ARMCHAIR M.B.A.
How a Technology Gap Helped China Win Jobs
By WILLIAM J. HOLSTEIN
 HINA
is challenging India as a low-cost home for software development. In
the process, says Dale L. Fuller, president and chief executive of Borland Software
in Scotts Valley, Calif., the technology industry is becoming ever more
globalized. Following are excerpts from a conversation with him:
Q. Is India still the country where Western companies look when they outsource technology work? A.
It is clear today that India has the leadership, in terms of market
share, for software development and outsourcing. The reason for that is
that they had an early jump start. They began by being more Westernized
and having more English speakers. A lot of guys who came over here from
their institutes of technology and got trained here have now gone back.
A lot of the start-ups during the Internet bubble were Indian, and a
lot of the resources here in Silicon Valley were the holders of H-1B
visas, who also transferred back after the bubble burst. Q. But the Chinese are catching up? A.
Over the past couple of years, we've seen China really put the pressure
on by bringing their skills sets up. They have the language barrier.
But their president made the statement that everyone will be speaking
English within 20 years. They're making some really big strides. Q. What do the Japanese think about China's emergence? A. Being in Japan recently, what I saw were quite a few of the systems integrators, such as NEC, Fujitsu and Hitachi, beginning to open very large outsourcing contracts with China, not India. Q. Is it a question of costs, or do Chinese workers have some skills that are in particular demand? A.
China is a little bit lower-cost than India. But I don't think that
will last for long. Both countries have what we would classify, over
the next 10 to 20 years, as inexhaustible sources of human capital. Q. Are both countries basically in the business of writing code, or of something more sophisticated than that? A.
Between the two cultures, there are some distinct differences. One is
that we see more and more services going into India, the complete
service, everything from consulting services to a full customer center
where you have your phone systems set up with people answering them.
It's all tied together. Having been established for a while, the
Indians have a methodology and a process that's very familiar to those
of us in the Western world. China hasn't really used that and is just
now beginning to adopt it. Q. Does China's very different political system help it compete against India?
A. China does have a lot more resources subsidized by the government.
For example, it is doing something unique to accelerate its ability to
compete against India. They are publishing a list of the authorized
software that any Chinese-sponsored agency or company that is
subsidized can buy. If you want to do business in China, you have to
have a development arm in China to build your applications or your
software. China is using their muscle to say, "Hey, Mr. Microsoft,
or Hey, Mr. Borland, if you want to sell to our companies or our
government, you have to be based here." That will accelerate China's
growth. Q. Does China have any other advantages? A. India
has processes and methodology from the 90's. It's old. China gets to
look at all the mistakes of the Indian outsourcers and learn from them.
And China gets to use the new technology that we and others have
developed over the past year, but India is handicapped. China did the
exact same thing with wireless technology. They were so far behind that
they said: "We're not going to lay copper lines all over China. We're
going to go wireless." So they are closing the gap. They will catch up. They are three to five years away. Q.
Are software development jobs moving from the United States to these
other places, or are companies adding positions offshore? A.
Over the 2001-03 time frame, we saw a significant decrease in the head
count within U.S. organizations because of cost controls. I don't
believe those jobs are coming back. There are clearly not as many
developers employed in the U.S. today as there were three years ago.
But you have to remember that if there are 600,000 or 700,000 very
well-trained staffers in India, that still pales in comparison with the
almost three million jobs in North America. Q. Isn't some of this work too complicated to be outsourced or offshored? A. Yes, the environments are more complex. Q. What do you mean by that?
A. That means there are multiple platforms, or different kinds of
computer systems, and they have to work together. It's a lot more
complex. The notion that you can make all that work well together by
taking your secret sauce and giving it to someone else just doesn't
make sense. Q. Is the American educational system doing a good job of producing the caliber of workers that technology companies need? A.
We have an amazing educational system, by far head and shoulders above
anywhere else. The unfortunate part of that is that while it attracts
talent from all over the world - people fight to get into our
universities - most graduates with engineering degrees are foreign
nationals and they don't stay here. One of our biggest exports is the
education of our competitors.
William J. Holstein is editor in chief of Chief Executive magazine.
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