Impossible for China to Chase After India on Software Outsourcing Industry in 3-5 Years?

On Tudsday, Kiran Karnik, the president of Indian National Association of Software and Service Companies (Nasscom), warned that in order to avoid being replaced by China the leading position on the global software outsourcing business, India should strengthen the investment on education and IT infrastructure.

Karnik said, it was unlikely that Chinese software outsourcing industry would catch up with India in the next three to five years, but other corrivals would act quickly, especially the rapid development of China. He considered that China was on the way of becoming an important country on software outsourcing with the growing number of IT talents and the completing of government management policies. “Although the global software outsourcing is still eyeing on India, we should ensure our leading place in the following years. This requires us to put forward relevant preferential policies, establish a good tax environment, increase the input on education and build a better IT infrastructure.

Last month, the Asian Development Bank pointed out that the input on education in India had lagged far behind its economic growth rate. It only has 12000 technical training and vocational colleges, whereas China has more than 500,000 such kind of organizations. In recent years, software outsourcing business has become the main impetus of pushing the economic growth in India. In 2006, the total revenue of software and service in India has amounted to $30.2 billion with the biggest increase in software outsourcing business, the number much higher than $5.8 billion in 2000. Nasscom said that the total revenue of Chinese software and service was $12.2 billion in 2006 and $2.4 billion in 2000, but the growth areas were mainly on the domestic market.

Karnik said that China not only has a huge domestic market and a large number of IT professionals, China’s IT professionals’ English was also rapidly improving. At the same time, the Chinese government encourages domestic enterprises to actively develop software outsourcing business. China's leading software enterprises had an average annual growth rate of 40% to 50%, and the outsourcing industry was also developing steadily, according to a assessment report by Nasscom on China’s IT capacity.

Karnik stated that in addition to China, the potential opponents of India on software outsourcing also included South Africa, Vietnam, South Korea and Mexico, etc. He added, China and India should strengthen exchanges and cooperation on IT field so that the two countries could draw the strong points of each other to offset its own weakness. Even if China would greatly shorten with India in IT development gap in the future, this would not pose great threat to India because the global software outsourcing business required further increase.