An Indian software canvassing organization stated China's software industry was 3 to 5 years backward

An Indian software canvassing organization was trying to break the mystery of China about replacing India in software outsourcing and IT services. This organization said that China was 3 to 5 years backward compared to the prosperous software industry in India. On the other hand, India National Software and Service Company Union warned their domestic vendors not to be too complacent because they considered the great potential in China would become a powerful competitor in the upcoming years as it would continue the efforts in software outsourcing.

In a report issued on 21st, August by the Indian National Software and Service Company Union, China was reported to have gained an income of 12.2 billion dollars in the emerging IT services and software industries last year, taking up 0.5% of the whole GDP.

In the same year, India’s IT service and software industry created a good value of 40 billion dollars, which was 5.2% of their GDP, but the proportion of 2005 was only 2.6%. Although India advertised a lot about their advantages of software industry, the professionals in the industry only counts about 1.6 million out of the total population of 1.1 billion, while China has become a huge manufacturing centre with billions of employees.

The Union stated that China was facing to various impediments despite its great potential to develop fast. Those impediments included language barriers, cultural differences, lack of transparency as well as the intellectual property issues. The report from the union also said that it was inappropriate to compare China with India and popped up the possibility of China replacing India as the leader in software outsourcing.

Last year, the total revenue of IT industry reached 150 billion dollars in China, but 90% of it was produced by hardware sector. It is predicted that the sales volume of IT services and software industry will reach 28 billion dollars by 2010, which is 2.4 billion more than the prediction made in 2000.

China’s software industry relies heavily on the domestic customers and joint ventures, taking up 86% of the software export businesses in China. On the contrast, India exports most of its software to Europe and America and will count on them much more heavily in the future.

China’s software export volume is 1.8 billion dollars, most of which is from Japan and South Korea market. China is taking policies to develop its software outsourcing industry. The Ministry of Commerce has already set up a plan of cultivating 300 to 400 thousands college graduates in the next five years as the human resource to engine the development of software industry. Other measures are also taken such as providing incentives for economy growth, encouraging companies to obtain internationally recognized certificates and providing discounted loan to cities in less-developed central and western areas.

It is said that corporations between China and India are highly possible for strong beneficial reasons. For example, along with the increasingly intelligent consumer electronics, Indian software companies probably will provide support in China’s household appliance manufacturing and other sectors.

Moreover, the union’s report deliberately skirted around the impact of rising salary of IT workers in India for the acclaimed reason that rising salary didn’t necessarily mean a cost rise and the profits were still high for software companies. However, they also admitted that the appreciation of the rupee against the dollar actually induced the loss of outsourcing businesses in India.