Sometimes the figures just don't match the hype. Take outsourcing to China, for example. Despite the current high profile of the country as a key global sourcing destination (see Further Reading links below), just 5 per cent of leading UK IT organisations are currently using China as base for offshoring, according to independent advisory firm EquaTerra.

So much for China as the new home of outsourcing - especially when you consider 100 per cent of UK businesses currently offshoring all or part of their IT functions are using India as one of their locations.

China, then - to paraphrase Edwin Starr, what is it good for? Well, absolutely lots of things, most notably research and development.

A recent survey by the European Commission found Europe’s research and development spending has been declining since 2000, standing at just 1.9 per cent of GDP ­ and almost half the rate devoted to research investment in China.

Want company-specific examples? Well, Computing - in the guise of editor Bryan Glick - recently took a trip to China, investigating research at Huawei, a manufacturer of telecommunications and networking equipment for customers such as BT, Vodafone and Telefonica. The following example illustrates how Huawei is able to take advantage of lower labour costs to invest big-style in R&D:

Huawei invests 10 per cent of its revenue in research and development (R&D) ­ a comparable proportion to Western IT providers. But lower staff costs make such spending levels deliver more than the firm’s rivals, says Huawei’s chief marketing officer Xu Zhijun.

“Our revenue this year will be about $11bn (£5.3bn), so our R&D investment will be about $1bn (£483m). In absolute amounts we are not investing as much as other big players, but R&D expense lies mainly in people costs," he says .

“If you look at our labour costs in R&D, China’s average is only about one-sixth that of the US and Europe. So Huawei’s $1bn (£480m) investment in R&D will amount to $4bn (£1.93bn) or even $5bn (£2.42bn) in the US or EU.”

To back up the claim, Huawei can point to a remarkable statistic: 48 per cent of its 62,000 employees work in R&D ­ that’s more than 30,000 people, a workforce percentage that no Western firm could possibly match.

Blimey, 48 per cent - where does that leave UK innovation? How can we compete long-term with China, especially when UK plc spends just 1.9 per cent of GDP on R&D?

The historic importance and inherent talent of UK IT professionals are all well-and-good. But if China carries on dedicating 50-per cent of its workforce to R&D, the UK's lead in innovation will soon disappear. Which is pretty discouraging.

Time, then, for the government and the private sector to step up to the plate and guarantee the UK's position at the heart of global IT R&D.

Further reading

China and outsourcing:

• 2008 - The year of multisourcing and offshoring
• Gartner reveals top 30 offshoring destinations

On UK R&D and the need to boost innovation:

• Forget the downturn and fight for innovation
• Don’t be afraid to be an IT innovator
• Innovate to impress the boss
• UK innovation needs private sector help
• Raise a glass to innovation partners

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