2010: A Benchmark Year for China IT and Business-Process Outsourcing
November 22nd, 2006 | by This is China! |Nine Chinese ministries have signed on to the proposition that by 2010 all total software and service-related exports should be at least US$10 billion, according to a China Tech News report.
The ministries posit in their document titled “Guiding Proposals On Devleoping Software and Related Service Export” that growth in the export industry should be no less than 25% per year. The ministries seem to understand that branding and global competiveness are the key. They know the competition is foreign companies and their products that establish a prescence in the domestic China market and then export internationally. In the case of IT and Business Process Outsourcing (BPO), we’re talking about the Indians buying up Chinese outfits (Shanghai and Hangzhou are favorite investment destinations), or establishing their own Wholley-foreign Owned Enterprises (WOFEs).
To put this in perspective, India’s ”…exports of software and services are expected to grow by 27 to 30 percent in the year to March 31, 2007, to a total of between $29 and $31 billion, Nasscom said, ” according to an Infoworld article from June 2006. Nasscom is the Indian National Association of Software Companies. The Infoworld article goes on to say, “India’s revenue from exports of software development, call centers and back-office processing will grow by 25 percent a year to $60 billion by 2010, according to a study last year by Nasscom and consulting firm McKinsey and Co.”
In other words, India will likely outstrip China in revenues by a ratio of around 6-to-1 by 2010, given the same average growth rates over the coming years.
China has several advantages over India now that will encourage China’s growth in the area of IT and Business Process Outsourcing: a better developed infrastructure through 2nd- and even 3rd-tier cities; a wealth of software engineers that are still currently less expensive to bankroll than Indian professionals; and the focused might of the national Chinese government behind efforts that has seen great success in the manufacturing sector.
However, the greatest asset China has over India is India itself: as a target to catch up to, as an investor in China in the same sector, as a trainer of future armies of Chinese engineers and entrepreneurs who will seed future generations of IT and BPO outfits in China.
William Dodson
Suzhou, China
