Posted on 08/01/2002 1:09:00 AM PDT by AIG
NEW DELHI: China's software services sector is fast catching up with India and could overtake its neighbour’s dominant position by 2007. Interestingly, Indian software companies will be there to reap some of this bonanza.
Surprised?
According to a new report by IT consultancy firm Gartner, the Chinese software industry is expected to match India’s growth and clock a revenue of over $27 billion in 2006. India too is expected to log in the same revenue figure by that time.
Gartner has cited three main reasons that are expected to add momentum to an already fast-growing software and application development services sector in China. These are: the country’s entry into World Trade Organisation (WTO), its hosting of the 2008 Olympic Games in Beijing, and its sweeping banking sector reforms.
Along with China’s recent thrust on English, these drivers will ensure that China matches India’s 35 per cent annual compound growth.
"China is not often thought of as a centre for software development, but changes are afoot. It is in a unique position. Its WTO membership and the 2008 Olympics will be significant drivers over the next seven years," notes the Gartner report.
"But as China reaches milestones, such as reform of its banking system required by WTO membership, growth in the software and application development services should start to slow in 2007 and reach growth rates similar to India's 35 per cent by 2010."
The Chinese entrepreneurs are also now returning home with the knowledge of western business and entrepreneurial skills just like when Indian entrepreneurs returned to India seven years ago. The cycle that started the Indian software industry seven years ago will therefore be replicated in China, according to Gartner.
According to analysts, an early market driver in China was the establishment of laws requiring software developed after March 2000 to support a Chinese national standard. Hence, the enterprises wanting to sell their software products in China must support this standard and have to engage in the localisation of their existing software. For the most part, this work will be done in China because it requires developers to read and write Chinese.
Gartner, however, notes that India’s software and services industry would evolve and grow further and even expand by setting up base in China. It is already beginning to happen with TCS, Infosys, Wipro, Satyam, NIIT and many other top Indian companies exploring China.
By 2004, 60 per cent of the top 25 Indian software companies will have a direct presence or enter into a joint venture in China, believes Gartner.
Forty per cent of the software services revenue generated in China will be from companies of Indian origin, with much of the profits leaving the Chinese economy and boosting the Indian economy, according to the Gartner report.
As Indian software companies expand into China, they will transfer their processes and methodologies, thus enabling Chinese competitors to evolve quickly over the next two years. But that will not be enough for them to challenge the majority of Indian companies at least until 2004.
"If Indian software companies do not fully engage in this opportunity, they will only delay the inevitable growth by another two or three years, missing significant short-term and long-term opportunities that can be derived through the Chinese market," warns Gartner.
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