Building a Future with BRICs Mark Kobayashi-Hillary (Editor) Building a Future with BRICs TheNextDecadeforOffshoring 123 Mark Kobayashi-Hillary National Outsourcing Association 44 Wardour Street London, W1D 6QZ United Kingdom www.noa.co.uk ISBN 978-3-540-46453-2 e-ISBN 978-3-540-46454-9 Library of Congress Control Number: 2007936168 © 2008 Springer-Verlag Berlin Heidelberg This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: WMX Design GmbH, Heidelberg Printed on acid-free paper 987654321 springer.com Dedicated to Nobumi and Matilda; thanks for your epic tolerance throughout the production of this book … and also my nephews Luke, Ben, and Lewis, who will look at this as a history lesson by the time they are able to under- stand it! Foreword It’s always a great pleasure to comment on a new book especially as this one lives up to the excellent standards of Mark’s earlier book ‘Outsourcing to India’ – so really this a great opportunity for me and the NOA. The NOA recently celebrated its twentieth birthday. Over that time we have observed several important changes in the way companies contract and work together, but one of the most dramatic changes and opportunities has been the globalisation of services and the growth of offshoring. The arrival of the Internet in the 1990s, the subsequent reduction in in- ternational communication costs and the arrival of the millennium bug all converged to create an environment in which companies started embracing the offshore option, whether by outsourcing to a partner or by going it alone. This has now developed to such an extent that many analysts be- lieve that India has the highest quality software industry anywhere in the world, regardless of cost. Forward-thinking economists are all in agreement about the importance to the entire world of growth in the BRICs region – not just for outsourc- ing services, but because these countries are developing from being rela- tively poor to being the economic champions of the twenty-first century. Mark’s book has taken the BRICs hypothesis and asked what it means for outsourcing and services as these regions develop and offer services to the world. Listen carefully to the views expressed in this book as the Chief Executives commenting here have clearly spent a great deal of time think- ing about the direction in which their industry is headed. It’s a valuable contribution to our understanding of the international out- sourcing marketplace today and I offer my congratulations to Mark and Springer for publishing another book that helps us all understand this im- portant subject. July 2007 Martyn Hart Chairman, The UK National Outsourcing Association www.noa.co.uk Preface I would like to thank you for choosing to purchase, borrow, or steal this book. I hope that you find it a useful addition to the wealth of knowledge and opinion on global technology-enabled services and offshoring. This is an area of international business that has exploded in importance since the millennium and I hope I can play a small part in the process of document- ing what is going on and where we may be headed. Why the BRICs region? Well, it helped that the Goldman Sachs analysis had focused so much attention on this region. Many economists have counter-argued that it is impossible to artificially connect the fate of these countries, yet to be honest I am not too worried about this. The BRICs analogy is better thought of as the economic development of those regions that are less developed – becoming wealthier and destroying poverty. The ongoing globalisation of services is creating a wealth of opportunity for regions to interact on a grander scale. I don’t think too much attention should be focused on the statist nature of the debate. We are not literally looking at a China versus India debate. The Indian government is now very supportive of the hi-tech industry there, but we all know that it is really the work of intelligent entrepreneurs such as Narayana Murthy who started this process despite the government - not be- cause of it. Chinese companies will compete against Indian companies and they will compete against Brazilian companies and Russian companies, yet they may also buy from each other and collaborate. There is no black and white or agreed corporate behaviour based on national borders. I put this book together because I felt that it was important to capture some important board level opinion on where the industry is headed. My own views are captured in the introduction and summary. As I am always meeting IT and outsourcing leaders and interviewing them, as well as working in various parts of the industry myself, I have developed some strong – and I believe, well-founded – opinions. I did not feel that there was anyone out there capturing this moment in time. We are at an impor- tant shift in emphasis now after the rapid growth spurt since the millen- X Preface nium. Offshore outsourcing is likely to change a great deal inside the next decade and those companies who still believe that the future is merely an extrapolation of the past are going to be left by the wayside. A few people have been really instrumental in helping me to form some of these views. My friend Mahesh Ramachandran of fxaworld.com contin- ues to give me new ideas all the time. I’m sure we will eventually write something together and enjoy even more nice dinners at Sangeetha in Har- row – possibly the best south Indian food in London. Dr Richard Sykes and I spent much of 2006 and early 2007 working on a book for the British Computer Society ‘Global Services: Moving to a Level Playing Field’ (BCS 2007) and this has helped to hone many of my thoughts. Arun Ag- garwal at Tata Consultancy Services – their EMEA head of consulting – gave me a great insight into what is going on in the industry from the viewpoint of a consultant, which is not really my natural environment. I grew up from the technical side of the business and never spent time hud- dled over 2x2 charts until I did my MBA! The book flows together in a logical way. I introduce the topic and look at the Goldman Sachs research plus my own views on the potential influ- ence of the BRICs – and offshoring in general. Then twelve senior execu- tives give their view on the industry; first the Brazilians, then the Russians, then the Indians, and finally, the Chinese. I then conclude the book with a summary of the key thoughts from the contributors. This book really focuses on the information technology industry and services that are enabled by IT. Although the original BRICs analysis was an economic study and prediction this is not really a book about economics – the focus is on the topic now known as ‘offshoring’ (or offshore out- sourcing, there is a difference between outsourcing and offshoring, but they are related) and where this trend might be headed. The key informa- tion offered within this book is the board-level opinion from companies in all four regions of the BRICs – plus my own ‘European’ summary of it all. You can read the book straight through for a complete picture of the BRICs, or single out key chapters that might be of most interest to you based on the company or region. As I have also written in my recent BCS book, writing a book is a thankless task. It means hours of solitary research and writing that stretch into days, weeks and months of effort even before worrying about whether anyone will actually like the result. To work on more than one book in a year is almost masochistic. For this book I even checked into a Brighton hotel for a week so I could get some editing done without any distraction, other than my iPod. Editing a text might seem easier than writing the entire Preface XI book yourself – after all it’s the contributors who do the research and write the text – yet the process of finding people, getting them on board with the project, guiding them, chasing them, and editing the final submissions from each author was immense. I never imagined how much work would be required to pull this together and so I expect my next work to be one in which I can lock myself away for a period of time and write without wor- rying about anyone else at all! I’d like to thank Katharina Wetzel-Vandai and Gabriele Keidel at Springer for being flexible about the manuscript delivery and helping to make this book a reality. It all took a lot longer than planned, but Springer was supportive enough to help out when it mat- tered – they probably see it from apologetic authors all the time.