Software Wars: China vs. India
"Indian industry is substantially ahead of the Chinese software industry, not only in terms of revenues but also quality, skilled manpower, project management capabilities and execution skills," said Sunil Mehta, vice president of NASSCOM.
Mehta, who recently visited China, said the Chinese government has officially projected it would achieve $1.5 billion in software exports in 2005; the Indian projection for 2005 is $23 billion. Chinese exports between April 2001 and March 2002 stood between $400 million to $600 million, while Indian exports for the same period were $7.8 billion, Mehta said.
Yet while those projections comforted Mehta, a top executive of a software firm in Hong Kong scoffed: "No Indian company in its right mind should fall for this false sense of security," said the executive, who spoke only on condition of anonymity. "Figures lie. One fine day India may wake up to the fact that China has beaten it to the finish line."
The executive declined to elaborate on what exactly China is doing to achieve this end. And while the executive's decision to remain anonymous might seem unnecessary considering the innocuous nature of his boast, one Indian investor says it's all part of the way the Chinese do business.
"Many corporates there have taken a policy decision not to react to the Indian software industry. They don't want Indian companies to get a clear idea of what they are thinking," said investor Mahesh Murthy, who watches the industry and the markets closely.
Murthy, and others in the industry spoken to for this article, dismiss NASSCOM's newfound optimism as little more than cheerleading for the home team.
"I can tell you that this talk about China not being a threat only helps in guarding Indian software companies at the stock market," Murthy said.
The reality, he and other industry people said, is stark. While until about a year ago top Indian service firms were charging American companies $75 to $90 an hour, today the figures are merely $6 to $9. Murthy believes that China will very soon do the same job at about $3 an hour -- and that will bleed Indian firms to death.
The projected growth rate for the Indian software firms between 2002 and 2003 is about 20 percent, a tremendous decline from the recent days of more than 100 percent annual growth. "Even steel companies grow at 20 percent," an observer said.
One of the factors that Indians count on in securing software contracts is their mastery of English. The Chinese, meanwhile, have only recently begun to emphasize English in their schools.
When China was bidding for the 2008 Olympics, the mayor of Beijing announced that every man in his city will learn to speak English if the sporting event comes to his town. China has bagged the right to hold the Olympics in 2008, and there are some Indians who think it's a bad omen.
Ironically, China's rapid growth in Internet technology could wind up being a plus for India; many are beginning to view China as a great market rather than as a potential competitor.
The size of the Indian domestic market fades in comparison with China's. India has just 7 million Internet users while China has 34 million. This means that while 68 Indians in 10,000 have access to the Net, the corresponding figure for China is 260.
"Indian IT companies seeking to globalize their operations should evaluate China as a huge potential market in telecom, financial services and manufacturing sectors," said Nandan Nilekani, CEO of India's Infosys, which is very serious about doing business in China. "China could also serve as a base for software development for Indian companies."
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