A comparative study on the sustainability of the IT services sector in India and China

Abstract

Over the past decade, the Indian IT sector has become the country’s premier growth engine. The sector has generated large scale employment and has achieved tremendous revenue growth, in addition to becoming the global brand ambassador for India. Exports contribute a bulk of the sector, with exports to U.S. and Western Europe forming a major chunk of it. But during the current economic phase, when many western economies are undergoing recession which are the main markets for the Indian IT sector, maintaining the growth rate is a big challenge. At a time when clients are cutting their IT budgets, cancelling projects and delaying payments, the sustainability of the competitive advantage is questionable. The Chinese Software sector, on the other hand is inherently different from that of India. The majority of Chinese software services producers are domestic companies with domestic consumers. As software development enhances the manufacturing processes, China’s software industry is in high demand. Similar to its support of the manufacturing sector, the Chinese government has provided enormous support to the software industry through tax breaks and high tech development zones. China's software outsourcing industry is expected to grow further despite climbing labor costs and increasingly intense competition from overseas. But Chinese companies need to upgrade to stay competitive.