The future is Eastern

More than ever, Asian IT will have a bigger influence on Western IT, says James Woudhuysen. He predicts that Indian IT service providers, like Chinese IT hardware manufacturers, will be able to do a whole lot more than people here currently imagine. Which will have an impact on the English speaking construction sector far beyond the current but tentative outsourcing of technical services and the cheapening of computer power for CAD monkeys.

Legend, China's $3bn PC specialist, is to join the elite of Kodak, Panasonic, Samsung, General Electric, Schlumberger and others in sponsoring the 2008 Olympic Games in Beijing. For the privilege, and that of sponsoring the 2006 Olympic Winter Games in Torino, Italy, it probably paid $65m.

Meanwhile, IBM has won a big and intriguing piece of business in India. It is to look after the hardware, software, data centres, customer billing, customer relationship management, help desks and disaster recovery facilities of Bharti Tele-Ventures, India's largest private telco - and one which is 28 per cent owned by Singapore's SingTel. Over 10 years, Big Blue will earn $0.75 billion for this outsourcing deal, which will transfer some Indian jobs to IBM's telecoms innovation centre in Le Gaude, southern France, as well as to its native US.

For Legend, the Olympics deals are essential if it is to build a world brand - Lenovo - in short order. They are even more vital if, to the £100m of PC components the company exports to the EU, it is ever to add exports of complete PCs. It needs not just a distribution channel in Europe, but public exposure.

Predictably enough, some were dismissive of Legend's move. The company has 27 per cent of the Chinese market for PCs, but loses money on its new handsets and announced, earlier in March, that it would fire 600 of its workforce of 12,000. Since China's accession to the World Trade Organisation in 2001, Legend has suffered a squeeze on home-market margins at the hands of Dell. On the Financial Times, the magisterial Lex column pronounced the company's Olympics spending spree '... less cheering for investors than for sports lovers'.

On this occasion I think the FT wrong. Legend's CEO, Yang Yuanqing, maintains that its R&D costs run at one eighth the level of those that obtain in the US. Certainly Legend's advertising costs, at $24m, are low compared with its cash pile of $350m. Though I dislike any corporate relapse into branding and playful activities, I think Legend's Olympics moves will prove essential to raising its profile and thus its market share among EU PC purchasers.

Similarly, Bharti's choice of global IBM over local outsourcers has a lot going for it. Through the deal, it will become IBM India's preferred supplier of telecoms services. More important, Bharti expects its base of mobile subscribers to shoot up from six to 25 million people in just two years. IBM may be the only outside supplier who could really handle that kind of explosive growth. For Bharti, to lose some jobs in what could become a seminal example of outsourcing-in-reverse must seem like a small price to pay.

Will French and American IBMers, manning Bharti's help desks, ever understand enough of India to please the irate mobile Bharti subscriber who has lost his signal somewhere up the Ganges? Even to pose the question is to underline just how elitist the phobias are that surround the more typical despatch of Western call centres to Indian locations.

Over the next 20 years, Indian IT service providers, like Chinese IT hardware manufacturers, will be able to do a whole lot more than people here currently imagine.

Ironically, too, they will use European and American speakers of the English language as much of their overseas base of suppliers and customers. James Woudhuysen 1 August 2004

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