China Will Lag a Long Time in Offering Services

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Quick read on the prospects of China overtaking India as a source for IT work. In “China\’s IT challenge may be manageable,” author Jay Bhattacharjee cites a discussion at an “informal roundtable in Dehli,” in suggesting that while European politicians and businesspeople are hoping for a major rivalry between the two countries, it won\’t materialize for many years to come.

His reasons for thinking it\’ll take longer? “…there are weak areas in China\’s framework. The first is that the industry is fragmented and does not have size and expertise required to get sizable global projects. There is hardly any indication of efforts for consolidation. The primary engine of growth is domestic, mainly SMEs that need customised software… Japanese customers of Chinese IT buy low-value application-development services, rather than more expensive design work. Many projects are not up to optimal scale and there is often fierce competition among suppliers on price. Payment collection is a headache. China\’s software industry will have to consolidate, if it wants to compete in global outsourcing arena.”