China soon to become the 'next India' in software services

The one area in which India has long been able to claim superiority over China is in software services. This too will end if China has its way and India fails to innovate.
Written by Rajiv Rao, Contributing Writer on

In India, the specter of Chinese superiority has hung like a pall over the country's sense of self for the last few decades. China's "opening up" in the mid-'80s and its resulting explosion in manufacturing and improved livelihoods sharply contrasted with India's own efforts at liberalization. Still, Indians would always measure their country against China in almost every economic category, in a quasi-comic, ritualistic, existential exercise in self-worth.

Thankfully, anyone in their right mind in India today has wisely stopped these comparisons, since it's painfully evident as to how far ahead of us our neighbor is in almost every department (excluding cricket, for now). With an annual gross national income (in purchasing power parity terms) that is at least three times that of India's today, the writing on where India stands in relation to China is on not just the wall, but also on pretty much every product purchased by consumers around the world.

However, the one succor that India has found is in its world-class software services sector, which was propelled by the tax rebate that the Indian government offered IT services companies from 2000 onwards. So much so that a question making the rounds in the last few years, in an ironic twist, is whether China can become "the next India".

According to a recent report from research outfit IDC, the answer to that question is a resounding "yes". Apparently, China has nosed ahead of India in the availability of software developers, and is rapidly closing the gap in the pool of employable people in IT — an area that India has dominated for over two decades.

According to this article, globally, there are 18.5 million software developers of whom 11 million are professional developers and 7.5 million hobbyist developers (amateurs). There are 29 million skilled IT workers, including professional software developers, and 18 million operations and management skilled workers.

While the US houses 19 percent of global software developers (both professional and hobbyists), China, with a 10 percent share, is now ahead of India, which has a 9.8 percent share. The US also accounts for 22 percent of global IT-skilled workers, followed by India with 10.4 percent, and China with 7.6 percent, according to IDC.

Two things have happened in the last few years. One, China continues to soar in areas like e-commerce, dwarfing India's own trajectory — annual revenue from just one of China's top e-commerce retailers for 2013 was equivalent to the size of the entire e-commerce industry in India (especially if you take out categories like air travel, where the cost of the ticket is counted as revenue for an online site.)

This means that China has had to rapidly scale the pool of coders and technical services companies to cater to this explosion. What it has also done is to focus on teaching English to its engineers. Today, as the article points out, many global software service firms and product companies have set up development centers in China.

Of course, China has some ways to go before it can match India's competence and skill in software services delivery to the rest of the world. Its firms lag Indian ones in the stuff that is de-rigeur for any services firm — namely, excellence in project management, business analysis, and general exposure to processes and systems.

However, if there's anything that the Chinese have proven to date, it is their stick-to-it-iveness. At this rate, without any counter from Indian firms, don't expect the Indian advantage to remain forever.

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