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October 21, 2005

China and Technology

Oded Shankar, author of "The Chinese Century - The Rising Chinese Economy and its Impact on the Global Economy", now has the stage at the POPTech Conference.

Thus far Oded is discussing the massive trade deficit with China and the exports of manufactured goods to the U.S. Oded is also the Chair of Global Busisess Management at Ford Motor, which yesterday posted a quarterly loss of over $280 million. 50% of the content of Ford's new Rover Maverick truck is from China.

We think of China and manufactured goods, but I've been in recent talks with a company that is interested in having my team benchmark the development productivity of its software operations in the U.S., Europe, and - not India, but China.

What comes to mind for me is the blurring of offshoring and outsourcing in both maufacturing with knowledge work (which includes sofware design and development). The unifying economic force with regards to outsourcing of manufacturing and IT is the lower cost of labor. But what most technology companies fail to recognize is the difficulty of outsourcing or offshoring R&D, which poses difficulties that do not exist on work that is basically a ramp-up of low-cost, repetitive activities like production.

In manufacturing, we automate what we know. In design work, most of the efficiency comes from maximizing the flow of thought between people to uncover that which we do not know, to discover a way to solve a problem before a team. Invention is not as easy to speed up, or lower its cost, by sending it overseas. Invention is difficult to streamline by splitting a team across two continents. Friction ensues when what is designed isn't what the customer wanted because of miscommnication.

That being said, I think the difficulties that companies experience on outsourcing technology projects to India (as opposed to manufacturing) could have similar challenges for projects done in China, which may not have as strong a mastery of the English language to boot.

Shenkar is describing a scenario where India does software design, China does manufacturing, and the U.S. takes out more mortgages to buy more stuff (by borrowing from India or China).

Lots of questions here, few simple answers.

Side note, that's not exactly trivial: The U.S. Energy Information Administration projects demand rising from the current 84 million barrels a day to 103 million barrels by 2015. If China and India — where cars and factories are proliferating madly — start consuming oil at just one-half of current U.S. per-capita levels, global demand would jump 96%.

Doomsday situation - Many see another, potential ultimate conflict coming: China in a clash with the U.S. over the oil... sitting under Middle East soil.

Posted by Mike at October 21, 2005 12:34 PM

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