Will Chinese IT firms rival Indian firms? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Will Chinese IT firms rival Indian firms?

Jun 27, 2008

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

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock (Views On News)

Oct 14, 2021

Infosys raised its forecast for annual revenue growth to 16.5-17.5% from the earlier 14-16%, predicted in July 2021.

Info Edge: The Anatomy of an Indian Internet Behemoth (Views On News)

Oct 2, 2021

Info Edge is very popular in the Indian startup ecosystem due to its active participation in funding events.

This Indian Company is Tapping into the Huge Autonomous Driving Opportunity (Views On News)

Sep 14, 2021

Despite many challenges, Indian companies and startups have not shied away from entering this space.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE IT


Dec 2, 2021 01:20 PM

S&P BSE IT 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS