India should be quite relaxed now to know that China needs another 3-5 years to be of a potential threat to it as regards the global IT industry. surprised right! read on..

Nasscom, India’s National Association of Software and Service Companies, the premier trade body and the chamber of commerce of the IT software and services industry in India has released a Whitepaper (the first one in the series) on Tracing China’s IT Software Services Industry Evolution where among other aspects it dispels the myth that China will overtake India as the preferred IT outsourcing destination in the near future.

Some of the Key Highlights (as per Nasscom’s press release)

1. China has the potential to develop a large IT-BPO industry. Underlying this is substantial domestic market potential, a sizeable educated workforce and strong government emphasis on developing the sector
2. Currently the IT-BPO industry in China is in its early phases of evolution. Frequent comparisons with India and commentary positioning China as a substitute destination is misplaced
3. The current industry landscape in China bears some resemblance to earlier years of Indian IT-BPO. However, systemic weaknesses and comparatively evolved demand and competitive environments today pose some additional challenges
4. The Chinese government is keen on promoting this sector. Rapid progress on the ‘tangible’ aspects of infrastructure and capacity creation is evident, softer aspects remain a challenge
5. China is unlikely to catch on India’s lead in global services sourcing in any significant manner over the next 3-5 years. However, it must not be ignored
6. There is a strong case for increased partnership between the two countries as global corporations strive to strike a balance in their Sino-India co-sourcing models

Some interesting comments by Mr. Kiran Karnik, President, NASSCOM, at the launch of the white paper :

Comparisons between India and China have been a topic of interest for years and we are pleased to commence our ‘Country Report Series’ with China. China has come a long way in establishing itself as a destination for IT sourcing, with all stakeholders including Government, academia and industry working towards improving the regulatory environment, offering incentives to IT companies and  increasing the talent pool.

While India continues to be the most favoured destination – by far – for IT outsourcing and ITES-BPO we need to ensure that we maintain this position in the years to come. This will require a favourable policy and tax environment, a huge thrust in education and human resources and vastly better infrastructure.

Each month we host delegations from China which seek to learn from India. India too must learn from China’s experiences. China’s systematic and planned approach to rapidly developing key sectors of its economy and especially its strong focus on education and infrastructure offer key learnings that may be usefully adapted to the Indian context

Mr. Ameet Nivsarkar, Vice President,NASSCOM, joined him to further add :

China has immense potential to develop its IT-BPO sector given its vast talent pool, huge domestic market and strong government support. However, presently the Chinese IT market is hugely skewed towards IT hardware which is 90% of the total market size.

The IT software and services sector accounts for just about 0.5% of China’s gross domestic product in 2006. While this presents a tremendous opportunity, China has its own set of challenges to overcome such as scalability, global recognition, complex tax and investment incentive systems across different provinces, highly controlled financial systems and regulation of ownership structures, increasing number of ‘unemployable’ resources, pressures of dealing with more evolved (western) outsourcers and intensifying competition.

Given this, Chinese Government and industry has taken a systematic approach towards addressing the above challenges with ICT oriented industry policies under its Informatization Strategy 2006-2020

One thing is quite sure here that Nasscom’s Report and the wordings of its officers would keep the India- china IT comparisons at bay for a while.

However we expect China to be gearing itself up to be able to make sure its not really ignored. India at the same time will emphasise on education and infrastructure among others to stay on the lead in the global outsourcing race.

Another alternate could be a collabortation between the tiger and the dragon, precisely Chindia, where India’s expertise in IT sector partners in with China’s manufacturing dominance!!

Lets watch what happens, after all 5 years is a pretty long time for things to change the other way round!  
 

This entry was posted on Wednesday, August 29th, 2007 at 5:07 pm and is filed under Business, Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.