IT growth – a threat or an opportunity?

Representatives from developing countries and mature markets came to loggerheads Wednesday over how to spur IT industry growth, with emerging markets pushing for further globalization while established markets looked inwards.

The debate, which took place at the Economist’s Technology Industry Summit in Hanover, Germany could spell future friction over IT industry development as competition among all nations heats up. Representatives for developing markets saw continued globalization as an opportunity to gain more IT jobs and investment, while some mature-market leaders saw it as an increased threat.

“We need to develop a universal collaboration development model for technology,” Infosys Technologies Ltd. Chairman NR Narayana Murthy told summit attendees. Murthy, in his role as a top executive of one of India’s largest software services companies, argued that further globalization is the way not only to speed up tech development, but to lift developing nations out of poverty.

For countries such as India, China and Russia, a greater dispersion of technology jobs and investment could greatly benefit their economies, he said. Murthy presented a model in which each country would supply its own expertise, with the U.S. offering intellectual capital, Japan providing hardware and Taiwan doing the manufacturing, for example. India, in his scenario, would do all the software design and development. “Globalization is about sourcing where the product is the best, production where it is most cost effective and selling where the margins are high,” Murthy said.

But for mature markets that have already seen some IT jobs and investment go abroad to cheaper markets, Murthy’s model didn’t sit well.

Europe has lost ground in the IT industry by not investing enough in local research and development and technical training, said European Commissioner for Information Society and Media Viviane Reding.

Reding is introducing an initiative in coming weeks to help spur the European IT market with further investment and training, and is calling for individual EU member states to generate their own tech industry plans. “If Europe doesn’t seize this initiative someone else will,” Reding said.

Some summit attendees called for a more pragmatic approach to IT development than the collaborative model posed by Murthy — saying that technology moves too fast to develop one system — but thought Reding’s stance might overlook the benefits of tapping outsourcing markets for reduced costs and expertise.

“One view is hungry and the other seemed more satisfied,” said Mike Mathias, of U.K. head-hunting company Whitehead Mann Group PLC. As developing markets like India, China and Russia continue to grow, taking a greater share of the market from the early IT leaders, it remains to be seen how if the two sides find a middle ground.

The Technology Industry Summit is running in conjunction with the Cebit trade fair in Hanover and ends Wednesday.

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