsourcing brings outsourcing in-house.

By Jim Holland, President and CEO, The Holland Group

April 25, 2007 -- It is no secret that the manufacturing industry is constantly looking for innovative ways to cut costs. Pressures from OEM's to their suppliers are constant. This struggle to save money is taking a toll on manufacturing throughout the country.

While manufacturers continue to search for an answer, one global manufacturer found an innovative concept. It provided them not only substantial cost savings, but solved their concern with co-employment issues while improving their processes. They took a concept, called Manufacturing Process Outsourcing (MPO), and spread it throughout seven manufacturing facilities in the U.S. Their ability to save money, maintain quality, avoid co-employment issues and utilize focused resources was obtained by outsourcing inside their facilities.

Manufacturing Process Outsourcing may surprise many who are familiar with the term, 'outsourcing.' The concept is quite different. While most would assume outsourcing company functions involve an outside vendor operating in a different location, the intent of MPO is to 'run a business within a business.' It involves outsourcing manufacturing functions to a vendor who actually operates inside the company's facility, while guaranteeing the quality and cost of output." What makes this manufacturer's success story so unique is that not only was MPO and the production of their product under their own roofs, but MPO was flexible enough to adapt to each facility's unique needs.

Implementation In An Entire Facility

In one facility, the manufacturer had successfully produced a prototype product and was ready to begin full production. Since the assembly production was self-contained in a single facility, the company outsourced the entire process to the MPO provider. From the planning and ordering of materials to shipment of the finished product, the process was in the hands of the outsourced provider. This included labor, supervision, management and technical support. The billing was based on shipments instead of an hourly bill rate, allowing the outsourced provider to be efficiency and quality driven.

Multiple Facilities On A Campus With Multiple Vendors

Another way MPO was incorporated involved multiple plants in one location. Looking to avoid co-employment issues, cut costs and reduce the number of vendors, one MPO provider manufactured and managed product in both plants. While the two plants' operations varied greatly from different shifts to size of workforce, MPO was able to leverage shared management and resources while maintaining quality.

Ensured Transfer Of Knowledge To Outsourced Employees

At another facility, the manufacturer selected a very large plant with over 2000 employees and designated approximately 15 processes involving over 200 employees for MPO. However, the manufacturer was concerned about loss of production skills and tribal knowledge if the processes were outsourced. To eliminate this concern the MPO provider developed standardized and certified work instructions which were implemented and monitored by MPO trainers. The manufacturer and MPO provider instituted periodic audits of training records to ensure all employees received the same quality throughout.

With change at this magnitude comes obvious hesitation and concern. Will the manufacturer's product maintain its high quality standards? What influences a manufacturer's willingness to allow another company to manage and produce its product?

After evaluating the risks associated with outsourcing versus the rewards MPO provided, the decision for this manufacturer became clear. Not only did MPO allow total visibility by being in-house, but it guaranteed product standards while improving processes. The decision allowed them increased focus on core competencies so efforts could be spent on growing the company.

The results that that manufacturing process outsourcing brought to this manufacturer were as follows:

* Savings of 40% in labor costs

* An In-house outsourcing model

* Continuous process improvements

* Avoidance of co-employment issues

* Maintained quality of output

* Flexibility of implementation in several locations

* The ability to focus on core competencies

Chengdu: an emerging BPO hub in China

24 Apr 07

By TIGER TONG

AS industrial growth in China suffers increasingly from constraints on its resources and environment, the country has been paying more attention to its services industry in order to make its economic growth sustainable.

Software development is one of its targets. In 2006, China's software industry had combined sales of 480 billion yuan (S$94 billion), 23 per cent higher than 2005. But, more importantly, with the rapid development of telecom infrastructure, software development is no longer centralised.

In addition, the IT industry is moving from providing products to a service-oriented one. With a huge talent pool and competitive price, China views business process outsourcing (including IT outsourcing) as one of the potential growth sectors in the future.

At the 2007 China International Software Summit last week, five of the seven enterprise representatives were talking about outsourcing in China. The China International Software Summit is the key forum of ChinaSoft 2007, an international IT event held in Chengdu from April 19-21, 2007.

An attractive talent pool, strong government support, low attrition rates, and a strong presence of foreign companies in China are cited as the reasons why MNCs, such as Oracle, IBM, HP and NEC have set up outsourcing centres in the country.

