I’m writing from the annual conference of the Confederation of British Industry (CBI) in London. This annual shindig is where the captains of industry get together once a year to talk about the big issues of the day. Quite often this might be issues of tax, red tape, the minimum wage and various of pieces of legislation that the UK has adopted from diverse EU directives, but this year it’s all about India, China, and the perils of globalisation.

The opening session of the day was titled ‘China and India - facing up to the challenge’ and immediately followed a keynote speech by Conservative Shadow Chancellor George Osborne. Osborne and his leader David Cameron have developed into the masters of spin in the same way Tony Blair did before his own rise to power in 1997. I was only just looking at the weekend newspapers featuring photos of Cameron helping destitute children in Darfur and as his Shadow Chancellor speaks in Islington, he is off to meet our troops in Iraq. They have a formidable PR machine driving the Tory image at present.

The CBI has become very concerned about the challenges presented by the powerhouse economies of China and India. They want to understand how do we compete in, and with, these exponentially growing economies. The conference blurb asked 'And what are the opportunities and challenges of working in partnership in third-country markets?' Is 'third-country' a new euphemism for ‘third-world’ that I just haven’t run into yet? I thought ‘developing world’ was the standard, but when you find countries like India and China where immense wealth rubs along with grinding poverty ‘developing’ is somewhat of a misnomer. I heard a commentator on TV calling the developing world, the ‘two-thirds’ world. He might well be technically correct, but I don’t think that one is going to catch on either, so for me I guess it will have to stay as ‘developing’ until someone comes up with a better definition for those countries that are newly-developed, but still poor in regions.

The main concern for the CBI has been to ask the question ‘how does the UK shape up against India and China?’ It’s an important question and our news bulletins are becoming full of M&A activity that far exceeds the impact of a few call centre jobs lost here and there. The Indian Tata group makes the tea that’s in your mug (Tetley), and could possibly be the owner of the old British Steel company – now known as Corus – if their takeover plans go through without any hitches. The hard-nosed face of Chinese industry was also exposed to the British consumer when MG Rover collapsed not so long ago and the state-run SAIC swooped in to scoop up the juicy bits of what was left over from the British marque.

Yet, the story is so much more complex than a raid on UK industry by those in the East seeking to grasp economic development as fast as possible, and at our expense. The Tata Group is also a major employer in the UK. In fact, most of the offshore suppliers in the technology industry (where I normally focus) have realised that they won’t be invited to the table on large deals if they are not employing people locally; you just can’t outsource everything offshore because it is cheaper. We are experiencing a fundamental shift in the way people are employed, creating what the sociologist Manuel Castells termed a ‘network society’.

In my view, the concern about India and China should be seen more in the light of supply-side economics. I mean, we should not be too concerned about the now – because the truth is that UK companies are still world-beating, especially in services. We need to think more of the next generation and how our economy can compete in a global environment – where peer-to-peer systems will allow any company to located expertise in any location. Let’s sort out the mess over A-levels and work out some better funding for kids at university, along with improving vocational education, because if we don’t start training the people who will lead British industry in future then we all know where it will end up.

This week I enjoyed a very pleasant meal at the very hip and trendy Amaya Indian restaurant in Knightsbridge. My wife moans constantly about how I’m constantly out on ‘business’ in fantastic restaurants, yet when we go out it’s more ‘Star of India’ than ‘Tamarind’, so I now owe her another expensive trip into the West End – these free PR-themed meals do have a cost if you are married.

This time, the meal was hosted by Satyam, the Indian technology services group who sit just outside the big 3 of TCS, Infosys, and Wipro, but well past the $1bn-a-year revenue milestone and are growing at a phenomenal rate.

The occasion was to talk about their increased expansion into China. Satyam has just opened a new 100-seat centre in Guangzhou with the intention of scaling up this new facility to host 1,000 employees by the end of 2008. This new office is in addition to existing facilities they have in Shanghai, Beijing and Dalian.

There are a couple of interesting points to note beyond the normal press release puff. Satyam claims that 97 per cent of their Chinese employees are local hires, meaning that this Indian company is growing into a serious employer of Chinese talent. The largest Indian technology group, Tata Consultancy Services (TCS), has a publicly stated aim to build up its own Chinese operations to about 50,000 staff. These are big operations and certainly larger than any of the indigenous companies in the same field.

