The East is Shining

When the issue of software outsourcing and business process outsourcing (BPO) comes up, the focus is very often on USA as the economy from which such work is outsourced and India as the country to which such work is outsourced. Separated by thousands of miles, with a continent and oceans in-between, USA and India have emerged as the visible partners in the growing love-hate dance of outsourcing.

Yet, quietly and with far less fanfare, outsourcing is a burgeoning activity across the much smaller geography of the Sea of Japan.

Typical of such relationships is the one between BroadenGate Systems, a software firm based in Dalian, China and this company’s major Japanese clients. In 2002, for example, SCM – a construction industry unit of the Japanese giant Mitsubishi – awarded nearly a $100 million contract to BroadenGate. As part of this contract, BroadenGate provided “SCM with offshore COBOL coding services in databases (DB2) and business process in the environments of IBM S390 series”.

Started in the late 1990s, by 2004 BroadenGate scaled up rapidly to 400 software-development and systems consulting professionals and over 30 project managers. Its foreign locations include offices in Los Angeles and Tokyo. The company has become adept at developing comprehensive outsourcing solutions, systems development work, implementation projects, and providing consulting services in the telecom, network security, e-Business, ERP, CRM and GIS sectors for customers worldwide. While BroadenGate has a small but growing base of American clients, the company’s most successful foreign market is Japan. Its Japanese outsourcing clients include Mitsubishi’s SCM unit as well as Kawasaki Steel, mega-retailer Sogo, Canon, Yasuda Trust Bank, Sakava Bank, Sanyo, Tokyo Gas, Daitokyo Insurance, Kaneka Engineering, and Kyushu Electric Power Company.

At its 2004 annual meeting NASSCOM, India’s software industry association at the forefront of discussing outsourcing issues, invited Dr. Hongbing Lan, President of BroadenGate, to speak about “China - The Next Outsourcing Frontier”. Dr. Lan pointed out that outsourcing work was a natural offshoot of the billions of dollars – about ten times the level of India – that multinationals invested in China’s industrial sectors.

Of course, for BroadenGate the major source of revenue is the burgeoning domestic industrial sector of China itself.

Just as the British colonial legacy and the widespread use of English among the college educated workers of India provides India good access to the outsourcing markets of UK and USA, the centuries-old cultural affinities – even though marred to some extend by the hostilities of the twentieth century – provide Chinese outsourcing firms with preferential access to Japan, and of course to many Asian nations as well as North American settings where Chinese diaspora are in positions of business leadership.

For India’s software and BPO firms, China presents a very challenging mix in terms of potential clients, possible partners, and most definitely a range of strong competitors. In terms of technical skills, the gap – if there is one – between Chinese and Indian software and BPO firms will disappear rapidly. The question of cultural comfort and connections will then become increasingly central. From the perspective of India, the key question is what is being done to narrow the cultural gap between India and the region where much of the real future economic power of the world resides – East Asia. While much of the braggadocio of the “India Shining” advertising campaign was exposed during the 2004 elections in India, the fact of “The East is Shining” is here to stay for decades. Business and political leaders of India should take notice!

Nik Dholakia