27.11.08

Attacks in Mumbai

I had planned to finish my trip report and write up my impressions of a dozen or so companies I chatted with in Chengdu last week.  Until late last night, when my wife checked the news on-line and pointed out this to me.

The summary is that there were coordinated attacks in Mumbai yesterday, at several 5-star hotels, and other places through the city.  Apparently the attackers were targetting Americans and Brits.  

"The death toll had reached 101 by early Thursday afternoon, with nearly 300 injured. WB Tayady, head of St George’s hospital, said most fatalities had been caused by bullet wounds."

I am largely desensitized to reports of violence in the news.  But this...  tragic and bad and distirbing and sad all at once.  I feel for the victims, and I think this starts to change my opinion about the safety of traveling and working in India...  

A few years back, I elected not to send work to a company in Indonesia, because I didn't think I would feel safe there, and I didn't think I'd be able to ask my staff to travel there without worrying about their safety.  India, I thought, has a long history of tolerance, and of dealing with conflict peacefully..   Well, maybe not so much any more.  It's too early to draw conclusions, but this is a big deal.  Fingers crossed for the remaining hostages.  I hope they resolve this, and rain vengeance down on the perpetrators. 



25.11.08

China Outsourcing Summit - Day 3

Some of the Summit delegates on a tour of the Tianfu Software Park

If you're following along this week, you know I'm doing a one-week phase-shifted live-blogging about the China Outsourcing Summit I attended last week.

This summit was hosted in the city of Chengdu, in the Sichuan province.  You'll remember the Sichuan province from the 2008 Sichuan earthquake, that killed around 70,000 people and devastated the region.  In Chengdu, located about 20K from the epicenter of the quake, I saw no visible damage remaining.  But the city has been busy.  This summit was clearly a focal point for the rebuilding and recovery effort; and everyone I spoke to about the quake had a nearly palpable desire both to illustrate the resiliency of the Chinese nation and, more importantly, just to get back to normal. 

That aside, my first full day in China began with an introduction to the power of an autocratic socialist state.  As part of the introduction to my tour of the IT parks in the city, I was made aware of two significant state decisions that have directly and materially benefited Chengdu. The first was the announcement of a $150 Billion (900B RMB) infrastructure rebuilding campaign that will last the next three years.  The second was Chengdu's inclusion in China's 1000-100-10 Project.

1000-100-10 Project

Here's the summary:  (You won't find this on Wikipedia, and I hadn't heard about it until this trip...)  
  • The 1000-100-10 project is part of China's 11th 5-year plan.  You'll no doubt remember 5-year plans from your high school world history courses.  Think of them as comparable, in American-centric terms, to the campaign promises of presidential administrations.  In the current (11th) 5-year plan, China seeks what seems to be achievable growth over pretty much every economic sector and measurement you could imagine.  It's an ambitious plan, in a long series of ambitious plans.
  • The 1000-100-10 program is a small subset of this 5-year plan, focused on China's emerging IT Services Outsourcing industry.
  • The "1000" comes from their stated goal of establishing 1000 mid-to-large scale outsourcing companies in China.
  • The "100" comes from the goal of winning the outsourcing business of 100 "internationally famous" MNCs.
  • The "10" represents the 10 "base cities" they've selected, in which the government is funding development of IT parks and centers of innovation comparable to the largest office parks in the US.  Think "not as big  as Silicon Valley" but significantly bigger than "the Cisco Campus in Silicon Valley."
  • For reference, the cities are:  Dalian, Shanghai, Xi'an, Chengdu, Shenzhen, Beijing, Tianjin, Jinan, Wuhan, Nanjing, and Hangzhou.  There are 11 cities in this list, a discrepancy for which I have found no explanation other than "1000-100-11 doesn't work, does it?"  
  • Within each of these target cities, the ChinaSourcing Working Committee (which I will introduce by simply saying "it is exactly what it sounds like")  is steering educational institutions to tailor degree programs to the needs of the outsourcing industry.
  • The Working Committee also runs the PR and marketing campaigns for these cities, and they do an amazing job producing professional collateral to "sell" the cities.  
  • The Working Committee has also led the creation of incentive structures that make it very attractive for companies and individuals to relocate or set up shop in these target cities.  The list of amenities the government provides includes:  100% income tax refunds for qualifying workers, spousal work placement, short-term company subsidies for hiring new college grades, 15% company-tax rebates with further incentives for companies with higher headcount, 1% total subsidy on software exports, and a "welcome home" bonus of 200,000 RMB for non-resident Chinese who return to China to start a business.  It's an impressive incentive package, and a fascinating communistic take on Keynesian economics.
  • Lastly, the Working Committee is responsible for the development of office parks in these cities, complete with shared lab space (with computers and software), managed infrastructure, and amazingly cool modern buildings.
There are links to translated summaries of the 1000-100-10 Project here and here.


