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Re: Chinese know how to cut costs



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This news points us again to the issue which many in India have begin to 
realize. The good news is that Ministry of Human Resourse Development is 
conscious of this (as it can be seen in its consultation paper on IT 
education). And it is that Indian software Industry is operating at the 
lower end of the value chain. If india really wants to become software/IT 
superpower, it must move up the value chain. Until today, the only advantage 
India software professionals (= programmers) has been  english language and 
lower cost. With Russian/Chinese programmers entering into the market, it 
seems that english language may not be such a high barrier to entry into the 
programming business. Marketers (and Strategic Planners ) anywhere in the 
world will tell that the price last item to be negotiated; and as far as 
possible, never engage in price war with your competitors. Therefore, entry 
of China and Russia (both are non-English country as far as medium of higher 
education is concerned) should be an early warning to Indian software 
industry to move up in value chain and not to sell low cost structure as its 
competitive advantage. If indian software industry does not capatilizes its 
early movers advantage and fights with China and Russia on price alone, it 
my have to loose a huge chunk of this business to other countries.

The process of additional value creation my be difficult for Indian company 
because of weak domestic demand as most of the software is still written for 
external consumption.

Anyway, according to some analysts, this industry will loose speciality 
(=growth market) status sometime around 2008 when people will take this just 
as much part of life as we take telephones or automobiles. Therefore, the 
Indian industry has to make as much as possible. There is no doubt that IT 
industry will exist after 2008, but it will be a very low margin activity 
(just as computer hardware industry has become today) with lot of suppliers 
are fighting for same non-growing market. The ability of market to support 
lot of players will diminsh and only those who are best will survive.


Sincerely,
Ratnendra Pandey

>From: Arun Mehta <indata@satyam.net.in>
>To: debate@indiapolicy.org,India  Gii <india-gii@cpsr.org>
>Subject: Chinese know how to cut costs
>Date: Sun, 04 Feb 2001 08:56:35 +0530
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>http://www.economictimes.com/today/03tech07.htm
>
>India’s software MNCs look to China for cheap talent
>
>Snigdha Sengupta
>...
>The good -- or bad, depending on your point of view -— news, is that the 
>Chinese professional will be at least 15-20 per cent cheaper than his 
>Indian counterpart.
>
>Today, a high-end Chinese software professional costs $20,000 per year 
>against the Indian rate of $12,000 per year. But according to Wipro 
>vice-president (corporate finance) Suresh Senapaty: “In a couple of years, 
>when a larger resource base builds up, the cost structure in China will be 
>lower than India by at least 15-20 per cent.”
>
>Nasscom president Dewang Mehta predicts that Indian IT firms will probably 
>start out with re-routing their low-end activities, like coding and 
>maintenance, to Chinese branch offices or subsidiaries.
>____
>Needless to say, I disagree with Dewang when he calls coding a "low-end" 
>activity. If you are doing package software or are any good at your craft, 
>programming (a less disparaging way to describe the same activity) is the 
>best paid job in the business.
>
>
>
>Arun Mehta, B-69, Lajpat Nagar-I, New Delhi -- 110024, India. Phone 
>+91-11-6841172, 6849103.  http://members.tripod.com/india_gii To join 
>india-gii, a list which discusses India's bumpy progress on the global 
>infohighway, mail india-gii-subscribe@cpsr.org
>

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