While language remains a big hurdle for China in venturing into English voice-based BPO businesses, its geographic and cultural knowledge of Japan and South Korea has provided China an edge over other competitors in these two markets.

With India, the world's most important BPO (including ITO) player facing an increasing talent shortage and higher attrition rate, similar industries in China are expected to grow very fast. In 2006, China's overseas BPO business is valued at about US$1.4 billion. It is expected to reach US$5.5-6.3 billion by 2010.

At the same time, compared to manufacturing, the services industry is less constrained by geographic distance and might provide chances for cities in the China hinterland to emerge as new BPO hubs. Chengdu, the capital city of Sichuan, is more associated with its spicy food and pandas. What is less well known is that Chengdu has a strong IT foundation. And in the past few years, it has made considerable achievements in IT manufacturing.

Intel, the world largest chipmaker has invested US$525 million in two assembly and testing facilities in Chengdu. Following in the footsteps of Intel, Semiconductor Manufacturing International Corporation (SMIC), the world's third largest foundry, set up an assembly and testing plant in Chengdu.

Cension Semiconductor Manufacturing Corporation, the first 200mm wafer fab in Central and Western China, is expected to start trial operations in the city soon. The facility is invested in by Chengdu government controlled companies and will be managed by SMIC.

Encouraged by the quick development of the IT manufacturing industry, the Chengdu government has chosen software as one of the key areas of focus and they are looking at BPO business in particular.

The city's rich human resources is certainly the most important factor. There are 40 universities and colleges in Chengdu with more than half a million students. IT particularly is a popular major in Chengdu. According to data released by the Chengdu Software Association, there are currently more than 65,000 people working in Chengdu's software industry. In 2007, there will be nearly 18,500 new IT graduates from Chengdu's universities.

Compared to major cities, such as Beijing and Shanghai, the labour cost for the BPO business in Chengdu is about 30 per cent lower. In addition, the turnover rate, or attrition rate in these cities is more than 30 per cent while that in Chengdu is about 5 per cent.

'Compared to Beijing and Shanghai, people in Chengdu pursue a more relaxing lifestyle and are less willing to job-hop, unlike their counterparts in the coastal cities,' commented Jade Zhang, president and founder of Sofmit Co. Ms Zhang sees Chengdu carving out a niche in the BPO market.

'There is no doubt that Beijing and Shanghai have closer ties with the world, which means they have more opportunities to reach out to customers. But Chengdu can complement Beijing and Shanghai by offering lower cost services. They do the marketing, we do the job,' Ms Zhang said. Currently, Sofmit has set up offices in Shanghai and New York, and works closely with companies from Beijing and Shanghai.

Ms Zhang, a Chengdu native, returned to Chengdu after a short stay in Canada and set up Sofmit in 2002. In 2006, Sofmit's revenue was 40 million yuan, about 40 times more than it was four years ago when the company was founded.

To some companies, talent itself has become reason enough for them to set up a branch in Chengdu. Liu Jiren, chairman and CEO of Neusoft Group is one who thinks so. Neusoft is one of the biggest software companies in China. In 2006, it became the first Chinese company to have BPO business revenue exceeding US$100 million.

At the same time, Neusoft also became the first Chinese software company with more than 10,000 staff. To focus more on the BPO business, Mr Liu plans to have more than 30,000 staff within a few years. To hire the additional talent, Mr Liu has shifted his focus from Shenyang and Dalian, the two traditional bases of Neusoft, to Chengdu. In October 2006, a software park in Chengdu invested in by Neusoft started operations. Mr Liu plans to have more than 5,000 staff within five years. The race for talent is on.

The booming BPO industry in Chengdu has also attracted the attention of international players. In February 2007, IBM opened a new global delivery centre in Chengdu, its fourth in China after Dalian, Shanghai and Shenzhen. In his speech at ChinaSoft 2007, Harry Storer, senior VP of Oracle Consulting in Asia-Pacific, said that a new technology centre will commence operations in Chengdu in June 2007.

While Chengdu's future as a BPO hub looks promising, there are many challenges as well.

Compared to pure software development, people for BPO will require good language proficiency and communication skills. As fast growth is expected in the future, Chengdu may become a victim of its own success. It needs to find the answer to creating a fast talent grooming system before it can become a true BPO hub in China.

