1. IS CHINA A THREAT TO INDIA.
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China'sburgeoning ITindustry isnota threattothe Indiansoftware
industry yet, but it iswellentrenchedinthedomestic market tomake
theIndianmajors sweattogainentry,says a topIndianITofficial.

2. "Our $100billionsoftwareindustry isunder nothreatfromChina,"
says RangarajanVellamore,CEO of Infosys, China.
"The ChineseITisnothreatinoveralltermsbecause it isnot yet
investingbig intheUS where Indiansoftwarefirms are well
entrenched,"Rangarajan,whohasbeenworking intheChinesemarket
forthepast sevenyears,toldPTI inaninterview,providing abroad
viewabout the statusof theChinesesoftware industry.
"ChineseITcompanies are not investingintheUS astheyare unableto
understand thenuancesof themarket penetrationand hasgivenup
theireffortsmaking itsecure forthe Indianfirmsat leastasof now,"
Rangarajansaid.
The exchange ratealsomade difference.Costshavegone up due to
appreciationof RMB againstdollarcompared tofewyears ago,hesaid.
The RMB appreciated over25 percent inthelast fewyears overdollar.
"Instead,the ChineseITfirms focussed more onthelocal markets
where theyare wellentrenched.Also thecurrent US-China internet
warfurthercomplicated thesituationforAmerican companies toview
Chinaaspreferred offshoredestination,"hesaid.

3. Rangarajanalsosaidthesize of theChineseIT market isfarsmaller
compared totheUS marketsand profit percentagesare not highwhich
iswhy theIndianITfirms pay not sohigh interest.
"Ifyou lookattheChinese ITindustry per se overalladdressable market
spending isabout $150billiononthe ITspace. Itisabout $14billionper
annumis theaddressable space" which isnot big forIndianfirms,he
said.
"FromanIndiancompany's perspective itisnot big market anyway"
because the addressable market size ofUS market isabout $600billion
andthe Indiancompanies reapedmore benefitsthereastheyexpanded
onhardware,he said.
"Interms of purchasing powerparity, US willhavea revenue
productivity of twoandhalftimescompared toChina.There itselfitis
veryhigh.It translatesthemarket size by lessthantwoand halftimes,"
he said.
Is China a threattoIndiansoftwareindustry?
In Favor:-
 China'sIT spending isincreasingrapidly. Chinesegovt is
supporting a lottoITsector.

4.  More andmore Chinesefirms are goingprivate andare ableto
give tough competitionforIndianIT giants.
 Chinesefirms are concentratingmore onproviding attractive
jobsforgraduates inITsector.
 Chinaovercame theproblem of talentshortageastheno.of IT
graduatesinChinais increasingat agreat rate.
 Chineseservice providers are focusingmore onlarge scale
development andoninnovativeResearch& Development.
 Chinahascrossed India inthe availabilityofsoftwaredevelopers.
Many Indiansoftware professionalsare not working forIndia.They
are workingforforeigncountries.More than100,000Indians
migrating tothe UnitedStateseachyear forbetter-paidsoftware
jobs.This isabig disadvantage toIndiansoftwareindustry.
In Against:-
 InitiallyChinaconcentratedmainly onmanufacturingsector and
nowChinais theworld'slargest manufacturer.China'sfocus on
softwareindustry startedvery lately,andnowit ismuch difficult
tocompete with thecountrieslike India,which are already
among thetopmost countriesinITsector.
 Chineseengineeringgraduatesare focusingmore on
manufacturingsector thanITsectorasthe China'ssoftware

5. industry isunable tooffer attractive,excitingandfast moving
careeropportunities.
 Chinais lackinginEnglish-speaking talentpool.So, Chinacannot
overtakeIndia anytime soononoutsourcing.
 China'soutsourcing industry's servingmainly Japanese and
Koreancompanies due tolanguage barriers.
 Many Chineseservice providers arefocusing more ondomestic
market thaninternationalmarket.
 Chinalacks efficientpoliciesregarding data privacy and
intellectualpropertyprotection.
 India isproducing more no.of engineeringgraduatesthanChina.
 Indiangraduatesare more exposed toprocesses & systems during
theircourse of studiesbecause of theevolutionofITindustry
overthelasttwodecades.
 At present,India isfaraheadthanChina inIT sectorandit is
developingtoofasttocatch it.
 Many IndianIT companies openedtheirbranchesinChina and
are recruitinggraduatesfrom Chineseuniversities.It'sa plus for
India.
Conclusion:-
Chinaisdefinitelynot a threattoIndiansoftware industry as
India isfaraheadthanChinainITsector andtheIndia'ssoftware

