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Last month, India's top IT lobbying group, the National Association of Software and Services Companies (NASSCOM), presented detailed analyses of China's ICT market and consequently recommended a five-point agenda for Indian IT software and service companies to maintain their competitive edge. This comprised: improving productivity; better innovation practices; better alliances; more collaboration with academic institutions to improve training development and a further drive to upgrade and strengthen skills, including languages.
The organisation also advised the India Government that rather than look to push China out of the market on cost, India should adopt a policy of collaboration with China in order to sustain its edge without damaging itself economically.
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Kiran Karnik, President of NASSCOM, said: "The possibilities and advantages of 'co-operation and collaboration' with China far outweigh any concerns about competition. In any case engaging rather than ignoring China is the better policy. A well thought out entry strategy into the China market will further help boost India's software exports."
Phiroz Vandrevala, Chairman of NASSCOM, added: "China does not pose an immediate threat to the Indian Software and Service Industry as China's software industry is currently very focused on catering to its domestic IT market. Contrary to the myth that China can offer cheap labour, the average wage costs in China are comparatively 15-20 per cent higher than in India. Further, India is far ahead of China in quality certification and project management skills."
In a comparative analysis between India and China, China scored highly with respect to Government investments in education, research and development, venture capital and infrastructure as well as on the size of its domestic market and the cost of telecom bandwidth and equipment. Chinese telecom facilities were found to be at least 10 years ahead of what India has developed.
However, India scored highly on parameters such as: the size and quality of its talent pool; the cost of talent; its project management skills; its quality processes and domain skills; and its customer access, which NASSCOM identified as being essential to the growth of its software market.
In terms of the size of China’s talent pool, independent estimates suggested the number of people employed in Chinese software companies currently numbered around 200,000 to 300,000. However, the supply/demand gap is overwhelming and the annual supply of IT professionals is estimated at 50,000 against a demand of 350,000.
India too is experiencing similar problems with its supply/demand levels. Recently released statistics warned that India is set for an impending skills shortfall of more than 500,000 IT workers by 2005 and is losing $2 billion annually from the 100,000 IT workers who are emigrating each year to work in America alone. Shortfall estimates put demand for Indian IT programmers at 1.4 million by 2005, with 875,000 workers actually available in supply by that time.
For China, another major factor in the international IT market is the issue of communication. Most Chinese IT professionals, especially university graduates, are comfortable with reading and writing English, but cannot speak it well. About 20 million Chinese citizens were reported to be undergoing English language training within the Chinese education system in early 2002, according to recent figures.
As well as investing in language training for its bid on the international IT market, China has also injected large sums into its Higher Education systems with its top 10 universities receiving in excess of $200 million from the Ministry of Education for IT research projects within the last year.
The specialist Chinese Government Department for IT, the Ministry of Information Industry (MII), has also sought to further Western countries’ access to China's IT market in exchange for technology and investment from them. With the revenue from this scheme and from public funds, it is driving forwards a series of 'Golden Projects', the name it has given to initiatives intended to modernise the country’s IT infrastructure on a wide-ranging scale.
The MII has also begun to reap the rewards of its software policy it originally implemented in June 2000 to ensure growth in the IT software and service industries, raising international interest further still. The policy, coupled with: tax incentives; investment and funding policies as well as a strong focus on setting up high-tech zones and the desire to enhance domestic competitiveness in light of China's accession to the World Trade Organisation is all ensuring lucid growth within China’s software market.
Co-operation between China and India, rather than a war over cost, could pave the way for Asia to take over the world's future IT industry
On a state trip to India, the then Chinese Premier, Zhu Rongji, told IT leaders in Bangalore that if Indian software combined with Chinese hardware, the two countries would lead the world in IT.
At the same time he gave approval to India's best-known software firm, Infosys, to set up an operation in the city of Shanghai and added that China's huge population and vast potential market made it an attractive location for more Indian firms to follow suit.
Infosys’s own Director, Narayana Murthy, had earlier given a warning that China could overtake India in the global software market ‘if it was not careful,’ despite the fact Indian software exports tower over Chinese exports with their 2001-2002 turnovers at $6.2 billion, and a more modest $1 billion, respectively.
Despite the difference in figures, Gartner, the American business research group, also recently warned China could eventually overtake India as the main IT outsourcing hub for US companies if it expands as it has announced it will.
The UK Government has joined international support of China’s becoming an IT superpower, illustrated by Stephen Timms’, Minister for e-commerce and competitiveness, calls for the UK's Information Communication Technology and e-commerce companies to consider China 'as a market with real potential and growth' on his first official trip there this week.
Mr Timms told representatives of the Chinese Government and national IT leaders: "China is rapidly becoming a digital dragon. It has the largest mobile phone market in the world with over 170 million subscribers. Internet subscribers have risen by over 300 per cent in the past year and its economic growth is over seven per cent. Last year UK ICT exports to China were worth almost £400 million, over double the previous year's exports.
"Following their entry to the World Trade Organisation, China is becoming more open for business."
Mr Timms had talks with senior Chinese Ministers on ICT policy issues such as technology standards and visited leading Chinese ICT companies to promote the UK as the ideal location for companies looking to enter the European market.
Patricia Hewitt, the Secretary of State for Trade and Industry, also signed an agreement with the Chinese Minister, Wu Jichuan, in October 2001 cementing co-operation between the UK and China on a range of telecommunications and e-commerce areas.
Meanwhile India has tried to shirk off its image of being the cheap outsourcing capital of the world in favour of being a market that is 'moving up the value chain', but regardless of appearance it remains a vast pool of cheap, skilled labour which is now under threat from a larger, cheaper pool of skilled labour.
With two such pools in Asia, the continent stands to dominate the future of international IT. Whether quality within and support for each Western countries’ IT industry is increasingly overlooked in favour of minimising expenditure remains to be seen, the consequences for traditional Western IT workers means they will be operating in an even tighter marketplace.
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Richard Powell, © Shout99.com 2002
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