Wipro Technologies appoints Japan and China operations head

Hiroshi joins Wipro from BEA where he was their Managing Director and headed their Japan operations.

Wipro is a $3.2 billion company, offering services in Consulting, R&D, IT, BPO, Testing and Infrastructure Outsourcing. Wipro has a strong presence in Japan and is the preferred partner of many leading corporations. Alley's role at Wipro will be to drive the growth strategy of its Japan and China operations, and provide leadership and guidance to the team in the areas of customer satisfaction, business understanding and quality.

"We believe Alley's strong exposure to a global and multicultural work environment, and background in sales, strategy and operations, will go a long way in maintaining our leadership position in Japan," said Dr A L Rao, Chief Operating Officer, Wipro Ltd.

Hiroshi grew up in Japan for the first 17 years and then moved to the US for his graduation. He spent a large part of his early career in the USA with Honda USA in Sales & Marketing, Engineering, localization and quality control. His work in the next organization gave him the opportunity to move to Japan to head up their Business Strategy Division in the Asia Pacific region to implement a "Just-in-time" delivery system. Subsequently he joined BEA as a sales leader and rapidly rose to the position of Managing Director.

DarwinSuzsoft Makes China the Destination for IT BPO

Thirty-to-Sixty Percent Savings over India, with Assurances of U.S. Controls, Drives Largest Chinese BPO Deal to Date

WAKEFIELD — DarwinSuzsoft, the American IT outsourcing services leader in China, has introduced a full suite of IT Business Process Outsourcing (BPO) services, linking demand for sustainable savings and better satisfaction levels to China’s deep pool of IT talent. It has also signed the largest BPO services deal in China to date, with India-based Datamatics.

DarwinSuzsoft’s China-based IT BPO capabilities are among the most scalable in the world, with engagements ranging from a dedicated staff of 50, upwards to 1,500 – the scope of the Datamatics collaboration. Its clients enjoy fully integrated U.S.-China project and process management, and 30-60 percent savings over comparable pricing in India.

“The global outsourcing landscape has dramatically shifted, and so have the measures of success,” said Dan Ross, CEO of DarwinSuzsoft. “China meets the new standards – technical competence, ability to deliver, workforce stability, and long-term sustainable savings. We’re the fast-track gateway to this irresistible advantage.”

DarwinSuzsoft’s BPO clients gain faster processes, improved service and product quality, and significant cost savings – coordinated with other IT consulting and development services – through a single point of control and accountability. Through its unique “smart-shoring” strategy, DarwinSuzsoft taps key regions in China like Suzhou, Nanjing and Dalian, which are ideally suited for these BPO services because of their strong university systems and loyal, inexpensive workforce.

As a full-service IT outsourcing partner, DarwinSuzsoft helps global CIOs align business objectives with sophisticated services – from application development and re-platforming, enterprise architecture design, quality assurance and testing, and commercial software development and maintenance, to cost-effective BPO offerings. Its customers include more than 300 of the world’s top financial institutions, software firms, insurance providers, healthcare companies and telecommunications firms.

DarwinSuzsoft Guides Datamatics into China

Datamatics, an IT consulting and services firm headquartered in India, is tapping DarwinSuzsoft to establish a 1,500-person BPO offshore development center (ODC), gaining trusted guidance on Chinese market entry, an accelerated ramp-up, immediate cost savings and a risk-adjusted offshoring portfolio.

With this deal, DarwinSuzsoft has become the largest BPO service provider in China – three times larger than its closest competitor. The firm’s established presence across six regions in China ensures clients receive world-class service without the complexity that undermines many outsourcing relationships.

DarwinSuzsoft’s BPO services include: data entry, capture, conversion and verification; data reconciliation and cleansing; document coding and indexing; processing of forms, claims, credit cards or stock trades; and call center and data center support operations.

About DarwinSuzsoft

DarwinSuzsoft is a leading provider of information technology (IT) and communication services, combining 20 years of consulting experience with a deep engineering presence in China. IT services clients gain local accountability, highly skilled IT professionals and high-quality outsourced development capabilities, at 30-60 percent savings over most Indian firms. Communications clients stay ahead of rapidly changing market demands with nimble design, deployment and optimization services. With more than 1,000 employees in Boston, San Francisco, Shanghai, Beijing, Hong Kong, Suzhou and Dalian, China, DarwinSuzsoft serves many of the world’s largest companies in financial services, software, insurance, healthcare and telecommunications industries. For more information, visit www.darwinsuzsoft.com.