6. industry isdevelopingfaster.Anyway, it'sgood tohavehealthy
competition.Competitionhelpsboth countriestodevelopthemselves.
Is China a threattotheIndiansoftware industry
OtherForms forthisTopic:
Is China a threatoranopportunity
Points:
As withmany sectors inIndianindustry, theIndiansoftwareindustry
tooisworriedoverthethreatfromChina.Yet insoftwareand
hardware,India might haveanopportunity thatmore thanmakes up
foranythreat.
For40 yearsnow,since border skirmishes erupted justaftersome
emotionalposturing in1962,Indiansand Chinesehaveviewedeach
otherwith mutual suspicion.Over theyears, althoughthetwogigantic
countrieshavesettledsome differences,theystillseemtowarilycircle
each other.Inrecent times,Indianindustry onthereceivingend ofdirt-
cheapChinese imports hasbeenattheforefrontof a ‘SaveUs from
China’campaign. And noweventheczars of theIndiansoftware
industry are acknowledging thatChinaposes a seriousthreattoIndia’s
ambitionof becoming anITsuperpower. That Nasscom isfinalisinga
whitepaper ontheimplications ofthe Chineseforayintosoftware

7. exports showsthegeneral alarmthathassetin.
There’snodoubt about China’scompetitivenessintheIT sector,
considering itshardware andtelecommarkets are much bigger than
India’s.And eveninsoftware,China hasa huge captive domestic
market,ascompared toIndia’srelativelytinydomestic market.There
are some otheralarmingfiguresforIndia:theratioof China’sITspend
toitsGDP isnearly5 timesthatof India’s.If India’scurrent growth rate
inITdoubles, itwouldstill takeus25 yearstocatch up with China,and
thatonlyif China’sgrowth rate remainsstagnant.
Frankly,these numbers doseem toput a huge questionmark over
India’smuch talkedofaim ofbecoming anITsuperpower.
Large domesticmarket
But,ratherthanthrowinginthetowel,thereisa school of thought
developinginIndia which believesthatthe IndianIT industry can
convert thisapparent Chinesethreatintoanopportunity. Nasscom
president Kiran Karnikis oneof themain votariesofthisopinion.He
believesthatwhileChina willalwaysremaina formidable competitor,
a policy of engagement ratherthana policy of isolatedapproach would
perhaps be a betterstrategy.First,itwouldgive Indiancompanies a
door toentertheChinesedomestic market which istoday dominated
by MNCs. Plus,IndianIT companies based inChinacanaddress other

8. East Asianmarkets like JapanandKorea.This viewisalsoendorsed by
NoshirKaka, principal, McKinsey & Co.
It isa wellestablishedfact today thatIndianITfirms haveanexcellent
opportunity waitingtobe tapped inthe Chinesedomestic market,
which isestimatedtobe fourtimesthesize of India’s.Also,withChina
becoming apart ofthe WTO, local banks inChinawillsoonbe forced
tostartupgrading theirtechnology.As local playershavenot beenable
toprovide therequired expertise and technologyinthedomestic IT
market,the Chinesemarket iscurrently dominated by MNCs. Thisin
itselfoffersanexcellent opportunityforIndianITfirms, whose
development expertise isnoway inferiortotheseMNCs.
Anotherimportant aspect isthegrowing purchasing power ofthe
China’s1.3 billionpeople which inturniscreatinga strong massive
base tobuilddomestic technologycompanies. Chinaisalsoexpected to
be the largestmarket intheworldby 2004formobile phonesanddigital
cameras, andthesecond largest forPCsaftertheUS. A key reasonwhy
India ismilesaheadof Chinainsoftwareexports isdue tothe simple
fact thattheeffortsof Chinesesoftware firmswere spent inaddressing
thehuge domestic market (estimatedtobe worth $16.2billion).
But thingsare about tochange, asChinawantstoemulate India’s
success inthe softwaresectorandbecome amajor globalforce.China
hasinitiateda seriesof measures,which include planstoset up

9. specialist ITtraininginstitutionsonthelinesof ourIITsand Chinese
firms arefollowingthesame strategyIndia’sITmajors did (bagging
projectsbased onprice) beforegoing ontobecome software majors.
Yet,thereisa bigger opportunity forIndianITplayers inChina.One,
according toInfosys chairmanN RNarayana Murthy,is thatChinese
firms cannot meetthe fulldemand from theChinesedomestic IT
industry, resultinginthegovernment allowingforeignfirmslike
Microsoft,Oracle andIBM tooperate throughjoint ventures.In
addition,Kaka feelsthatIndianIT firmscan takeadvantage ofthe fact
thatChinaoffersIndianITfirms lowertrade barriers, lowertaxesand
excellentinfrastructure.Nowonder Infosysisonthe thresholdof
settingupfacilitiesinShanghaitotapthe Chinesedomestic market.
WindowtoJapan
The second premise forlookingatChina asanopportunity isthatit can
provide Indiancompanies agatewaytoJapan, amarket hitherto
virtuallyuntouched.Thislogic issignificant ascurrently,Japan isthe
world’ssecond largest economy-estimated tobe worth agigantic 70
percent of theentire Asianmarket and which contributes
approximately 11percent tothetotaloutsourcing globalmarket.
There isobviouslya huge gap tobe filledasonlyfourpercent ofIndia’s
softwareexports go toJapan.

