After a spectacular success in manufacturing, China is aggressively developing its software industry to compete with India.
Following two different paths, in the last two decades, India and China are on the way to prosperity. India concentrated on the knowledge-based industry, whereas China excelled in manufacturing. But, after noticing the stupendous success of India in the software industry since the 1990s, China has aggressively started developing its software industry to become a major competitor for India. In any key macroeconomic comparison with China, software development is the only sector in which India is ahead by at least 5 years.
Being a late entrant in the software competition, the software industry in China is fragmented, with most players having fewer than 50 employees below the optimal scale to get complex projects from international clients. For instance, in India at least 15-20 companies have more than 2,000 employees compared to only five such companies in China. The software services were employing 0.7 million people at the end of 2004 in China, whereas in India the number stood at 1 million.
Many firms are considering China as an attractive destination for offshoring activities because of the huge domestic market and promising growth potential. Diversification of risk, low-cost, access to Japanese and Korean markets and the opportunity of serving the growing domestic market are all driving the MNCs to China. US and Indian software companies are opening up centers in China as a hedge against increasing costs of labor in India. Most of these companies are starting their developing centers in the Dalian region because of its proximity to Japan and Korea. |
