Is China a threat to Indian Software Industry

I just happened to come across some essays, blogs, Q&A on the Indian and Chinese Software Development. 

http://www.studymode.com/essays/Is-China-a-Threat-To-Indian-1309408.html

http://groupdiscussionideas.blogspot.in/2011/05/is-china-threat-to-indian-software.html

http://wiki.answers.com/Q/Is_China_a_threat_to_Indian_Software_Industry?#slide=1

Same arguments in all three and they are the top hits on Google. 

To be frank these articles are slightly dated (2011-2012), but I don't think these arguments reflected the reality even during that period. They are so early 1990ish. They however motivated me to share my thoughts (counter-views) also on this. I worked for a Chinese company in Software Development for many years and have seen both Indians and Chinese working side-by-side in both India & China from close quarters.

First of all we must stop playing these ZERO sum games. For Indians to do well in any field, the Chinese have to fail or vice-versa. Indians and pakistanis play this all the time and get nowhere except the odd chest thumping display. We need to grow up. You never have outright losers and outright winners. You win some, you lose some.

Coming back to topic, the Indian and Chinese Software Industry IMO are very different. Chinese Industry is based on systems (hardware+software co-design) and Products. Because of the language barrier, right now their service industry is largely limited to only Chinese speaking territories. China's first priority is to first capture the big local Chinese market and not depend on imports for high-tech gear. Today China is able to develop almost all network equipment, handsets, computers and key services like baidu, QQ, and Xunlei  internally and not depend on imports. This also conserves their forex reserves. Their next priority is to globalize and capture non-China markets beginning with the other less developed countries and finally the developed west (A case in point is Tencent's WeChat, Huawei, ZTE, Haier, etc). The chinese have also used their outsourced hardware manufacturing prowess to build completive advantage in hardware.  Their manpower skill is thus more tuned to developing Products not outsourced services.

In contrast Indian Software Industry is largely based on a successful outsourcing model of software development targeted to English speaking countries in the *developed* west (North America, Western Europe, etc). Our customers are the very ones with whom the Chinese Product & service companies are trying to compete. Our unique value to the western world is the vast talent pools for doing programming and testing and the massive 4:1 cost arbitrage. Our talent pool is more skilled to work in projects not products.

In simple words, if the west introduces an innovative product, the Chinese might react by thinking how we can copy and improve it and go in that direction, while the Indians think on what kind of services (installation, servicing, maintenance, technical support) we can offer apart from opening our markets to that product.

To me it clear that from the very mindset, Indians and Chinese industries are not competing. So my surprise to the above quoted articles. India, infact, has threats from other developing countries (Philipines, eastern Europe etc) which are cost competitive and can match the skills that the Indians have accumulated in writing software easily, because the technical information is so openly accessible to everyone and costs are lower in these countries. The same happened in BPO industry. An indirect threat also looms from China in the sense, that if the Chinese are able to outsmart the western manufacturers, and sink them (remember Nortel) in the market, then it will ultimately put pressure in the outsourced business to India (as no one is left to outsource). Already in many areas Chinese Companies (Haier, Huawei, Lenovo, etc) have become the best in the world. China is not going to outsource to India as they themselves have a much bigger and skilled talent pool to look to and they have not more than 25% cost arbitrate disadvantage over Indian manpower and infrastructure. No technology or skill advantage for them to come to India, no cost advantage and so it does not look attractive for them to come to India for outsource (unless government regulatory policy forces them to and in which case likely it will again be a case of having a different set of teeth for eating and different for smiling).

Hope it forces us to think on how we can improve ourselves and stop worrying about China. For our service companies, their success depends on moving up the value chain and making our existing Western customers successful. We must play a bigger role in innovation and top-end of the product development life cycle. help them in doing what they find hard to do. This is one strategy. The 2nd one should be for our service based companies to move into emerging countries and set up captive centers. The 3rd option ( the hard one, but perhaps the right one) is to follow what China has done. We have to move into products also just as Chinese have done. It has to be a unified effort from policy makers (government), Educational Institutions (Universities) and of-course the Industry. We can begin by first serving the needs and opportunities in the Indian market and then think about the rest of the world.