China drafts stricter controls and preferential treatment on foreign software – Can India replace America in Chinese requirements of software engineering?
Harish Baliga
Apr. 12, 2005

According to news sources from China, the country has quietly drawn up draft regulations that would impose tight controls on government procurement of foreign software, shrugging off concerns expressed by the US government and international companies.

The rules call for software vendors to be defined as domestic, non-domestic or preferred non-domestic. China's determination to use government procurement to give greater support to local software companies will disappoint international suppliers.

Recent trip of Chinese Premiers to India has raised hope of Indian software companies that they will get free access to Chinese markets. While China is looking to learn from Indian IT service sector the model by which Indian companies are making enormous amount of money, China’s policies are very shrewd.

Indian companies will enjoy some sort of preferential non-domestic status in China, say some experts. But where India really specializes is application software based on client requirements using American databases and systems software. The other sector where India excels is legacy system maintenance and reengineering – a dreadful waste of talent that no one in the West is interested to do, Indian companies will eventually find that in China it is extremely difficult for a non-Chinese company to build requirements driven application software. The main reason is that China has smart programmers and English is not the language in China.

Where China will look forward to India for cooperate and join ventures are Databases and Systems Software as well as firmware. But unfortunately Indian companies did not focus on that. Their policy is to specialize on “quick money” schemes supplying programmer bodies at low price and performing requirements driven application software development. India has no software products of international status in spite of millions of qualified software engineers. The goal is to service the deflation of the US and Europena economies and not really create value added products.

As a matter of fact, unless Indian Government changes the policies fast in recognizing the Diaspora of Indian expatriates in America and Europe, India will lose the IT advantage soon. Recently, may of the so called Non-resident Indians are busy selling mortgages and real estate instead of working on software engineering in America. China will be busy building Systems Software and firmware that will be integrated with hardware. And India will not have much to do there. Because of India’s dependence on American and European corporate clients and relatively easy Dollar and Euro driven projects, India actually has lost a lot of opportunities.

India’s IT revolution started with Sam Pitroda, an Indian American, a close associate of Late Prime Minister Rajiv Gandhi of india who pushed for serving American companies at a lower cost. Americans and Europeans came with big money and made Bangalore and Hyderabad the deflation capital of Software Engineering. The Indian companies have enjoyed unprecedented boom in easy money software engineering while Western nations lost millions of IT jobs. However, the concept was to get the Indians do what no one wants to do in the Software field – the low end tedious and non-futuristic legacy system maintenance, Y2K etc.

Now India faces the real challenge. China will ask for real software engineering from India with hope that India can replace America. They will soon find, Indian software oligarchs cannot deliver because they never really performed software engineering – they performed “body supplying” and low-end service work for the American and European companies.

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