CALCUTTA, India, April 19 (UPI) -- India's software industry agrees there is a threat from China's fledgling IT sector, but is divided over how to handle it.
Nasscom, the country's apex association of software companies, sees a long-term threat from China, but says most Indian companies favor a partnership with their northern neighbor.
"The view within the industry is to go in for a collaborative strategy," said Kiran Karnik, Nasscom's president. "The majority does not perceive any real cause for panic before three years. In the medium term, therefore, the strategy would be to identify areas of cooperation and get into collaborative agreements."
But not all agree with that assessment.
"India's software sector has nothing to gain from partnering with China," said Arjun Malhotra, chief executive officer of Techspan Inc, a global software consulting company and software developer that has development centers in India and United States.
"I clearly see China as a threat," said Malhotra, who has dealt with China for the past two decades. "They are there to take our business."
The reason for the threat is clear. Although India is expected to end fiscal 2003 with more than $8 billion worth of software services exports, and China's barely touches $1 billion, Beijing is ahead on most other indicators.
"China has proven that they can build credible and successful businesses in new segments very rapidly," says Jesse Parker, executive director of the Edward R. Murrow Center for International Information & Communication at Tufts University in Massachusetts. "Most importantly, the Chinese government is engaged in fundamental ongoing economic reforms across the economy. India, however, is not engaged in reforming the fundamental elements of the Indian economy."
Parker, who is currently working on a research project that seeks to identify and understand the motivation of technology entrepreneurs in China and India, also argued that India's software earnings are hardly a consolation.
"China does not have a need to export software services right now because, unlike India, there is a large and growing domestic software market available to them," he said.
A Nasscom analysis comparing the IT sectors in both countries showed India ahead on the number of skilled software talent, business processes, domain skills, and cost of talent. But China scored higher on most other factors.
It got higher marks on government investment in education research and development, venture capital and infrastructure, and hardware prowess. It also scored high on the size of its domestic IT market; cost of telecom bandwidth and equipment; personal computers and telecom penetration; and the use of IT at the state level.
China also has a lead in the area of enterprise software, or IT services, where its companies are focused on packaged software, and have acquired a fair amount of system-integration skills by catering to the domestic market. India, on the other hand, has hardly any presence in packaged software space.
"Indian companies should embrace Chinese opportunities now while the Indian companies can still craft a direction themselves, because in five to 10 years there will be many fewer choices in cooperating with Chinese companies," Parker says.
Several Indian companies agree with that assessment and say a partnership with China could benefit both countries.
Nandagopal, of Network Systems and Technologies, says China could serve as a test market for its software products.
"As a delivery point, China is a very, very large market," said Nandagopal, who goes by one name, "India still has not gained critical mass for marketing products and China could be one great testing bed for all Indian companies big and small to try and harden its products for the global market."
Phiroz Vandrevala, chairman of Nasscom, says: "Most Chinese companies lack domain expertise or project management skills which offers potential opportunity for Indian IT companies to enter into joint ventures with Chinese IT companies."
"This also will provide the opportunity to serve multinational customers of Indian companies who are already operating in the Chinese IT market," he said. "China can also help Indian companies to tap the Japanese market through offshore development."
But most agree the competition would be good for India.
"I think it's very valuable for a country to feel threatened," said Microsoft Chairman Bill Gates in an interview to India's Economic Times. "It keeps you on your feet, it keeps you focused."
