Nasscom recently released a report a Whitepaper 'Tracing China's IT Software Services Industry Evolution',which this is the first in a quarterly series which will focus on regions that are alternate markets, competitive destinations and/or potential partners for India.

Key Highlights

• 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

• 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

• 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

• 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

• 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

• 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

Mr. Ameet Nivsarkar, Vice President,NASSCOM, said, "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".

"Though China is far from being immediate competition to India in the software services space, it does have great potential to catch up and we need to keep in mind that it is moving rapidly, particularly in the education space where they are making huge investments," said Kiran Karnik, president, Nasscom.

China is a dominant player in the global hardware business. IT products accounted for more than 90% of its $150 billion-in-revenue technology market in 2006.

Source:1, 2

Tags: china - nasscom - india - outsourcing - offshoring

Prashanth Rai