The Hindu Business Line : India still way ahead of China: Nasscom

Making a point: Mr Kiran Karnik (left), President, Nasscom, and Mr Ameet Nivsarkar, Vice-President, addressing a press conference in the Capital on Tuesday. In a report released on Tuesday, Nasscom said the Chinese IT dragon is unlikely to catch up on India’s lead in the global IT services sourcing market at least over the next 3-5 years. —

Our Bureau

New Delhi, Aug. 21

The Indian IT industry can breathe easy for the time being. The Chinese IT dragon is unlikely to catch up on India's lead in the global IT services sourcing market at least over the next 3-5 years, according to Nasscom.

However, unveiling a report on China's IT software services industry, Nasscom pointed out that China "must not be ignored" and that India must emphasise on education, human resources supply and infrastructure to ensure that it stays ahead in the global outsourcing race.

"The frequent comparisons with India and the commentary positioning China as a substitute destination is misplaced. The IT software and services sector accounted for just about 0.5 per cent of China's GDP in 2006. Apart from scalability and global recognition, China faces challenges such as complex tax and investment incentive systems across different provinces; highly-controlled financial systems and regulation of ownership structures; and increasing number of unemployable resources," Mr Kiran Karnik, Nasscom President said.

While the revenue aggregate of the Chinese IT sector in 2006 was estimated at over $150 billion, about 90 per cent of this came from hardware alone. The revenue from IT software and services raked-in just over $12 billion in 2006. India, on the other hand, grossed IT software and service revenue of approximately $30 billion in 2006.

Although China's software and services revenue is projected to reach nearly $28 billion by 2010 ($20.6 billion from domestic market and $7.1 billion from exports) growing at 22 per cent annually, India would still be way ahead at an estimated $74 billion.

Indian IT and BPO exports largely serve the US and the UK markets (80 per cent of the total exports), and China's key exports markets are Japan and Korea.

Comparative export profile

A comparative snapshot of the export profile of the two nations revealed that while China's growth was fuelled by its domestic market, India's IT industry was predominantly export-led. The scale of the overall sector in China is still less than a third of that in India. Also, compared to 1.6 million professionals employed in the Indian IT industry, China employs an estimated 0.5 million IT professionals. "The Chinese IT industry is highly fragmented and the largest firms have a headcount of 6000-7000 employees, while an average IT company in China employs anywhere between 50-80 professionals," Mr Karnik said.

More importantly, India-based providers have built robust processes for managing remote services delivery, transitioning of processes and integrating distributed workflows across large teams - a practice that is still evolving in China. The average local Chinese service provider still suffers from sub-scale inefficiencies and lacks the experience of delivering large contracts, Nasscom said. Information security and IPR enforcement were cited as a key concerns relating to IT and BPO.

"While China's strength includes strong Government support and quality of physical infrastructure and connectivity, it has weaknesses such as lack of suitable talent, low usage of English language and difference in business cultures, lack of scale players and international brands," Mr Karnik said adding that there was a strong case for increased partnership between the two nations.

Asked if China could gain an edge over India, after the five-year projection period, Mr Karnik said, "At present, we do not have enough data to make long-term projections...but 3-5 years is still a long time."

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