The China Way

There was certainly a feeling of deja vua spanking new technology park,
gathering of government and other dignitaries, and the proud park developer
inviting me to say a few words. This was for the inauguration of the new
facility that would provide employment to thousands of young software
professionals, and house many national and international technology firms. The
only difference in this scenefrom the hundreds such, that have been come up in
India in the last ten yearswas that the location was Nanjing, China. In many
ways it was a signal to the world that China had arrived, ready to take its
place among the serious contenders for leadership in outsourcing, in the next
decade.

The data that was shared at the recent 3 I (India, Israel, and Ireland)
summit hosted by the city of Nanjing, shows that there is little that India has
to worry about in terms of an immediate threat to its pole position in
outsourcing for the western world. In the first six months of 2009, software
exports from China was just over 8 bn Remenbi, which is just over a billion US
dollars. It is largely focused on the Japanese and Korean market, while
attractiveness of China as an outsourcing destination for the western world
remained weak. The contracts had actually declined in volume and value, since
recessionary clouds had darkened economic prospects of companies and countries.

Ganesh natarajan

The Chinese domestic market has grown to $20 bn with the major spending
coming from government and state owned enterprises (SOEs), and fulfilled largely
by smaller Chinese solution providers.

Consider moves of the leading outsourcing firms in China in the recent past.
Two of the leadersNeusoft and iSoftStone, with over $600 mn of revenues between
them, have been picking up new business rapidly since the beginning of the
financial crisis. The same move that has benefited medium sized firms in India,
in the current year, has also seen business from global multinationals. To build
competencies, iSoftStone has acquired scale and business streams by buying two
smaller rivals in southern China; while Neusoft recently acquired the mobile
phone software development and testing business of Finland based outsourcing
firm, Sesca to gain an entry into western Europe. Other key contendersVanceInfo,
ChinaSoft, and hiSoft have been looking for similar growth and market access
opportunities. Liu Tianwen, CEO, iSoftStone says, Citi, Fidelity, UBS,
Honeywell, Boeing, and BT are now all here.

The results of these developments are visible in the sector with a total
employment base of just under 2 mn, thirty-four enterprises with revenues of
over a billion, and over fifty attaining or approaching SEI CMM Level 5 status,
highest in process maturity. With strong commitment to policy initiatives,
infrastructure creation, and investments in education; the only thing that seems
to stand between China and a great leap towards success in global outsourcing is
the understanding of global processes and technology outsourcing projects. But
with investments being made, this will not be a gap for long.

What should be Indian response to what will indubitably be the biggest
challenge to this countrys supremacy in IT and BPO? First and foremost, there
is a need to engage rather than either deny or fight the China factor. Already
training companies like APTECH and NIIT have established strong bases, and
availability of unlimited free space and employment incentives in most cities
should encourage more Indian firms to set up centers in China. China will
provide access to the Korean and Japanese markets; and provide a solid alternate
base for remote infrastructure management; and even animation and gaming as it
has a much better developed local industry than India. China will certainly be a
key future competitor, but can also be a worthy collaborator when markets open
up in 2010.

The author is Vice Chairman & MD of Zensar Technologies. He can be reached at
maildqindia@cybermedia.co.in