by Stephanie Overby

The Problem With “Chindia”

Oct 16, 20077 mins
IT Leadership

The World Is Not Flat. There. I’ve said it.

Personally, I’ve been itching to say that since 2005, when Thomas Friedman published the best-selling business tome that’s been lugged around in briefcases, read in business class, and collected dust on the nightstands of executives worldwide ever since. (Side note: Any time an author turns an Indian vendor’s sales pitch into a business mantra that is then swallowed whole by much of the Fortune 1000, I’m going to be a bit skeptical. Besides, wasn’t Friedman a little late to the Indian outsourcing party, anyway?)

It’s not that I don’t believe in globalization. Globalization isn’t something you have to believe in. It just is.

But it continues to amaze me the amount of irrational exuberance that’s surrounds the topic. Sure, Friedman’s book may have hinted at some of the complexity involved. But more often than not, when you hear an executive referencing the best-seller, it’s not because he wants to engage you in a detailed discussion about the relative merits of globalization. It’s more like, “The world is flat. Why don’t you cut costs and send that work to India?” or “We gotta be in China. Why? The world is flat.”

I’m exaggerating for effect. Mostly.

But the lack of nuance that exists, particularly in the coverage of the global IT services market (read: offshoring), is downright scary.

The big topic these days is “Chindia” — that apparently irresistible combination of China and India. BusinessWeek recently published an article on “The Exponential Power of ‘Chindia‘” which said, “We are witnessing new joint ventures between Indian IT service firms and their Chinese counterparts, 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.” Gartner says everyone needs to have a “Chindia strategy” “”The bilateral economy of China and India is in its infancy, but new momentum suggests a powerful relationship is building, said Gartner VP Partha Iyengar. “China-India – Chindia’ – enterprises will have access to complementary skills and resources and, in turn, will have the potential to lead many global markets.”

True enough, there have been numerous joint ventures and other back-and-forth between Indian IT service firms and their Chinese counterparts. Once talk in the outsourcing industry turned to the idea that China was the Next Big Thing in technology services, the tier one Indian providers, to varying extents, put stakes in the ground almost instantly.

And it’s no secret that this global expansion and integration is not limited to the powerhouses of China and India. How about Mexina (Mexico + China)? Indentina (India + Argentina)? The Ameribbean (I think you get the idea)?

It’s all happening.

The sheer amount of activity is dizzying. Infosys is the big recruiter on campus, not at the Indian Institute of Technology, but at Kings College London, University College London and Warwick University. Satyam added a development center in Australia. Wipro’s in Atlanta. Genpact is banging the drum about Mexico. Accenture says its new hot spot is Latin America. IBM is such a large presence in India (53,000 employees and counting), it’s now the local market leader there. And, If you follow the IT services press releases the way I try to, you know I could go on… and on… and on…

The prevailing wisdom surrounding all this cross-border, often transcontinental hiring and acquiring and partnering and expanding seems to be that it represents a fulfillment of the promise of globalization. That, for IT leaders, we’ve arrived at a place where, as Ben Worthen of the Wall Street Journal writes, “finding an outsourcing provider is no longer an issue of choosing an Indian company or an American one. They can all do the work anywhere.”

Yes, the lines are getting kind of blurry. But what gets missed (not necessarily in the media coverage itself, but in what many take away from the coverage) is the fact that all of this is just beginning. Eyes seems to gloss over words like “early stages” and “infancy.” Maybe the ultimate destination is an IT services industry where anything can be done anywhere. (By anybody? Nah.) But we’re not there yet. My guess is we’re not even close.

Savvy IT leaders who must make decisions about global outsourcing and offshoring know this. A lot of their bosses don’t.

Was it that long ago that everyone rushed after the promise of 80 percent savings by outsourcing work to vendors in India only to come away disappointed? Do we not remember how those pesky cultural, process, and people issues got in the way? Sure, not everyone high-tailed it out of India (although some did). But for those who stayed, it took time, effort, and money to try to make it work reasonably well. And, of course, there weren’t any 80 percent cost savings. Hell, some people are still having trouble with their work in India.

Doesn’t it stand to reason that all those issues only get multiplied as the outsourcers themselves expand globally? If it’s difficult to recruit and retain people locally, isn’t it exponentially harder to do halfway around the world? Mergers and acquisitions are tricky to integrate in similar geographies. I mean, Nextel was based in Reston, Va., and Sprint was based in Overland Park, Kan. and even they couldn’t make it work. Do you want to outsource to a vendor that just set up shop in whatever region it is you’re considering? Or one that just got acquired by another company in another timezone? Or one that’s been operating there forever, but doesn’t have as good a reputation as the other two?

Let’s think this through. I’m considering re-locating some work closer to my U.S. headquarters. How about Mexico? Who do I go to? I’ve been working with Genpact in India. They’ve set up shop in Juarez and they’d love an inaugural deal with a marquee customer like me. But they’re new to Mexico. Are they getting the best people? Do they know how to fully take advantage of the location yet? Is Genpact Mexico the same as Genpact India? Hmmm. Maybe I should consider local Mexican company. How about Softtek? They’re the largest private IT services company in Latin America and headquartered right there in Monterrey. What’s that? Their management is busy with the daunting task of integrating I.T. United, the Chinese software development company they acquired? O-kaay. Maybe I should call up IBM. They’re what?

Now, I’m not picking on Genpact. Or Softtek. Or IBM. Everyone is doing it. (Or almost everyone.)

It’s not a small world after all. In fact, the more connections we make, the more big and messy and complex it is. Eventually, perhaps, the world will seem flatter. Maybe you’ll be able to send work wherever it’s convenient or cost-effective or compatible for you without too much thought. But not just yet.

I’m not advocating sticking your head in the sand or building walls or whatever your favorite metaphor is for isolationism. I’m just saying, let’s not be coy about what it all really means right now.

Stephanie Overby Senior Editor CIO magazine and