X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Will Chinese IT firms rival Indian firms? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 27, 2008

    Will Chinese IT firms rival Indian firms?

    India has basked in the glory of an IT boom. India Inc. has played its IT card well and has been able to grow in leaps and bounds in the last 20 years. This is the time to analyze whether Indian IT firms can survive competition brewing across the emerging markets especially China, which is one of the fastest growing economies in the world. Today China has become the world's fourth largest software producer. The country's share of the global software industry rose from 1.2% in 2000 to 8.7% in 2007, with an annual growth rate of more than 30%. Chinese firms are attracting venture funding and expanding staff in an industry viewed as strategic for the country's future growth. The moot question now is - Can China emerge as a potential threat to the Indian IT industry? To understand the nature of competition between the two countries let us analyse the fundamental aspects of the software sector in these two countries.

    Size of industry: The industry size and the scale of operations in China is still very less when compared to India. The Chinese IT sector is less than a third of the Indian IT sector. The following tables highlight the fact that the size of the Indian top companies and their operations is much larger than their Chinese counterparts.

    Top 4 companies from China
    Company M Cap (US$) Revenues US$ (as on Dec 31 2007) No. of employees
    VanceInfo Technologies 359 m 62.7 m 3,675
    Chinasoft International 152 m 925.2 m 4,363
    Sinocom Software 194 m 564.5 m 3,229
    Shenyang Neusoft Co Ltd 118 m 410 m 6,740

    Top 4 companies from India
    Company M Cap (US$) Revenues US$ (as on March 31 2008) No. of employees
    Infosys 25.3 bn 4.17 bn 91,200
    TCS 20.2 bn 5.31 bn 111,400
    Satyam 7.07 bn 1.97 bn 46,000
    Wipro 1.61 bn 4.64 bn 82,100

    Structure of industry: The IT-BPO sector in China is growing on the back of its domestic market while the growth of Indian software firms is led by exports. In China, the domestic market accounts for 85% of revenues. The total value of software and services exported from China in 2006 was US$ 1.8 bn, which is very less than the total value of software and services exported from India (US$ 23.6 bn) in the same year.

    Service portfolio: The portfolio of IT-BPO services exports from China is dominated by application development, coding / testing and localization services. The portfolio of Indian firms is more broad-based and includes application management, infrastructure services, offshore product development and engineering services. This shows that India is in a different evolutionary phase. The Indian software sector has climbed up the value chain and is now providing more high-end services. Indian firms have built robust processes for managing remote service delivery, transitioning of processes and integrating workflow across large teams spread over different geographies. IT firms in China are still evolving, the average local Chinese service provider still suffers from sub-scale inefficiencies and lacks the experience of delivering on large contracts.

    Conclusion...
    The IT-BPO sector in India is altogether in a different growth phase than that in China. Infact, India and China are operating in different spheres with few overlapping areas. Although China's software sector is booming, its small size and lack of experience will take years to emerge as potential rival to Indian software companies.

     

     

    Equitymaster requests your view! Post a comment on "Will Chinese IT firms rival Indian firms?". Click here!

      
     

    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    Ankit Shah's First Five Insider Recommendations (The 5 Minute Wrapup)

    Aug 5, 2017

    How to get exclusive insider recommendations from Ankit Shah.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE IT


    Aug 23, 2017 03:36 PM

    S&P BSE IT 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS