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Raja Simhan T.E.

IDC, feels that fuelled by the generally healthy demand for all types of outsourcing services, especially in Greater China and Korea, the region will experience a compounded annual growth rate (CAGR) of 24 per cent.

CHENNAI, June 18

INDIAN software companies are still not clear as to how to approach the Chinese market.

Some industry officials say China really poses a major threat to India in offshore software sector, while a few others deny such a sentiment. And, adding to this unclear picture are different views given by research agencies on the Chinese software market.

Recent media reports said Infosys was shelving its China offshore centre plan, while Satyam Computers said it was on track to put up the China centre. Mr Azim Premji of Wipro recently told Business Line that while the company's plan to enter China was always there, Wipro would rather wait and watch for some time as to how some of the competitors fare there before taking any decision.

Tata Consultancy Services (TCS), on its part, has been working on entering the Chinese market for over two years. ``While the plan is still on, we are yet to decide on the right timing,'' Mr S. Mahalingam, Executive Vice-President, TCS, told Business Line.

``We will begin with a small offshore centre in China," he added. According to Mr Mahalingam, things are not yet clear in China especially on issues like productivity and services. The cost is marginally higher in China when compared to India, but it is not a major issue.

``We need to spend a lot on the product and training in China. Eventually, presence in China will depend on what the clients want,'' he added.

Mr Azim Premji recently told Business Line, ``China is no major threat to India. However, we just cannot ignore China just because of the English language barrier. They are a very strong people, and have a lot of government backing. However, things are not yet clear in China. Further, China is at least five years behind India in terms of technology, and there is no immediate threat to us.''

Even as reactions from industry people on Chinese software offshore threat to India are mixed, the research agencies also have differing perceptions.

In its recent report, Deutsche Securities said it did not consider China/the Philippines a threat in software outsourcing to India.

``We have met with IT service companies in Beijing and Hong Kong over the last fortnight to understand where China stands vis-à-vis India as a destination for outsourcing. Our discussions indicated that, besides the language barrier, the cost disadvantage compared to countries such as India for software skills and opportunities in the domestic market are keeping companies away from this model. The Philippines, in our view, is significant only as a call centre destination, and not for software outsourcing,'' the report adds.

IDC, on the other hand, feels that fuelled by the generally healthy demand for all types of outsourcing services, especially in Greater China and Korea, the region will experience a compounded annual growth rate (CAGR) of 24 per cent.

Within the broad outsourcing marketplace, the fastest growth rate is expected to be in applications outsourcing, with a CAGR of 51 per cent

IDC predicted that the Asia-Pacific IT outsourcing marketplace would experience very strong growth rates across all three major outsourcing service delivery areas. Overall, the market will grow from $4.7 billion in 2001 to nearly $14 billion by 2006.

``The differing growth dynamics of the marketplace will have a tremendous impact. ANZ will lose its dominant position in the marketplace, falling from 52 per cent to just over 30 per cent of the total. The Greater China region is forecast to grow from 15 per cent to 26 per cent in the same period,'' said Mr Phil Hassey, Senior Analyst, IS Outsourcing, IDC Asia-Pacific.

``This changing of the ways will have a significant impact on the dynamics of the region. It will present significant challenges for existing service providers, and those who are looking to enter the market. However, while the focus is quite rightly on the North Asia economies, there are still very large opportunities in each of the other regional countries,'' Mr Hassey said.

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