While companies across the globe are debating over the IT capabilities of China over India, IPR issues in the land of dragon hinders its prospects of growth. Also, interestingly, China has always been considered as a hub for manufacturing, whereas India has attracted most of the services outsourcing projects making the debate futile.

Despite vast differences in cultural, linguistic, technical and economic growth patterns, the titans are always read as clashing and crossing lines into each other’s territories. But the truth is that one has been leading from the front and the other still building its capabilities.

“China is four-five years behind India in terms of its IT capabilities and is no threat to the Indian IT-BPO industry,” said Kiran Karnik, President, Indian National Association of Software and Services Companies (Nasscom) at a conference announcing the release of a whitepaper — Tracing China’s IT Software Services Industry Evolution.

The whitepaper highlighted the fact that China has the potential to develop a large IT-BPO industry considering the domestic market potential, educated labor size and strong government support which is lacking in India. And though information security and IPR enforcement are key concerns in discussions relating to IT services in China, its capabilities cannot be ignored.

Yet, the findings seem far-fetched for very simple reasons.

First, the current IT-BPO industry in China is in its nascent phase. With Chinese IT software and services industry contributing only a little over $12 billion to its total IT revenue of $150 billion in 2006, it is long way to go. Unlike India that rides its success on the back of software services, the Chinese market largely focuses on the IT hardware segment. Over 90 percent of the total IT revenue generated in the year 2006 came from China’s IT hardware business. The numbers are far less than India where the IT services revenues totaled $30.2 billion in 2006. 

Second, both the countries cater to the needs of clients in different geographies. While Japan and Korea serve as the major export markets for Chinese IT services accounting for about 60 percent of the total exports from China, the Indian IT exports are predominantly catering to the U.S. and European markets that account for more than 80 percent of the total exports.

However, leading Chinese IT firms have reported average growth rates of 40 to 50 percent over the past few years and are beginning to receive a steady stream of business enquiries from Western customers.

“One of the issues that keeps the western customers away from China is the language. But the Chinese people are learning English at a breakneck speed to overcome this issue”, commented Karnik.   

So while all comparisons and speculations will continue about who will lead and who will follow, there are voids that both countries need to fill. For instance, to retain its crown India must push its technical education and infrastructure so that there is a readymade talent pool available for the country. In the run, China needs to address issues of intellectual property, and match up to the technical and linguistic skills of the Indians.