What is also interesting is the general march of the Indians into China. India has the maturity and experience of remote technology delivery and China has bundles of raw talent. The Chinese technology services industry can benefit and create huge numbers of jobs through extending a warm welcome to the Indians and allowing them in to set up parallel India/China operations (the TCS future strategy predicts an equal number of staff in India and China), but will the welcome always be so strong and will the local companies always be so much smaller?

The Chinese military strategist Sun Tzu, who presided over battles approximately 400 years BC once said: 'If you know the enemy and know yourself, you need not fear the result of a hundred battles.' Once the Indian players have established a strong foothold in China and the industry benefits from the maturity of good techies with solid experience, from the foot-soldiers to the chief executives, then I’m sure a major Chinese brand name will also break through as a major supplier to the US and Europe. Until then, the safe money is on companies like Satyam to continue their extraordinary growth for the foreseeable future.

I recently attended a very nice lunch at the Bombay Brasserie (great restaurant near Gloucester Road tube station) hosted by the Labour Friends of India. This is an association of Labour MPs and Peers who all have some association with India, either through a business interest or through representing their constituents.

There are many interest groups in the British parliament, with everyone being a friend of something, but this group is particularly strong and well connected. As I munched on my sag paneer and roti I found myself sitting next to the manager of ICICI bank in Knightsbridge. This is an Indian bank that started a few years back by opening a single London branch and which has now expanded to a small chain of branches in the UK. They handle a large percentage of the Indian money flowing into the UK and they are now looking at European expansion plans.

Opposite from me was an old acquaintance, Mohan Kaul, the Director General of the Commonwealth Business Council. Even the CBC has now decided that global sourcing is an issue they need to address and focus on, as he spoke about the need for more research into this area.

I usually focus on the technology industry and how it relates to the UK. The new book I have written with Dr Richard Sykes of hi-tech trade association Intellect is focused entirely on how our industry interfaces with the rest of the world, hence the title ‘Global Services: Moving to a Level Playing Field’. But it cannot be avoided that when examining global services and the technology that makes this possible, India is storming ahead of its rivals. The UK should really exploit our long and historic association with India to ensure we can work together as partners in a knowledge economy environment.

Just look at some stats the Indian High Commissioner Kamalesh Sharma talked about over the Bombay brasserie lunch:

• 1.5 million people of Indian descent live in the UK
• Trade between the two countries was up 57% year on year from 2004 to 2005 – that’s an incredible growth in trade and it is flowing in both directions
• We have more Indian companies listed on the LSE than Indian companies listed in the US – a very important point given the issues many companies have faced over the onerous Sarbanes Oxley legislation in the US
• 16,000 Indian students are here in the UK studying at university, with more wanting to come to the UK for an education

In 2007, India will celebrate the 60th anniversary of freedom from the British Empire. Though there was initial, and then sporadic, bloodshed as the Empire left the subcontinent to fend for itself, India is becoming a mighty superpower of the 21st century. Given our historic links and strong economic relations, shouldn’t we be thinking about how to create a multinational joint venture focused on the knowledge society?

I spend my days engaged in various aspects of offshore outsourcing, in whatever I am doing. In fact, I’m spending about half the week on paid assignments right now and the other half working on doctoral research at the London School of Economics (LSE) – trying to keep a foot in academia and the ‘real world’ of business at the same time.

As a result, I get even more invitations to related events, conferences, and parties than if I just focused on one or the other – though the PR parties are always fun! Last night, I went along to a slightly more cerebral event at the LSE where the state of the UK economy was being discussed.

It’s a big topic and the director of the school kicked off the debate by asking if we had reached the ‘end of history’ for economics - Sir Howard Davies using a deliberately controversial turn of phrase and the evening itself was designed to plug his new book ‘The Chancellor’s Tales’ – a walk down memory lane with former chancellors recounting the good and bad from their time in office. The speakers never failed to give a glowing reference to the book before launching into their own comments on UK plc today. I hope one of my own future book launches has such complimentary panellists.

