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India stands to gain from the growth in China's software market as it is facing a shortage of information technology professionals.
According to Gartner's research on key IT trends and scenarios for Asia Pacific in 2003, there is a huge shortage of top-end professionals.
While China can recruit low-end professionals from universities, they are unable to produce system architects and project managers. Majority of them come from India.
The Chinese government has set its sights on becoming more than just the world's 'factory floor.' Software services is receiving significant government attention and incentives.
China is moving from an agricultural-based economy to an industrial one and some cities and provinces are moving into a knowledge-based economy.
Against India's software export market of $8.35 billion last year, a rise of 34.7 per cent over 2001, Gartner said the mainland software export market had grown by roughly 121 per cent to $1.88 billion last year from $850 million in 2001. It was expected to touch $27 billion by 2006.
China's strong growth figures, however, do not impress analysts who see China being forced to import workers from India and also need the help of Indian IT service companies.
According to Gartner, China needs two million information system professionals to service its export market and another two million to service its domestic market.
Dion Wiggins, research director, Gartner, said, "The reason is simple why China needs Indian IT service companies. China does not have enough skilled IT resources to meet domestic and export software demands; it is willing to give up a large portion of its market to gain these resources. India has more than 3,000 software companies, just half that of China."
According to him, many Indian outsourcing companies are of a significant size employing several thousand staff.
"However, for Indian enterprises to fully engage and maximize the potential market opportunity that China presents, they need a significant number of skilled IT services professionals far greater than are available in India today," he said.
Gartner's forecasts show that China needs to increase the pool of skilled IT resources by 26 times over the next four years, while India only needs to increase it by 2.5 times.
If India is to engage the opportunity presented by China, the demand on skilled IT resources in India will be directly proportional to the level of engagement in China.
To the extent that India and China fail to develop the requisite number of IS professionals, they both lose out on this market opportunity.
"China's chronic shortage of IS professionals will be filled mainly by Indian foreign nationals and vendors, as well as mid- to top-tier foreign nationals from Australia, New Zealand, Singapore, the Philippines and Europe," said Wiggins.
China may be able to quickly educate large volumes of talented software developers, but higher skilled IS professionals (such as project managers and systems architects) take years to cultivate and mature.
"This is where the opportunity and the challenge reside for Indian IT software and AD service companies, especially those ranked in the top 25 in India," Wiggins said.
TCS, Infosys and Satyam Computer Services, for example, are already pursing operations in China. By providing mid- to top-tier resources that the Chinese market desperately lacks, and by using Chinese development resources, Indian IT service companies will be positioned to take the bulk of the larger projects in China.