Despite the lack of clear regulations and inadequate transparency, we continue to observe rising deal values in the Asian M&A markets now reaching $360 billion. The anticipation of lucrative growth opportunities seems to outweigh the perceived risk - even with the current expectation of higher interest rates that will increase borrowing costs and put pressure on capital and consumer spending. Nevertheless, Asian companies are targets of acquirers desiring access to the soon-to-be worlds largest economies.
And, as domestic Asian markets mature, the influence of these countries on the global economy will rise as well. This is reflected by the increasing investment outflows we have observed over the last decade. Last year Asian investments in the U.S. reached a record high of $45.8 billion. Many of those investments provided Asian buyers access to well-known brands and natural or technological resources. Included in that was the paradigm-shifting acquisition by China-based Lenovo of IBMs personal computer division for $1.75 billion.
Over the last few years, we have all observed how India and other Asian countries have been flattening the world with their outsourcing services. We have seen how Oracle, SAP and Intel have all set up major development centers in India, followed just recently again by IBM, Nortel and Cisco. Microsoft has set up only its second research center outside of Redmond in China. And, according to a report from Ewing Marion Kauffman Foundation, among 200 multinationals the trend of corporations sending their research work to China and India will continue.
As that trend continues, they are in fact also now cooperating. 2006 is the China-India Friendship and RelationshipYear. The first Sino-India software research, education and training base has been established in Chengdu. India's private IT education firm, NIIT, has announced plans to train hundreds of thousands of Chinese not only in the area of programming but also in such high-value skills as project management, analysis and system design.
While visiting Bangalore last year, Chinese Premier Wen Jiabao said: "Cooperation is just like two pagodas, one hardware and one software. Combined, we can take the leadership position in the world. When the particular day comes, it will signify the coming of the Asian century of the IT industry." It seems that Howard Frenchs outlook in the New York Times stating that in the near future we will see "Indian employees in the back offices of rising Chinese corporations, implementing business systems devised not by Oracle or IBM, but by Indian companies like Wipro or Satyam" is becoming more realistic by the day.
The school of thought of many software engineers in Europe and North America has been that the Asians are good at coding, but not at design - they do not possess the creativity and design skills needed to develop software. The question remains: how long before that changes, or has it changed already?
A version of this article originally appeared in Soft•letter and Software Success.