Red flag flying over LinuxWorld Expo

China stakes its claim to become the next IT outsourcing superpower, with an emphasis on open source

It may have been the worst conference presentation I've ever seen. Behind it, however, was one of the most compelling trends in the IT industry today.

In a conference room tucked away on the second floor of San Francisco's Moscone West convention center, a scant handful of reporters had gathered at LinuxWorld Expo 2005 to hear a sales pitch. But this wasn't your everyday vendor briefing. Doing the selling was a consortium of Chinese software companies called the Beijing Software Industry Productivity Center (BSIPC), there to promote Beijing as not merely the capital of China but also "Asia's Linux Capital."

The emergence of China as a global economic power has been one of the key trends of this century. Relaxed economic and regulatory conditions have opened U.S. markets to Chinese companies in ways previously unthinkable. In manufacturing, China is already an unstoppable juggernaut. Little wonder, then, that Chinese companies would now be looking for ways to provide goods and services higher up the value chain.

Sure enough, the BSIPC delegation opened its press conference with a 15-minute video presentation that did its earnest best to paint Beijing as Bangalore North and then some. Skyscrapers leapt to the clouds, models strutted the runways, neon lights blazed above the bustle of cars and people as they moved the wheels of industry. And, of course, computers were everywhere. Chinese teens, we were told, now enjoy Internet cafés "more than almost any other entertainment."

Looking past the razzle-dazzle, however, the BSIPC offered some provocative figures. Beijing is now home to some 150,000 software development facilities, serving about 5,500 software and IT service industry companies. In 2004, software development was a $6.4 billion industry in Beijing, the result of an annual growth of roughly 30 percent since the year 2000. Exports currently account for $227 million of that figure.

Could China really overtake more established nations like India and Russia in the IT and software development outsourcing market? It's possible, yet doing business in Asia carries with it a unique set of concerns for U.S. companies.

The BSIPC made a valiant effort to gloss over the West's unease at Asia's poor track record for IP (intellectual property) protection. "In Beijing, copyright registration takes just one week," the video presentation offered cheerfully. "And it's free!" But the BSIPC actually had an answer to the IP question that was far more compelling than streamlined bureaucracy. It wasn't just selling outsourcing. It was selling open source. 

When the software is free and open to begin with, IP concerns move to the background. After all, why not open source? The areas of an enterprise most ripe for outsourcing are those areas that are nondifferentiating or provide no competitive advantage. Not coincidentally, those same areas are prime candidates for collaborative software development, as open source advocates like Bruce Perens will explain.

But there was another concern in evidence at the press conference, and that was the one I mentioned earlier: This may have been the worst conference presentation I've ever seen. The reason, unfortunately, had everything to do with the language barrier.

Following the video, BSIPC director Hu Qinghua delivered his opening comments to glassy-eyed reporters through a translator. Of the BSIPC members who spoke, only the representative from Sun Wah Linux  seemed fluent enough in English to engage the audience; others just read prepared speeches from paper. And the provided press materials were as slipshod as they were slick and colorful, full of the typos and malapropisms that fans of imported video games adore.

Nothing against Mandarin, mind you; it's a beautiful language. But one lesson companies engaged in offshore outsourcing learn early is that establishing clear communications channels throughout the development process is paramount. Fail there, and costs and failure rates start climbing immediately. Compared with countries such as India or the Philippines, where English fluency among software developers is virtually universal, outsourcing to China seems like a tough sale.

Though the BSIPC delegation was certainly eager, I couldn't help but come away with the feeling that Beijing as the new Bangalore was an idea whose time had not yet come. Still, though the Chinese IT outsourcing superpower hasn't arrived yet and there are still hurdles to overcome, it's on its way. If the BSIPC successfully communicated one message at LinuxWorld, it's that in IT and software development -- as in manufacturing before them -- China will not be ignored.