McKINSEY’s STUDY ON IT CAPABILITY China no threat to India
China may have stolen a march on India in manufacturing but it will take years before it can catch up with its neighbour in information technology (IT), says a study conducted by consultancy firm Mckinsey, reports PTI from New Delhi. “It will be many years before China poses a threat to India in IT. For starters, the Chinese must consolidate their highly fragmented industry to gain the size and expertise needed to capture large international projects. Currently, there is little movement in this direction,” the study said. Shortcomings in the structure of China's IT industry prevent it from taking full advantage of fast increasing number of engineering graduates, software-applications professionals and English-speaking graduates, the study said. Since 1997, annual revenues in software and IT services have risen 42 percent a year, on average, reaching $6.8 billion in 2003. Although revenues from IT services are rising, they are barely half of India’s $12.7 billion a year. Growth in China is driven by domestic demand; most customers are small and midsize Chinese enterprises that want their software customized to their own needs. China’s nascent foreign software-outsourcing business accounts for just 10 per cent of the industry’s total revenue, compared with around 70 per cent for India. Japanese customers, who seek mostly low-value application-development contracts rather than more lucrative ones for design, supply about 65 per cent of this sector’s income. Despite lower costs, operating margins in Chinese software-services companies average only seven per cent, compared with 11 per cent at similar companies around the world, because many projects are below optimal scale, suppliers often compete on price and collecting payments can be problematic. To compete effectively in global outsourcing, China’s software industry must consolidate. The top 10 IT-services companies have only about a 20 per cent share of the market, compared with 45 per cent commanded by India's top 10, McKinsey said. China has about 8,000 software services providers, and almost three-quarters of them have fewer than 50 employees. No company has emerged from this crowded pack; indeed, only five have more than 2,000 employees. India, on the other hand, has fewer than 3,000 software services companies. Of these, at least 15 have more than 2,000 workers, and some, including Infosys Technologies, Tata Consultancy Services, and Wipro Technologies have garnered international recognition and a global clientele, the consultancy firm said. Without adequate scale, Chinese players are unlikely to attract top international clients. The study shows that only about 12 per cent of Chinese software services providers see mergers, acquisitions, and alliances as a priority. Managers in China have little M&A experience, and although the culture tends to favour organic growth, relying on it to counter new competitors is not realistic. Meanwhile, several Indian companies are considering acquisitions of Chinese firms to expand their operations. ------------------------ Yahoo! Groups Sponsor --------------------~--> Take a look at donorschoose.org, an excellent charitable web site for anyone who cares about public education! http://us.click.yahoo.com/O.5XsA/8WnJAA/E2hLAA/BRUplB/TM --------------------------------------------------------------------~-> *************************************************************************** Berdikusi dg Santun & Elegan, dg Semangat Persahabatan. Menuju Indonesia yg Lebih Baik, in Commonality & Shared Destiny. www.ppi-india.uni.cc *************************************************************************** __________________________________________________________________________ Mohon Perhatian: 1. Harap tdk. memposting/reply yg menyinggung SARA (kecuali sbg otokritik) 2. Pesan yg akan direply harap dihapus, kecuali yg akan dikomentari. 3. Lihat arsip sebelumnya, www.ppi-india.da.ru; 4. Satu email perhari: [EMAIL PROTECTED] 5. No-email/web only: [EMAIL PROTECTED] 6. kembali menerima email: [EMAIL PROTECTED] Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/ppiindia/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