Chinese pollution costs on the rise, and NGO outsourcing

According to The Los Angeles Times ("U.N. REPORT RAISES PRESSURE ON CHINA TO CUT POLLUTION", 2007-04-09) studies (we're not sure which exactly) estimate that pollution exacts a 7% to 10% cost on China's economy. This is significantly more than the 1% or 2% the Chinese government estimates.

However, complicating what passes for an environmental debate in China are still layers of political sensitivities, a highly controlled media, widespread rural poverty and a long tradition of top-down government.

Still, in the past it has been the urgent desire to maintain the momentum of economic growth that has shifted the usually pretty ossified Party into action - if pollution is actually costing a lot then maybe it's time to do something about it...or then again, maybe not.

Outsourcing to NGOs in China

NGOs still find themselves limited in China, often distrusted and viewed more as a source of free cash than a partner. Registration alone is a major obstacle that deters many from ramping up their activities in China.

So interesting that Reuters is reporting that Beijing is increasingly recognizing NGO strengths in reaching out to disadvantaged groups, and is experimenting in Jiangxi province with essentially sub-contracting some of its poverty relief work to NGOs, through a bidding process.

The selected NGOs go to their assigned villages to listen to residents about how they want their RMB500,000 (US$65,000) in government aid to be spent. They then help implement the plans.

IT And The East The Chindia Syndrome

No topic continues to remain as hot in the high-tech industry and the world at large than the impact of China and India. For strategists and decision-makers at companies of all sizes and locations, the ramifications for the future are profound.

	Q&A A Conversation With Jiten Patel, CIO, Finca International Action Plan

Our extensive travels in China and India have inspired us to think about what lies ahead for these countries, prompting our exploration into how the pair creates alliances in specific markets under what's coming to be known as the Chindia bloc. Such alliances are already evident in IT services, automotive components, and other sectors. For example, Bharat Forge/FAW is a joint venture that has created competitive stress on the world's forging companies as they try to win business in the rapidly developing Chinese and Indian economies.

The bilateral economy of China and India is in its infancy. Yet the momentum we see suggests a powerful relationship that will keep building in the next five years. Access to complementary skills and resources will make it possible for Chindian enterprises to lead many global markets.

New joint ventures between Indian IT-service providers and their Chinese counterparts are early illustrations of how formidable this emerging economy could become. Indian companies 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.

Chindia is an early work in progress. Ultimate outcomes are far from certain, but early signs are positive. Some people still remember a time, before the 1962 border war, when the two countries traded cries of Hindi Chini bhai bhai—Indians and Chinese as brothers—which Chinese premier Wen Jiabao echoed during his visit to the Indian Institute of Technology in New Delhi last year. As the economic strength of China and India increases worldwide, business strategists and IT decision-makers—who may already be engaged in business relations with one or both countries—need a framework to help them monitor their bilateral commercial activities. To be sure, these global activities will affect end users and sellers of IT products and services worldwide, but how much and how soon remain to be seen. Both economies offer high growth, inflows of foreign capital, a global IT presence, global client awareness and interest, and large markets.

Additionally, China and India are producing some of the world's best-trained computer-science and electrical-engineering graduates. Both countries will soon compete favorably for global business not simply in terms of price, as India's IT-service providers have already done, but based on competence and capability. Even more crucial to their increasing global predominance is the rapid growth of domestic markets for technology and consumer goods in China and India. Soon, both nations will have spending power equaling that of the United States and Western Europe combined.

Much of the West's mainstream attention on China and India to date has focused on the outsourcing of manufacturing and low-end service jobs. Optimistic observers believe the current flow of jobs across the Pacific is immaterial in the long run, arguing that growth-oriented innovation remains strong in the West. But while their assertion is technically correct, it hides a deeper truth: China and India are getting better at driving technological innovation. More and more, traditional high-tech companies such as IBM, Microsoft, Panasonic, and Samsung are sourcing not just the assembly of their products to India and China, but also the innovation that drives these offerings.

Despite mounting stakes, the quality of information, research, and advice on how to make key decisions related to China and India is uneven. Business leaders need three basic tools: accurate information on the current state of global IT competitiveness in India and China for their internal markets; realistic scenarios that explore potential social, political, or other disruptions to these economies; and milestones for defining pivotal issues that over time can help determine when and where to invest, cooperate, compete, analyze, or ignore these countries.

China's potential power will affect every major corporation in the world, whether or not it's directly engaged with China's economy. Simultaneously, China will transform the IT industry in ways that executives and managers in the West simply must address. This is especially true for companies in financial services, retail, and other supply-chain-intensive industries that embrace advancing IT for strategic and operational advantages.

	Q&A A Conversation With Jiten Patel, CIO, Finca International Action Plan

China's IT spending totaled $119 billion in 2005, about four times that of India. Most of this went toward telecommunications equipment and services (79%), reflecting the priorities of a growing infrastructure. China's IT spending is expected to grow 6.5% annually through 2009—significant, but below the 7.9% rate predicted for the Asia/Pacific region and the highly robust 25% growth projected for India. China's spending will be led by the purchase of software (17.5%) and IT services (14.5%).

As the software market expands, IT leaders of Western corporations operating in China need to ask when locally provisioned software and services will be available, and whether they'll be competitive with Western software and services.

The most significant inhibitor to China's vast potential for innovation is its continuing government control over the most basic economic levers. China's ability to set a practical course to ease government influence in its economy and to promote innovation is the pivotal issue in forecasting the country's future.

You may think that government policies and relations are far from your specialty or your problem—lawyers and government-relations pros, not IT executives, worry about what politicians and regulators are up to; rather, your job is to place calculated bets on big issues and market trends in cost-effective, innovative IT. Don't fall into that trap. The Chinese government often is the biggest factor in determining IT issues and trends, and business leaders can't afford to delegate these relationships or distance themselves from the core analysis.

The blunt challenge for China—now best at being a low-cost, high-volume manufacturer—is whether it can move up the global value chain to the commanding heights of innovation and global marketing prowess. In IT, the particular challenge is whether China can transfer its demonstrated expertise in low-margin, high-volume hardware manufacturing into high-margin software and IT services.

There are signs that China will rise to the occasion. By 2008, for instance, it's highly likely that the country will generate intellectual property at a rate comparable to that of developed countries and, in the same year, actually surpass the United States as the population with the largest English-language capacity. In terms of English-language comprehension and proficiency, however, China won't be the global leader, though it will remain a challenger.

We anticipate that by 2010, at least eight Chinese IT brands will be recognized internationally. The world will witness the birth of a real IT superpower if government restrictions are loosened and the 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 another pivotal issue for corporate business strategists and IT decision-makers in the West. 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.

The answers to the above questions may not be clear for years. But companies must address these issues now, given the high upside potential of engagement with China and the risks of staying on the sidelines.

With its challenging logistics, stifling bureaucracy, corrupted officials, and leftist political influences, many ask if India is still worth the effort. The consensus from the vast majority of global Fortune 1,000 companies is that it does indeed pay to pursue India's opportunities. We agree. In fact, we estimate that the largest IT-service providers will add an average of 15,000 to 30,000 employees annually for the next several years in anticipation of continued rapid growth in global demand.

	Q&A A Conversation With Jiten Patel, CIO, Finca International Action Plan

Until recently, the Indian IT industry has been the story of the widely differing fortunes of two cousins—the export sector and the domestic one. The former has been fabulously successful and richly applauded throughout the nation. The latter has been regarded as backward and hardly worth bothering about.

The numbers explain why. India's total exports of IT services—dominated by domestic companies, not foreign-controlled subsidiaries—were worth $21 billion in 2005. In contrast, India's domestic market for IT services was worth an estimated $2.7 billion in 2005. This figure is minuscule compared with 2005 IT-service spending in other countries in the region, such as Japan ($83 billion), Australia ($12.1 billion), and even China ($4.5 billion).

The intensive activity supporting the export-focused industry has distorting effects across India's economy: It changes the focus of local IT companies; it influences government policies, such as incentives and the establishment of software technology parks; and it hampers the ability of nonexporting local employers to find and retain quality staff.

The export side of the Indian IT industry got its big break in the early 1990s, when U.S. companies began hiring huge numbers of skilled systems analysts and computer programmers. Demand for Indian staff in the United States was driven to frenzied levels by three factors: Y2K fears, the dot-com boom, and a corporate craze for ERP software.

