Indian IT firms warm up to China

Friday, 20 June 2003, 07:00 Hrs
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About 50 Indian business leaders, including officials of top software companies will accompany Vajpayee to Beijing and Shanghai.

NEW DELHI: It wasn't long ago when the Indian IT industry's fear of China emerging as a potential competitor in the technology space bordered on full-blown paranoia.

But as Prime Minister Atal Bihari Vajpayee flies to Beijing June 22 on an epochal six-day visit, industry representatives and experts are touting China as a land of opportunities for India's export-oriented software industry.

About 50 Indian business leaders, including officials of top software companies like Tata Consultancy Services and Infosys Technologies, will accompany Vajpayee to Beijing and Shanghai.

"Trade relations between India and China, especially in the IT sector, will enter a more pragmatic phase with this visit after all these years of hostility," says Sameer Kochchar, CEO of IT industry research firm Skoch Consultancy.

"The Indian software industry has now woken up to the reality that it is high time they invade the Chinese market rather than look at it just as a potential competitor," Kochchar told IANS.

"Let's accept the fact that with or without India, China is going to be a major technology power globally. So it will be better for Indian IT industry to treat the country as an ally and a land of immense opportunity."

Currently, IT software and service exports from India to China is to the tune of 200 million, or a meagre 0.05 percent of India's total software exports in 2001-02.

At present China outstrips India in almost every sphere of business except software. China attracts the biggest chunk of foreign investment in Asia and its share of world exports is far larger than neighbouring India.

In IT, however, India takes pride in outdoing its rival. No major Chinese software companies are globally as reputed as India's Infosys Technologies and Satyam Computer Services.

Analysts say China, with software exports worth $1 billion, may not be a threat to the Indian software industry, which managed to earn $9.5 billion last year, in the short term. But studies indicate that China may catch up by 2008.

The opportunity for Indian companies is to use the Chinese base now to remain ahead, they say.

The National Association of Software and Service Companies (Nasscom), India's IT industry umbrella group, says China's vast domestic IT market and its entry in the World Trade Organisation offers great business opportunity to Indian firms.

Kochchar of Skoch Consultancy says the Indian IT industry needs to adopt diverse approaches to tap opportunities in China, the most populous nation in the world.

"The approach should be two-pronged -- one is selling in China and the other is selling out of China," he says.

"As part of the first approach, Indian companies can offer services to multinational companies operating in China and develop an alternate software development base in China to exploit the vast domestic market.

"Additionally, Indian firms can also enhance their market access using China as a route to enter Japan and South Korea."

And it has already started to work. Infosys Technologies, India's largest listed software maker, says it is planning to set up a branch office in China to tap opportunities in telecom, financial services and manufacturing sectors.

"We are getting some part of business from China through our direct contacts as well as indirect contacts, and the delivery is done out of India," said an Infosys spokesperson in an e-mailed statement from the company's Bangalore headquarters.

"We are studying the Chinese market and are continuing to force our request for permission to set up a branch office. There has been some progress in that direction and hopefully we will be able to conclude this soon."

Kiran Karnik, president of Nasscom, says: "Indian IT companies can work with China in the area of chip design and telecommunication technology and use China as an offshore development centre to serve the Japanese market."

New Delhi-based NIIT Ltd., one of India's leading computer training majors, says it has drawn up a strategy to strengthen its IT training in China. NIIT entered China in 1998 and operates about 100 centres.

"China offers a big opportunity for NIIT. We are well poised to grow China's IT manpower development effort," says P. Rajendran, chief operating officer of NIIT Ltd.

Source: IANS

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