Collaboration not competition with China says Nasscom

By : |April 17, 2002 0

NEW DELHI: In a recent survey carried out of the Chinese IT market by Nasscom,
the apex body for software and services companies, China clearly stands much
ahead of India as far as R&D, educational investments and cost of telecom
infrastructure is concerned. The study carried out last month revealed that
though China has inherent potential and a large domestic market base, India can
continue to bank on its strength of management manpower and cost of labor.
"Chinese companies lack domain expertise and project management skills.
This will help Indian firms to enter into joint venture with Chinese companies.
Its growing domestic market and entry into WTO would provide further
opportunities especially in the area of banking, securities, telecom and
energy", said Nasscom chairman Phiroz Vandrevala.

By year 2007, China is expected to be the largest IT player in whole of Asia.
Its IT services market is expected to grow at 50 per cent per annum, while
systems implementation would be the largest encompassing 32 per cent of their
market. There are many indicators pointing towards this growth like the extent
of PC penetration, cellular phone connections, bandwidth availability and number
of Internet users. In all of these indicators of IT growth, China is on the
average 4-5 times ahead of India. The government is undertaking significant
projects to boost this segment among which IT education at the primary school
level and an Internet backbone spread across the country are also included.

As far as the semiconductor business is concerned China is leveraging on chip
design since manufacturing equipment from US is only available to Taiwan. To
penetrate gradually into this segment local Chinese manufacturers are now asking
chip manufacturers to transfer low-end chip manufacturing to them. "By 2010
the estimated value of the chip-design industry alone will reach $ 10 billion
worldwide. And so there is much scope for India to embark upon skill enhancement
on chip designing and telecom technologies", said Sunil Mehta, VP, Nasscom.

"There is a general misunderstanding that their economy is closed to
outside investments, there is no such thing, they are very open to collaboration
and investments from foreign countries", added Mehta. Indian companies like
Wipro, Infosys and Satyam have already entered the Chinese market. China’s
software market is predominantly packaged software in both English and Mandarin,
but is still not a significant exporter. The government is implementing a policy
towards a widespread of Linux, and an OS in Mandarin, to lower costs of using
packaged software. "Companies like iFlex and Aditi from India are trying to
enter China’s packaged software segment." Added Mehta.

"The objective of our study was to assess the challenges and
opportunities posed to India by China’s IT market", said Nasscom president,
Kiran Karnik. A five point strategy for Indian IT players is being recommended,
of which are to enhance productivity & skills, innovate in pricing, service
and delivery models, and creating alliances.

The most enterprising nature of the Chinese government policies is in their
strategies toward foreign vis-a-vis domestic firms. Foreign firms are given
market access and production licensing in return for transfer in technology,
while promoting domestic firms without interfering. Increasing the costs
incurred by foreign firms through quality processes and export limits, while
increasing loan availability and contracts by state governments to local firms.
However, with a 15 per cent-20 per cent differential cost in income, India can
still leverage on its low cost of labor, and skills in domain expertise and
project management.

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