Software industry in China 2010
Last few weeks, I was teaching software engineering in China. Following is a summary of what I have observed this year.
Overall the software industry is rapidly developed but the majority of applications are still supporting the manufacturing industry (Mostly embedded software for electronics and integrated circuit industry) and government Information technology activities (Government is still the largest customers of the software industry). There are some activities in software game industry but mostly for local consumption rather than for export, computer games are still dominated by games makers in S. Korea and Japan.
The Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, October 4-6, 2010. Los Angeles, CA. Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, October 4-6, 2010. Los Angeles, CA. software service industry (outsourcing) is growing slower than expected due to the global financial crisis. The majority of software activities are still concentrated in few places (Beijing, Shanghai, Suzhou Wuxi and Dalian) even government has designated 20 cities targeted for software growth. Outsourcing business is still relatively weak as compared with other countries (Approx $2 billion dollars as compare with India who made $89 billion in 2009) Japan and S. Korea are still the main destination of China's outsourced software, accounting for 72 percent of the total. I believe that the software outsourcing industry does have a lot of market potential, due to their lower cost and better infrastructure but they do not have enough skilled managers in global business. Many of the top managers have been successful in local market, especially in government contract, but do not know how to do business very well at the global level. Another reasons are the lack of information security, limited intellectual property protection, and software piracy issues that make many global companies reluctant to outsource there.
The key challenges of China's software industry is the global financial crisis where many manufactures are now closed as export business is almost stopped. The domestic software market is weak but competition increases as more global companies are moving in and compete with local companies. Several top Indian software companies (Infosys, TCS and Wipro) are now set up service in China and begin to hire away top software people from local companies, which greatly intensified competition.
However, Chinese software industry does have advantages: Government supports of domestic demand expansion policies offered great opportunities for many small and medium sized software companies. Strong infrastructure incentives by local government also help boost the industry: In several cities that I visited, I saw many high tech parks being built with sophisticated infrastructure and network to prepare for future business. There are several industrial integration and acquisition activities as larger software companies began to acquire smaller companies to increase the power of China's software industry and prepare for more competition ahead. These activities will lessen the number of small companies and increased the scale and competitiveness of remaining firms.
There are more opportunities to the software industry because of new technologies, namely virtualization technology and cloud computing. The virtualization technology increases the utilization efficiency of server resources, integrates data centers and server platforms, and enhances the efficiency and capacity of software research and development. Cloud computing provides mass computing services based on the internet, which not only can be used as the platform of software services, but also offers spaces for storage, deals with information and business, and verifies business models of the software industry. Many of these investment costs have been subsidized by local government so China would have much better infrastructure than any countries in the world and enable local companies to expand business internationally. The integration of networks also accelerates their mobile internet as a new trend for software development, and create new business with more advanced technology and applications. From my view, the potential is there but to advance into global business require different thinking, new business model and changing the way company operate at the top level.
My friends told me that current software education is being reviewed and improved but it probably will take sometime because “Chinese always plans for a long time according to a strategy” so it remain to be seen how they will improve but students do not want to wait that long. Several students told me that they are planning to study abroad to obtain whatever technical knowledge possible and then create their own companies. It seems that technology is opening opportunity door for many as they are dreaming big. Many want to be the next “Bill Gates” or “Steve Jobs” of China and they are study very hard for it. During my lecture, which are long and intensive, students are very alerted, they carefully take lot of notes, asking a lot of questions, and very interested in advanced topics such as system architecture, software integration and many best practices.
As impacts of the global financial crisis continue in Europe this year, the growth of China's software industry will probably remain slow due to fewer demands in the manufacturing industry. However with the implementation of the country's policies for expanding domestic demand and conducting technological and education reform, the potential for growth will be ready for the next opportunity.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