It may seem longer, but it's only within the past five or six years that India's IT industry was transformed from a source of labor for hire to the formidable leader in IT services it is today.

Many Indian companies aren't letting the grass grow under their feet. Three works in progress serve to demonstrate the opportunities for foreign companies, the domestic industry, and the export sector:

U.S.-based Intel, which already employs 3,000 Indians at its Bangalore R&D center, has invested $250 million in partnership with local manufacturer Xenitis Infotech to make low-cost computers priced at $250—the cheapest machine for sale with an Intel chip. The target market is regional and rural areas within India.

On the domestic side, Bharti Tele-Ventures is growing in innovative, unexpected ways. Bharti and IBM are establishing an IT-service business that seeks domestic customers.

On the export side, all major Indian IT outsourcers have established beachhead offices in China, with a view to leveraging their IT-service skills not just in China, but also in the more insular Korean and Japanese markets.

These examples show that Indian companies can innovate, build capacity in areas not generally seen as strengths, and aggressively expand beyond a predominant U.S. focus into Asian markets generally. Such abilities have put Indian companies on the threshold of what we believe could develop into one of the great economic success stories of the pan-Asian region: the great global potential of India and China together, combining the world's IT-service powerhouse with the world's factory.

Anyone doubting India's capacity to play its part need only consider the source of its IT industry. Between 1995 and 1996, India's exports of IT services were worth about $1 million. In 2004, they reached $13 billion. In 2000, India's share of business-process outsourcing was worth $148 million. In 2004, it totaled $3.5 billion. Any student of business knows what those kinds of growth rates mean: disruptive, challenging forces that can unseat rivals and destroy business plans.

What's the significance of the current level of China-to-India and India-to-China commercial interactions? Where do the two countries stand along a potential path toward a unified economy? Modest steps recently under way provide only a hint of what India and China collectively could bring to the global economy and global balance of power in the coming decades.

Today, the two nations would hardly qualify as trading partners by conventional standards for industrialized economies. Total bilateral trade amounted to $18.7 billion in 2005—more than twice the 2003 level. But this is only a fraction of each country's foreign trade. China's foreign trade in 2005 was $1.4 trillion, rising 23% from 2004, while India's trade in the 2005-2006 fiscal year amounted to $241 billion, up 28%. Impressive as that is, the annual growth rate of internal Chindia trade is outpacing those high-stepping totals, at an estimated 30% to 40% per year.

Patterns of a widening bilateral commercial partnership are visible in increasing high-level official visits and pronouncements, conference participation, cultural exchanges, and—most of all—forecasts of accelerating goods, services, and investment flows across the Himalayas.

Despite these positive signs, there remain many unanswered questions. Can innovation be outsourced? Is it possible to compete in Asian markets without piracy of intellectual property draining away opportunities? Will the countries' mounting successes in world markets create a protectionist backlash among developed economies?

These issues may well be among the most important for setting the long-term course and success of your enterprise. The methods by which you explore them certainly will shape the quality and insight of what you find. 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.

Jamie Popkin, group VP at Gartner, and Partha Iyengar, VP and distinguished analyst at Gartner, are authors of "IT and the East " (Harvard Business School Press, 2007). Tell us how China and India are shaping your strategies and business decisions.

Whether your organization delivers or buys IT products and services globally, you'll find that the economies of China and India pose unprecedented threats and opportunities. Here are eight priorities to help prepare your enterprise for developments in those countries over the next five years.

The shaping of government policy

> Action: Engage appropriate government agencies and trade organizations.

Investment in rural development programs

> Action: Develop a knowledge base on government investment; identify and leverage commercial opportunities in rural areas.

Research, design, and development

> Action: Build local RD&D capabilities. Prepare proactive approaches to technology-transfer requirements. Develop localized mechanisms to protect intellectual property.

Market development

> Action: Recognize that the characteristics and expectations of emerging markets will probably differ substantially from those of traditional markets.

Chindia opportunity

> Action: Leverage the combined strengths of China and India for increased synergy and value.

Resource development

> Action: Develop the ability to recruit, train, and integrate Chinese and Indian talent and labor at all appropriate levels of your organization.

Local expertise

> Action: Identify and collaborate with savvy, trusted local advisers. Establish a clear understanding of global practices and laws to which the organization needs to conform.

Cultural understanding

> Action: Understand and act on significant cultural differences between the West and Asia/Pacific.