10. A significantgainerinthe Japanese market isChina,which hasbeena
favouredpartnerforJapan’ssoftwareimports. The synergy iseasyto
fathom.One, Japanese isthesecond language taughtinthe
northeasternpartsof China,where most Chinese companies are
located.Also,most Chineseprogrammers are familiarwith thedouble
byte system usedtogenerateChineseand Japanese characters.
Locationwise also,Chinaoffersagreat advantagetoJapanese
companies lookingtooutsource theirprojects.Due tothesesynergies,
it comes asnosurprise thereforethatJapancontinuestobe China’s
largest tradingpartner.
Though IndianITfirms haveestablishedbasesinJapan (thelist includes
thelikesof Wipro, Infosysand TCSand L&TInformationTechnology),
it remainsa tough market tocrack. The reasonprimarily beingthat
Japanese companies havetraditionallyresisted externalhelprelatingto
theirIT systems. But a gradual change is happening.The Japanese
economy, which is inthe throesof recession,isslowly but surely
catching ontheoutsourcingmantra ina big way.According to
industry estimates,spending onIToutsourcingislikelytoexceed $15
billionin2005.These figuresare roughlyone thirdof themarket size in
theUS.
Since China isa naturaltradingpartnerforJapan, itmakes more sense
forIndiancompanies tosetup base inChinaby followinga strategyof

11. partnerships withlocal playerswhohaveknowledge andexpertise
about localmarkets. Since the Japanese cultureis notasopenasUS
culture,tappingthe Japanese market will undoubtedly require a lotof
patience.But asexperts say,once bonds areestablishedtheystayfora
longtime.Hence,it makesevenmore sense forIndiancompanies totie
up withChineseplayers asChina hasbeena long-time preferred
tradingpartner forJapan.
Also,India’sedge overChinacould come from thefact thatithasa
good record inqualityandprotectionof intellectualpropertyrights.
Globalsoftware majorsare waryof outsourcingtheirprojectsto
Chinesecompanies asChina hasa terriblerecord insoftwarepiracy.
And onthequality front,asof December 2001,Indiahad36 companies
at theSEICMMLevel5 assessment out of 58organisationsworldwide,
whileChina hadnone.It isthusa win-winsituationforboth Indianand
Chinesecompanies asorganisationswhowereearlierwaryabout
Chinesefirms but wantedtoavailofthecultural andlocational
synergies, cannowdo sointhecase of a Indo-Chinesetie-up.
The hardware angle
Eventhehardware sectorcould gainfrom China’straditionalstrengths
inthissegment.KR Naik,managing directorof D-linkIndia proposes
thatIndiancompanies shouldset up hardware manufacturingfacilities
with technologyknow-howfromcompanies bothinmainland China

12. aswellasTaiwan.Most of theveryfew manufacturingfacilitiesinIndia
today dealmerely inassembling, andunlesstheyreplicatethe Chinese
model ofhardware development,theMAIT-E&Y estimateof $62
billionby 2010inhardware will onlyremaina pipe dream. Naik’s
formula forsuccess: Form a JV witha Chinesehardware major,procure
thetechnologyexpertise, theR&D set upand thendoactual
manufacturinginIndia.“Youcan evensupply tothe Chinesemarket,as
ourlabourforce isnot onlycheaperbut much more intelligent,”he
adds.
The key part of thestrategyforIndianITfirms istoforge partnerships
with Chinesefirmsand participate inthecountry’s explosive growth.
Some Indiancompanies havealreadydone this.NIIT,forinstance,has
seenhuge demand foritscoursesdue toitsunique English and
Mandarincourses. As Kaka says, “Goingforward,Indiansoftware
companies canoutsource theirworktoChinesecompanies toboost
productivity, whilemaintaininga strategicrelationshipwiththe
client.”
Indiansoftwarecompanies haveanexponential opportunitytobe
tapped inthefieldoftelecomsoftware.Currently,major telecom
players inChinalike Zhongxing and Huaweiexport their
telecommunicationsequipment toIndia,whileIndianIT firmsdevelop
therequisite softwareforthem.That’sa great example ofcombining

13. China’sstrengthsinhardware manufacturingwith India’sstrengthsin
software.With Infosys receivingthe greensignal toset up abranch in
Chinaand Satyam toolikelytojump intothefray, thefutureseems
bright forIndianITcompanies inChina.Whileit isinthebest interests
of IndianITcompanies toviewChinaas aformidable competitor,the
opportunitiesfaroutweighthethreats.Perhapsthe questionshould be
rephrased from,‘IsChinaasa threat?’to‘IsChinaasa landof
opportunities?’ForIndia Inc’ssake,we sure hope it is.