Professor Charles Goodhart chaired the debate, himself a former member of the Bank of England (BoE) Monetary Policy Committee. William Keegan from the Observer, Shadow Chancellor George Osborne MP, chairman of Abbey plc Lord Burns, and director of the Institute of Fiscal Studies, Robert Chote all formed what was a very impressive group of capable people who managed to bounce economic issues around and make it clear and interesting – even for me, and I have never made any claim to be an economist.

What was funny about this debate though was that when panel members referred to the Thatcher years there was some authoritative feedback from the audience - with both Lord Geoffrey Howe and Lord Nigel Lawson sitting there and grasping the audience mic when they could!

They talked quite extensively on the image of Britain staring into an abyss, the fact that we have had years of ‘Brownian’ economic stability now and we don’t really know how structures (such as the independent BoE) brought in by the present government might hold up if we move into recession again.

It’s quite a concern and though I’m not making trying to make a partisan comment, it seemed to be George Osborne of the Tories who was most tuned into the need to plan for a complete social change in Britain over the decades ahead. Osborne was clearly well-briefed and talked of the need to consider difficult supply-side issues that will govern the future of the UK in a world where labour and services can be sourced from locations such as India and China. He was basically talking about how you get people to realise that the internet is a reality for connecting global business together – at some point the wave of opportunity for big companies will trickle down to SMEs and how will developed nations, such as the UK, deal with that?

Whichever political party takes the idea of future skills requirements the most seriously probably has a good chance of power, as this issue is connected to careers, social security benefits, immigration… it’s a minefield of interconnected issues. Professor Goodhart brought the audience back down to earth when he reminded us that the talk was recorded and could be listened to as a podcast – in a non-plussed tone of voice that suggests he is more at home with micro-economics than micro-electronics.

I visited London Business School recently for the inaugural Aditya Birla lecture series, a new series of lectures on India that are now commencing on a regular basis at the school. The first speaker was suitably qualified to talk about the new knowledge economy; Azim Premji, is the chairman and managing director of Indian technology major, WiproTCS and Infosys. They are all now into the multi-billion dollar revenue league (and Wipro grew year-on-year by 41% last year!) so none of them are in the little league anymore, yet it’s still hard for these companies to shift away from the ‘cheap as chips’ image of offshore technology outsourcing.

Wipro is one of the ‘big three’ tech firms in India, the others being

Premji did give a good talk and focused a great deal of effort on some of the key questions surrounding the offshore outsourcing model of business. I’ve seen him before in India where he appeared to be a bit more reserved and stately, here he was authoritative, humble, and funny too.

He only talked for about 20 minutes to a procession of Powerpoint slides - clearly put together by some eager Wipro managers who wanted to cram every possible statistic about India into a short presentation. To his credit, Premji was quite disparaging about the presentation and said that it’s only people who ‘work for McKinsey or MBAs who do good presentations…’ to nervous laughter from those assembled, as a post-MBA job at McKinsey is like the Holy Grail to many of those in this school.

The best section was the open Q&A, which lasted for about 45 minutes, but zipped by extremely quickly as everyone had a question. Each time it felt as if Premji was coming to the end of an answer dozens of hands shot into the air, as if choreographed by ballet genius Matthew Bourne, only to wither disappointed as he would continue to answer by saying ‘…and another thing…’

A friend of mine, Mahesh Ramachandran, managed to get his question in. Mahesh asked Premji about the fact that all the ‘Western’ service companies are all hiring in India – Accenture, IBM, EDS, etc, they are all hiring thousands of people and creating and Indian back-office just as all the major Indian players are hiring a stronger front-end in regions such as the UK and US. >

Mahesh asked if Premji felt that there would eventually be some convergence in the IT services market. Premji replied with extreme confidence. He said: “Within three years from today you won’t be able to tell the difference between an IBM, Accenture, or Wipro or Infosys…”

Given the Indian companies are hiring experienced consultants at an incredible rate here in London now he has a good point, but three years seems to be extremely bullish for complete integration. When one of the Indian majors starts paying a huge amount of money to a celebrity who ‘embodies their values’ in the way that Accenture does to Tiger Woods then I might believe it.

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