A member of the ChinaSourcing Working Committee, telling us about Phase II of the Tianfu Sofware Park

As the picture above suggests, I toured one of these newly developed software parks.  It was impressive. The architecture was stunning.  The offices we toured were spacious, interesting, and full of people who were apparently gainfully employed for the companies located there.  The tenants at Tianfu Software Park (the motto of which is "a Five-Star Technological Platform Accelerating Industrial Growth") include some big names:   Nokia, NEC, IBM, Symantec, and SAP, just to name the highlights...

The day concluded with a welcome reception wherein I was obliged to sit and listen to about three hours of speeches from an array of government officials, committee members from ChinaSourcing, and Gartner analysts.  The talks were all given with simulcast translation (we all got receivers with three channels - Mandarin, Japanese, and English).  It was comparable to what I imagine it's like to be in the UN, only with software people instead of diplomats.  Below are some quotes I jotted down from the speeches.  These were interesting to me because they reflect the tone and rhetoric of the party and government officials, which I would describe as dogmatically optimistic:
  • "Will China become the global leader in IT Outsourcing?  This is only a matter of time!"
  • "There will not be another earthquake in Sichuan for another 2000 to 4000 years."  (I was told this might have been a bad translation.)
  • "This plan reflects the importance to building an harmonious socialist society."
...not your typical fare for a IT outsourcing conference in the US anyway.  

From a tourist's perspective, Chengdu is a pretty city.  The infrastructure is amazingly well developed.  Construction is booming, and there is no view of the skyline that doesn't include one or two construction gantries.  The only complaint I had was that it was gray - gray sky, gray streets, and gray horizon.  One of my fellow travelers (who manages a team of engineers in a coastal city in China) said this grayness is an omnipresent state in all Chinese cities, due to the large-scale pollution.  Having been in LA recently, I know this isn't exclusively a Chinese problem, but still, it's a sad portent of things to come.  

Foggy morning, 18th-floor view looking out over Chengdu


The People's Money

While I was in China last week, all the (English language) local news was zoomed in on China's economic stimulus package.  I'll write more about what the Chinese government is doing to stimulate the IT sector of their economy later today, but a few things were interesting to me, from a macro-economic perspective:
  • China apparently seeks to achieve something like balanced trade with the US.  According to my hosts this is more a matter of treaty than of policy.  Plus, the Chinese government has a lot of money sitting on the sidelines, so they actually need to spend.  Again according to my host, and independently verified with a bit of research and my own observations, one of the only things the Chinese government (and state supported industry) is able to buy in America is big civilian airplanes.  So, there are a lot of Boeing jets on runways in China.
  • Their internal stimulus package announced a couple of weeks ago was billed as a placating measure in their local press reports...  Apparently the People are not so happy with "slow" growth, even when that "slow" growth would look healthy by our own economic standards.
  • That's because of habituation.  The average rate of economic growth in China over the last 20 years has been over 10%, making it the fastest growing major economy in the world.
  • ... and on that front, this article from Financial Times is an interesting projection of what the recent downturn is likely to do to China:
The World Bank on Tuesday cut its growth forecast for China next year to 7.5 per cent, the slowest rate of expansion since 1990, and said the impact of the global financial crisis was likely to “intensify”.

The interesting thing about this is that China's plans to forestall the slowdown involve turning attention to domestic consumption, away from exports.  That means China, the world's workshop, is about to start shopping itself...



24.11.08

China Outsourcing - Days One and Two

6829 miles to destination.  That picture, taken off the in-flight TV on the tarmac at Idlewild, pretty much sums up Day One of my trip to this summit.

Six.  Thousand.  Eight.  Hundred.  Twenty.  Nine.  (Expletive deleted).  Miles.

And that's just one of the three legs of my trip.  It's the long flight, the one that goes over the North pole into Asia, but still only one of three.  This is an inescapable fact of China Inc., and of choosing China as your sourcing destination.  It is, quite literally, on the other side of the planet.  In a way that makes India seem close by comparison.
  
This long flight, coupled with the fact that I flew West across the international date line means that Day Two is also summed up with the same 4-digit number.  6829 miles to destination.

This might be a good time to bring up jet lag, but of all that has been written on the topic, there seem to be no truths, no stratagems, no approaches that actually do anything to help me.  So we won't speak of it, except to say that every trip I've ever done more than 6 hours off my home time zone has passed in a haze of sleep deprivation and vertigo.  Flying to China of necessity puts Americans, and to a lesser extent Europeans, well off their circadian rhythms. 

Instead, I'll dwell on the brutal and simple duration of this travel.  It seldom gets scrutinized as one of the hidden costs of outsourcing, but if you plan on setting up shop in China, you can also plan on spending about three to four percent of your effective work year on airplanes.  Two days going, and one day coming back, for each trip.  It's not an argument against sourcing in China, or against outsourcing in general, but it is something that should get real scrutiny when planning the financials of an outsourcing deal.

I was lucky enough in this trip to fly business-class, on China Air.  CA's business-class seats are not the best in the world.  The particular 747 that flies the Beijing / JFK route is old and tired, and the seats are not quite up to the "modern" standard set by BA and Virgin Atlantic.  But even old business-class seats that don't let you lay down flat are better than coach seats.

I've written about this before, a few years ago, but this might be a good time to reiterate my opinions about business-class travel.

That flight leg from JFK to Beijing took about 14 hours in the air. Make that 15 hours if you count all the runway time.  Try to sit in a coach seat for 15 hours.  I just dare you.  If you're over 30, it's a guaranteed trip to the chiropractor.  There's a reason "Business Traveler" magazine exists, and why it devotes most of its editorial content to reports about which airline has the best lie-flat seats. At 15 hours, this is a flight that could kill you.  The slow painful way, via deep vein thrombosis.  

Business-class, in addition to the free drinks, allows you to get up and move around, to shift seating postures, and to really try to rest.  It would be a pretty tough travel policy that didn't allow upgrades to business on legs over about 8 hours.  But it isn't cheap.  The summit paid for my travel (the fare for which was no doubt heavily subsidized by Air China, since more outsourcing in China will mean more people on that JFK-PEK flight...), but when I priced out a similar itinerary for reference just now, it comes to around $10,000 US, any way you fly it. Do that three times a year and you've suddenly added a significant amount of travel budget to your sourcing program.  

This is obvious, but a lot of people forget to budget for this when they start their outsourcing search.  To make outsourcing work, you have to travel, and the travel is both expensive and time consuming.

On that note, I'll briefly describe the play-by-play of my trip.  

I started my day at 07:30, well, 05:30 to be honest, when the alarm went off.  

I was nervous about this trip in a way I haven't been in a long time.  I've been to Asia a dozen times by now, but never China.  I talked with my wife about what was making me nervous.  It came down to, well, China.  People's Republic of.  

Suffice to say their reputation precedes them.  I already decided not to try to post any blog entries while I was there.  I already decided not to write a script to do NSLookups of all the domain names in the world to see what hostnames resolved as in China.  I just didn't want to invite any scrutiny that could result in my laptop being confiscated or searched, or me being detained for questioning. In planning for this trip, I was reminded of the apocryphal Chinese curse: May you live in interesting times, and come to the attention of those in authority. I guess my guiding principle on this trip was that I didn't wish to come to the attention of those in authority.

The first leg of travel was uneventful, and the only issue with the transfer to the last leg was an apparent incompatibility in the ticketing mechanics between China Air's JFK desk, and their Beijing hub.  But after 25 hours in airplanes and airports, I was in the air over mainland China, on my way to Chengdu.    Oh, and in what I suspect is a common mistake, my ticket was entered under the name Mr. Hickman Thomas.  In China, the family name comes first, the given name last.  So, I think it's a common mistake for Chinese travel agents to make.  The only airport that had a problem with this was Boston's Logan.

The staff of China Air, and through all the airports I traveled have nearly perfect English language skills.  My car ride from the Chengdu airport to the Shangri-la hotel was an uneventful 20 minutes in a VW Passat.  The only impression I had of China that first night in-country was that the cars weren't interesting (mostly European and American brands), and that I'd never be able to drive there myself unless I learned some Mandarin (the signs have only cursory English language translations).  Aside from that, Chengdu, with its wide streets and multi-lane highways, could be any European capital.  It's that big, it's that clean, it's that nice.

Bentley dealership, Jinjiang Dong Road, Chengdu

My day ended at about midnight local time with a seamless check-in at the Shangri-la, in a nice non-smoking room and a comfortable bed, in which I failed entirely to sleep for the next 7 hours.

27.5 arduous but uneventful hours door to door.  And I am, for the first but probably not the last time, in China.

All this week -- semi-live blogging !

I am just returned from a one week trip to Chengdu China, where I attended the Gartner China Outsourcing Summit, 2008 Edition.

Because of some (possibly unfounded) fears I have about the Chinese government's information policing policies, I decided to wait until I'm safely back in my homeland before I posted these blog entries.  

What follows over the next few days is my account, day by day, of my trip to Chengdu, what I saw there, and what I learned.

Read and enjoy.




Gartner China Outsourcing Summit - 2008 

Phase-shifted LiveBlogging