India still holds outsourcing aces over China

China is still some years away from threatening India's position as the software outsourcing powerhouse of Asia, according to an IDC report.

"Although there are substantial outsourcing projects in the US every year, China's IT companies are weaker than India in IT project management," said Nicholas Yong, a market analyst with IDC Asia/Pacific.

China's software companies also don't have the sales channels in the US that Indian companies do. Other factors which give India an edge include its use of English and the quality of its product, according to IDC.

China may be in second place now but its IT market is still the strongest-growing in the world and it is also strong in both the export and consumption of software, said the report.

While the US may be India's big market, Japanese IT firms are the biggest consumers of China-made software, according to IDC.

In the first half of last year, 44 per cent of China's revenue earned from exported software came from Japan, followed by the US at 17 per cent and Hong Kong at 15 per cent.

The same period garnered $54m in revenue for China, a 50 per cent increase of the same period in 2001, "further indication that China is now regarded as a viable alternative, besides India, as a county of choice for the offshore delivery of software-related services", said the report.

The close bond between Japan and China should come as no surprise - firms such as NEC and Fujitsu have been working with software providers in China since the 1990s.

Japan's economic woes have driven its firms to seek cheaper software houses outside the country, said Yong.

"The similarity of cultures, as well as the geographic proximity of China, has led to Japanese firms developing a preference for sourcing from China instead of India," he added.

John Lui writes for CNETAsia.