Is China eating into India's software business share?

The world leader in hardware, China now gets 30 % of its IT business from software and the Chinese government is going full throttle to build on this. This has got the Indian tech companies a bit worried reports CNBC-TV.

After hardware, China is now fuelling its software industry. Though 70% of china's IT business still comes from hardware manufacturing, you cannot ignore the 40% year on year growth, which its software industry is witnessing. The Chinese government is pumping in billions of dollars annually to mobilise growth. Infact, it has set up Hi-tech and industrial parks focusing on software development.

Suzhou, on the outskirts of Shanghai is one such industrial park. This Region has 50 software companies, exporting software worth 12 billion dollars annually. The Local government here looks after administration and policy-making, with central government only being the guiding power. Provincial governments in China are eager to build relations with Indian software giants to help their regions grow faster.

“Suzhou municipal govt would like to invite Indian IT companies here. We would like to extend our support to them to set up their base here,” says Zhou Wie Qiang, VC Mayor, Suzhou

English being a handicap, many local companies here are currently developing software for Japanese companies and also catering to domestic demand. Apart from encouraging their employees to learn Japanese, companies are recruiting fresh English speaking talent. Local companies here strongly believe that setting up BPOs is the next natural progression for them and they would like to learn from the India story.

We want to learn about outsourcing from India. But instead of them setting up a base in China, we would want to establish JVs and business relations with Indian companies” feels Xie Jin Ming, Director, SDS-IT Corp

China has over 15000 software companies and it is now aiming to build its outsourcing skills and invest significantly in research and development. This has led the govt to set up incubators to help small and new software companies

Companies that operate in incubators are judged on their performance and the best ones are given financial support, like reduced rentals, subsidies and at times the govt may provide with some capital. Indian software companies are growing at scorching 40%, however the hardware market lags behind at about 25-30%.

China on the other hand is sharpening its skills to corner hardware, software and process outsourcing as well. India will need to increase R&D spends, and has favourable policies to build bilateral relation with China to tame the emerging software giant.