China is threat and opportunity

BANGALORE: Two decades of liberalization has brought a remarkable change in the way China is viewed by the rest of the world. Added to this, China is also evolving as the single biggest market in Asia for IT products. However, whether China can pose a serious threat to the Indian software services and IT enabled services industry, is still to be seen.

Ravi Sangal, President IDC India has said that with a few reforms China could well pose as a big threat not only for the India, but also for the whole of Asia. He said this in his keynote address at the IDC’s annual event-Directions 2003 in Bangalore.

"Although the lifestyle of the Chinese has changed and the country has adopted many modern ways, language still remains the biggest barrier that an outsider would have to face today. Because of the language barrier, the quality of manpower is a cause of concern in China. This is where India stands to gain over China for a long time to come," said Sangal.

It may be recalled, during the visit of the British Prime Minister Tony Blair last year, ICT minister Pramod Mahajan had remarked, "The IT industry in India is credited to three people. The unknown Indian mathematician who found `zero’, Columbus, who found America-the land of opportunity- and the British for inculcating the English language on to us."

Probably true, India stands to gain and have gained immensely in the IT revolution. Time and again all research and analysis indicates to China and India as the potential growth markets in the world for the IT industry.

Some of the key initiatives, taken by the Chinese government, have helped the country become a hotspot market by itself. The initiatives include focussing on infrastructure, empowering its 31 provinces in the country, turning around of its state-owned-enterprises and export led growth. "If China implements WTO plus the reforms, the economy could reach $10 trillion by 2015, but if reforms fail and China remains inefficient, the economy could reach $10 trillion by 2025," said Sangal.

China’s IT markets posted a growth of 19 percent in 2001, inspite of a slowdown. Its market share in the Asia Pacific region, excluding Japan, is 28.3 percent and is poised to grow to 38.5 by 2006, according to IDC. India’s share in the pie is 6.5 percent, presently and is expected to touch 7.9 percent by 2006. The IT market in China, presently $ 18.6 billion, is estimated to touch $ 55 billion by 2006, credits IDC.

Unlike India, where Software services propels the growth, it’s the hardware which contributes over 70 percent in revenue for the IT market and is expected to contribute over 45 percent in 2006 too.

The China IT services market is the fastest growing market in the world, as it is expected to grow from $1.3 billion in 2001 to $10 billion in 2006. Finance, communication transport and government are the biggest segments to target in the services industry, during the coming years. Beijing, Shanghai and Guangzhon are the largest IT markets and account for 80 percent of China’s total IT services market. India’s USP in this would global expertise and functional and domain knowledge. In order to address the language problem and gain customers confidence, IDC recommends, partnering with a local firm being essential apart from having a good mix of English and Chinese speaking employees and building good contacts in the governments.

IBM, HP, Digital China, Neusoft and AsiaInfo are some of the domestic players in the top rung enjoying in the IT services market share. Recently Indian companies, which announced setting up of development centers in China were Satyam and TCS.

Sangal concluded, "Although China doesn’t have any quality man power, they have a disciplined and trainable man power. However China doesn’t pose as a threat for India in software services for the next 5 years. In order to maintain the edge over China, India has to focus on imparting qualitative and quantitative IT education, driving down costs and improving productivity and forming policies and infrastructure to attract and accelerate investments."