Talent, infrastructure boost software outsourcing firms

China, the world's second-biggest software outsourcing destination, is closing the gap with India because of the country's improved infrastructure, rich talent resources and government support, industry experts speaking at a Shanghai conference said yesterday.

China now has 12 percent of all global software outsourcing, up from 7 percent two years ago. India's portion is expected to drop to 43 percent from 69 percent in the same period, according to the International Association of Outsourcing Professionals.

"That doesn't mean China is eating into India's market share as the whole industry is growing rapidly," said Michael Corbett, an IAOP executive.

Global software outsourcing revenue grew to US$50 billion last year from US$32.8 billion the year before, according to Gartner Inc, a US-based consulting firm.

The Asia-Pacific region, powered by India and China, recorded an annual growth rate of more than 800 percent in the sector, according to Bleum Inc Chief Executive Eric Rongley.

China has a comparatively strong computer science talent pool, jumping from roughly 40,000 a year in 2001 to 140,000 in 2004, experts said. That allows China-based firms, like Bleum, to receive orders from the United States and Japan, according to Rongley.

At present, Chinese firms depend highly on Japan for outsourcing orders, but the size of that country's market is only one-fifth of that in the West, including the United States and United Kingdom.

China's software outsourcing industry generated about US$3 billion in revenue last year compared with US$23 billion in India, which gets most of the orders from the West, according to David Barrett, a senior lawyer and partner in Simmons & Simmons.

China's infrastructure, including airports, roads and Internet access rate, is a clear advantage in the competition against India, according to Rongley and Barrett.

"The government has also shown strong support for the outsourcing business, with tax incentives, logistics and special funds to encourage innovation," said Ju Dehua, vice president of the Shanghai Software Industry Association.