19-11-2012, 03:39 PM
Is China Threat to Indian Software Industry
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Introduction:-
From our point of view I believed that it is rather posing an opportunity instead of threat. Matter of concern is how we r taking a lesson from China about it’s a rapidly growing economy. Everybody r crying for its product which are very cheap at the same time they are as good as Japanese product in terms of quality.
We should focus on how china is producing such a quality product at so much cheap rate. When we became the part of globalization we expected that we are now part of global economy. Globalization will not only produce opportunity but at the same time it will produce threat also China have lot of knowledge in manufacturing sector. Today's situation states that there is nobody in the world now which even could think of giving competition to it and India is well settled in Software industry. China is very eager to spread its wing in Software and BPO side too. I believed that this posses itself a great opportunity for us. For example, Wipro is opening its fifth center in China. Likewise I believed that we should use every expertise that we have to tap this opportunity. We could set up lot of trading center in major Chinese cities like what NIIT is doing in china. China is considered as most advanced market in the world. One of the 4th largest IPO are coming from Chinese market. So there is lot of opportunity for Indian software industry
Large domestic market:-
But, rather than throwing in the towel, there is a school of thought developing in India which believes that the Indian IT industry can convert this apparent Chinese threat into an opportunity. Nasscom president Kiran Karnik is one of the main votaries of this opinion. He believes that while China will always remain a formidable competitor, a policy of engagement rather than a policy of isolated approach would perhaps be a better strategy. First, it would give Indian companies a door to enter the Chinese domestic market which is today dominated by MNCs. Plus; Indian IT companies based in China can address other East Asian markets like Japan and Korea. This view is also endorsed by Noshir Kaka, principal, McKinsey & Co.
It is a well established fact today that Indian IT firms have an excellent opportunity waiting to be tapped in the
Chinese domestic market, which is estimated to be four times the size of India’s. Also, with China becoming a part of the WTO, local banks in China will soon be forced to start upgrading their technology. As local players have not been able to provide the required expertise and technology in the domestic IT market, the Chinese market is currently dominated by MNCs. This in itself offers an excellent opportunity for Indian IT firms, whose development expertise is no way inferior to these MNCs.
Window to Japan:-
The second premise for looking at China as an opportunity is that it can provide Indian companies a gateway to Japan, a market hitherto virtually untouched. This logic is significant as currently, Japan is the world’s second largest economy-estimated to be worth a gigantic 70 percent of the entire Asian market and which contributes approximately 11 percent to the total outsourcing global market. There is obviously a huge gap to be filled as only four percent of India’s software exports go to Japan.
A significant gainer in the Japanese market is China, which has been a favoured partner for Japan’s software imports. The synergy is easy to fathom. One, Japanese is the second language taught in the northeastern parts of China, where most Chinese companies are located. Also, most Chinese programmers are familiar with the double byte system used to generate Chinese and Japanese characters. Location wise also, China offers a great advantage to Japanese companies looking to outsource their projects. Due to these synergies, it comes as no surprise therefore that Japan continues to be China’s largest trading partner.
Though Indian IT firms have established bases in Japan (the list includes the likes of Wipro, Infosys and TCS and L&T Information Technology), it remains a tough market to crack. The reason primarily being that Japanese companies have traditionally resisted external help relating to their IT systems. But a gradual change is happening. The Japanese economy, which is in the throes of recession, is slowly but surely catching on the outsourcing mantra in a big way. According to industry estimates, spending on IT outsourcing is likely to exceed $15 billion in 2005. These figures are roughly one third of the market size in the US.
The hardware angle:-
Even the hardware sector could gain from China’s traditional strengths in this segment. K R Naik, managing director of D-link India proposes that Indian companies should set up hardware manufacturing facilities with technology know-how from companies both in mainland China as well as Taiwan. Most of the very few manufacturing facilities in India today deal merely in assembling, and unless they replicate the Chinese model of hardware development, the MAIT-E&Y estimate of $62 billion by 2010 in hardware will only remain a pipe dream. Naik’s formula for success: Form a JV with a Chinese hardware major, procure the technology expertise, the R&D set up and then do actual manufacturing in India. “You can even supply to the Chinese market, as our labour force is not only cheaper but much more intelligent,” he adds.
The key part of the strategy for Indian IT firms is to forge partnerships with Chinese firms and participate in the country’s explosive growth. Some Indian companies have already done this. NIIT, for instance, has seen huge demand for its courses due to its unique English and Mandarin courses. As Kaka says, “Going forward, Indian software companies can outsource their work to Chinese companies to boost productivity, while maintaining a strategic relationship with the client.”
Conclusion:-
In my view, China is definitely not a threat to Indian software industry as India is far ahead than China in IT sector and the India's technology is developing faster. Anyway, it's good to have healthy competition. Competition helps both countries to develop themselves.