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Analysts Debate US IT Versus Growth in Upstart Nations

Analysts Debate US IT Versus Growth in Upstart Nations

It is such a major transformation that even if China or India — or a unified Chindia — doesn't overtake the US right away, it will only cause those countries to redouble their efforts.

Over the past decade, China and India have become leaders in high-tech manufacturing and IT services, respectively. But could either country - or an allied "Chindia" - overtake the US as the global high-tech leader within the next 10 years?

During the West Coast version of Gartner's Symposium ITxpo 2007 conference three Gartner analysts, each representing one of the countries, debated that question.

Arguing for the US maintaining its lead in high-tech innovation, Gartner's Jamie Popkin said America continues to attract the best students from overseas, most of whom decide to stay. The entrepreneurial environment in the US - from the maturity of the high-tech and venture sectors to the creativity of the entrepreneurs themselves - is "unmatched," Popkin said. And consumers as well as corporate buyers are the most demanding in the world, he said.

"Regardless of what other countries might feel about the rest of America, our business environment remains the envy of other countries," said Popkin, who co-authored a recently published book on the effect that China and India are having on the IT industry.

Popkin added that the US has survived four other recent waves of globalization. That includes Japan taking leadership positions in the automotive and consumer electronics industries starting in the 1970s, the loss of chip manufacturing plants to South Korea and Taiwan in the 1980s, the large-scale shift of low-cost manufacturing to China that started in the 1990s and the outsourcing of software development and IT services work to India since 2000.

Although there initially was fear about all of those transitions, Popkin asserted that the US emerged "not only unscathed, but stronger each time".

Sandy Shen, a China-based Gartner analyst, supported the case for that country's IT supremacy a decade from now by citing a litany of impressive statistics. China's 11 percent economic growth rate last year compared with 3.4 percent in the US, she said. In addition, China increased its research and development spending by 20 percent last year, already making it the second-largest investor in R&D behind the US.

Shen also pointed to the fact that the number of patent applications filed in China in 2005 was more than the number filed in the US that year, and to the 2 million students graduating with engineering degrees annually in China, as well as the return of overseas graduates to the country.

And she detailed examples of technology developed in China that has been exported to the U.S. market - for example, the hot-selling Motorola Motoming A1200 camera phone, which can scan business cards. Finally, Shen cited China's development of national technology standards that the country's government is pushing to be adopted internationally.

Meanwhile, analyst Partha Iyengar, who co-authored the book on China and India with Popkin, said that "while Columbus got lost the first time he went looking for India, my job is to help you find the right destination this time around".

Iyengar pointed out that despite the hype around offshoring to India, less than 8 percent of that country's gross domestic product comes from software and IT services outsourcing. He noted that while the US had the luxury of coming of age economically in the relatively uncompetitive post-World War II period, India is facing many more rivals. Hence, it "is working at a much more feverish pace", he said.

That is forcing India to become more innovative at a faster pace, Iyengar said. That includes mending political fences with China over the past two years, which has already resulted in business tie-ups and heralds the true possibility of an economically united Chindia, he said.

In the debate's argument-and-rebuttal format, Popkin took his second opportunity to quote a Chinese company's CEO who told him that although China graduates many computer science degree holders, "what he says he needs are engineers".

Popkin also pointed out the flip side of the fact that only 8 percent of India's GDP is based around outsourcing: 60 percent still comes from agriculture. And he claimed that out of about 500 million Indian workers, only 1 million have IT-related jobs. Also, despite the success of services firms such as Wipro and Tata, there really are only a handful of India-based IT vendors of note, Popkin said.

As for China's alleged patent lead, Popkin said "the deeper story" is that a high percentage of the patents awarded in that country are proposed and owned by foreign companies.

Shen acknowledged that point. But, she said, "who owns [the patents] doesn't matter, because the bigger point is that people in China were innovative and produced the patents".

Iyengar argued that an increasing number of the best and brightest Indian students are staying in the country and not going to the US. Or if they are heading overseas, they're choosing closer and cheaper destinations for schooling, such as Australia, he said.

In addition, Iyengar said Popkin's argument that the US has come through four previous competitive crises with no problems is reflective of "a sense of complacency" in this country.

"The fundamental difference in this wave of globalization is that for the first time, it's not just low-level jobs that are being sent overseas with the higher-end ones remaining in the US," Iyengar said. "For the first time, we are looking at knowledge-based work transitioning out of the US".

It is such a major transformation, he added, that even if China or India - or a unified Chindia - doesn't overtake the US right away, it will only cause those countries to redouble their efforts.

"The Asian view is to take the long-term view and continue admiring the United States, even as we overtake it," Iyengar said.

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