• silicon.com
• Management
• CIO Insights

By silicon.com, 26 November 2004 16:55

Two contract wins this week with Chinese authorities - in education and local government by Dell and by Microsoft respectively - are more important than the sum of their parts.

Taken together with news today that there are soon likely to be official restrictions coming out of China on buying from overseas vendors and we have a big issue on our hands, one that arguably is about a lot more than the none-too-small matter of how companies do business in China.

Consider offshoring. It has changed the way we think about sourcing skills and - we can go further here - the whole concept of free trade in goods and services.

For all the protests in the West about offshoring work to Asia - in IT development and support, business process outsourcing and other areas such as healthcare and accounting - we have to remind ourselves of the value of emerging markets to Western companies.

If you are the CEO of a technology company based in a Western European country and that country, say, bans use of offshore call centres in India, what are the chances the Indian government will award that tech company a juicy contract?

Don’t think such questions aren't in the minds of the management of the leading tech players. They will support offshoring and outsourcing not only because of their benefits but because it may be harmful to their own future order books to oppose these practices.

China is at an important stage in its development and will ultimately have such critical mass that it understandably won't want to hand its technological future to overseas powers unnecessarily. And let's not forget a not-so-long-ago communist regime isn't yet going to lose too much sleep over foreign capitalist interests.

But protectionism is a rocky road. It will hurt as many people as it helps. In the West, physical communities and communities of certain types of worker will increasingly be pitted against corporate interests who see bottom line benefits in offshoring. Both have their influence on politicians.

In China we are not talking about the same power struggle or freedom of debate. It means we are going to have to rely on a ruling elite to tread a careful path between talented homegrown technology companies and overseas vendors that sometimes have a valuable edge but reputations for their own brands of ruthlessness.