Manufacture for Control

One big difference in the strategy between India and China is that while

India is chasing only one slice of the pie, China is going after the whole. And

it starts with manufacturing.

China's is an interesting approach, one that I am sure will take it towards

global dominance. Manufacturing, according to Chinese experts, is the name of

the game: China thinks that manufacturing is the most vital and the culminating

point in the life cycle of any product. If manufacturing can be controlled, you

can control product design, outsourcing, and costs on the pre-production side,

and pricing and distribution on the post-production side. Effectively, if China

gets control over manufacturing, it will have control over everything.

IBRAHIM AHMAD By controlling manufacturing, China could control product design, outsourcing, and costs on the pre-production side, and pricing and distribution on the post-production side

To illustrate my point further with an example. One of the world's biggest

mobile phone companies has a huge manufacturing base in China. Because of this,

lots of ancillary units, which provide handset components, are also starting up.

This mobile phone company is now seriously looking at getting design and

development work done from the Chinese, because this country is also getting

stronger in embedded software skills. Since China is a huge market in itself,

this becomes a deadly combination-design, outsource, manufacture, sell-all

in the same place. In the case of India, it would be just design, and then we

get out of the loop.

The Chinese USP will thus be-good design skills, reliable and

cost-effective outsourcing options, global manufacturing strengths, huge home

market, and so on. India will just have software designing, and after that, BPO

to offer. And the way China is now encouraging and promoting education, their

grip over the entire design-to-manufacture-to-support cycle will only get

stronger. And India may be reduced from the position of producer to consumer.

China has already established itself as a manufacturing giant. The way it is

now encouraging its masses to learn English, adopt English names, only goes to

show that it is serious about exposing its people to global values and

practices. If China could have a huge English-speaking population in the next 15

years, India's BPO industry would be under siege. The way they are setting up

engineering colleges clearly shows that they want to produce more and more

engineers, specially software engineers and be globally big. Similarly, given

the way China is investing in enhancing its communications infrastructure, it

could very soon be one of the world's best.

India's approach currently is to identify a niche, and focus on that. As a

result, we have been able to make a mark in software development and BPO. The

lobbyists, the government, and the industry are very happy that we are world

leaders here. The point they seem to be missing is that somebody who controls

more processes in the production of an item will want to control the whole

process. It is natural, therefore, for China to work on plans, which will give

them control over other processes, and it will also be easier since they control

manufacturing.

Those of us who believe that BPO will be our answer to China should remember

that the world is moving BPO to India because of low costs and English language

skills. However, China as a destination offers not just lower costs, but

stability, a fast-growing domestic market, unlimited government support, big

investments in education and infrastructure. For instance, India is today

desperately short of people who can join BPO companies.

I do not think the Indian IT industry is even thinking this far ahead. The

government I know is not capable of thinking long term, especially in IT, which

will be of great strategic import in the years to come. If India does not want

to lose software and BPO to China, it should try to develop vision. Remember how

the West and the US always thought that manufacturing would remain with them.

China, working single-mindedly and silently, now owns manufacturing.

The author is Editor of Dataquest IBRAHIM

AHMAD