Krishna Baidya’s Random Musings

Posts Tagged ‘China

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Results of poll by China Internet Network Information Center released this week.

Most young Chinese use mobile phones to access the Internet as these are cheaper and easier to obtain than desktop computers, according to a survey by a government-linked body.

About three-quarters of China’s 195 million web users under the age of 25–roughly half of its world-leading online population–surfed the Internet using a mobile in 2009, up from 50% from a year ago, the poll revealed.

The finding marked the first time that mobile phones emerged as the top platform for Web use among China’s youth, according to the poll by the China Internet Network Information Center, which was released Monday.

The poll offers further proof of the importance of the burgeoning mobile Internet market in China, which has the world’s largest number of mobile phone subscribers at more than 765 million, according to government data.

Nearly 70% of young Internet users still use desktops–implying that many Web-savvy youth are using both methods to get online.

The center said more young people in the countryside had opted for mobile Internet than their urban counterparts, as the handheld device “provided youths in areas where computers are hard to get with an alternative.”

Young Chinese primarily use the Internet to listen to music, play games and watch video clips, the center said.

Source: Total Tele


Gartner assessed the suitability of APAC countries as offshore locations and identified “10 Leading Locations for Offshore Services in Asia Pacific for 2009.” These included the undisputed leader in offshore services, India, and the greatest challenger in terms of potential scale (China). The rest are a mix of mature environments that offer limited cost-benefits (Australia, New Zealand and Singapore) and emerging countries with a variety of challenges, but attractive costs (Malaysia, Pakistan, Philippines, Thailand, and Vietnam).

Although India continues to grow in top-line revenue levels of IT services being exported, its share of the overall worldwide totals has declined as other countries are investing to gain more market share. Enterprises seek strategies to reduce risk, and India faces challenges. These include wage inflation, local attrition rates, geopolitical issues (including the Mumbai terrorist attacks) and the “Satyam Effect.”

Despite increases in investment, infrastructure remains India’s biggest weakness while strained power capacity and inadequate connectivity remain challenges. Some IT service categories such as application outsourcing have matured and the level of incremental growth is smaller.

What about China?

China is still attracting great interest. But it has challenges to buyer confidence including security, quality and intellectual property issues, relatively low English-language capabilities, and a scarcity of middle managers.

A large portion of the current market is geared to R&D-embedded engineering services, which differ significantly from commercial enterprise buyer requirements. Thus, there is a need to build strong process and quality maturity for delivery of IT services to commercial enterprises.

Marketing skills across the value chain of the outsourcing industry are still immature, which results in a lack of information access and authenticated, verified sources of data for decision-making. Given the immaturity of the market, organizations wishing to set up in China should plan and budget for more substantial levels of project management, change management and governance requirements.

Where else then?

The Philippines generates considerably more offshore revenue than China. The country has a history of providing services to the US and Asian markets. Some IT services have been exported for more than 15 years. It’s now a key outsourcing destination for call centers, finance and accounting.

English continues to be the predominant language in the country and the level of accent neutralization required is relatively low – significantly lower than in India and China. It has a good labor pool that’s scalable at low cost and its overall cost structure is lower than India’s. Wage inflation and attrition ratios are also lower.

When considering the Philippines as an offshore location, companies must be sure to establish adequate risk mitigation measures around intellectual property protection, security and privacy. They should also ensure they are comfortable with specific technology and industry knowledge before signing a deal.

Companies seeking to be pioneers in a large and untapped low-cost destination should investigate Vietnam. Opportunities exist, but rigorous due diligence is required. Salaries of IT and business process professionals are among the lowest in the world. Consequently, Ho Chi Minh City and Hanoi are attracting a good deal of interest from major IT companies. Both IBM and CSC have made substantive investments in setting up global delivery centers in the country.

Companies should think carefully before allowing the cost base to overly influence their choice of Vietnam as an offshore destination. Understand all the risks, including hidden costs, risks related to data security, ease-of-doing-business issues and relatively low-level English-language skills. 

Source: Jim Longwood, Gartner

imagesAccording to a study performed by IDC for the Business Software Alliance, global software piracy is increasing. The report estimated that worldwide losses due to piracy totaled $53 billion, an 11 percent y-o-y increase.

The study estimated that pirated software accounted for 41 percent of all software installations globally, which is neck to neck to legitimate commercial installation of 44 percent. The remaining 15 percent of software was free or open source. Despite successes in fighting piracy in China and Russia there has been 3 percentage point increase in pirated software installation in 2008. All the while, global sales of PC software rose by 14% last year to $88 billion.

According to the study, U.S. piracy was about 20 percent of the total market, the lowest in the world but the highest single dollar loss, it was a major problem because more software was sold in the United States than anywhere else. Much of those losses came from small businesses that use unlicensed copies of popular software programs

There has been mixed results in Asia Pacific, with eight economies showing a decline in the PC software piracy rate, no change in seven and an increase in three. The PC software piracy rate for Asia Pacific meanwhile increased to 61 percent compared to 59 percent in 2007, with dollar losses stemming from software piracy escalating to over US$15 billion in 2008 compared to over US$14 billion in 2007.

The personal computer (PC) software piracy level in Singapore registered 36 percent in 2008, a one percentage point drop from 37% in 2007.  However dollar losses caused by software piracy continued to increase, rising to US$163 million in 2008 compared to losses of US$159 million in 2007. Amidst government action towards using legitimate software and ISPs cooperation in combating piracy, software piracy in China fell to 80 percent, a 10 percentage point drop from previous year.

The study said that the countries with the lowest piracy rates are the US, Japan, New Zealand and Luxembourg, all near 20 percent. The highest software piracy countries are Armenia, Bangladesh, Georgia and Zimbabwe, all over 90 percent.

  • While emerging economies account for 45 percent of the global PC hardware market, they account for less than 20 percent of the PC software market. If the emerging economies’ PC software share were the same as it is for PC hardware, the software market would grow by $40 billion a year. Lowering global piracy by just one point a year would add $20 billion in stimulus to the IT industry.
  • Of the 110 economies studied, Russia has made the most progress, with a one-year drop of five points to 68 percent and a five-year drop of 19 points.
  • The lowest-piracy countries are the United States, Japan, New Zealand, and Luxembourg, all near 20 percent. The highest-piracy countries are Armenia, Bangladesh, Georgia, and Zimbabwe, all over 90 percent.
  • The highest-piracy regions are Central/Eastern Europe (67 percent) and Latin America (65 percent). The lowest regions are North America (21 percent) and the European Union (35 percent).
  • The United States has the largest dollar losses from PC software piracy, $9.1 billion in 2008, because it is the largest software market in the world.

If you are interested in the detailed report, you can get it here.

Nation with billions still outplacing multi-billion deals

Large deals are still being (or waiting to be) signed in Ch-Indian context, specially in the IT/ Telecom sectors.

India’s domestic demand:

Multi-year IT outsourcing deals from new telcos in India (Unitech Wireless, Loop Telecom, Swan Telecom, ByCell Communications and Datacom) are likely to be worth up to US$2 billion. Taking a cue from Bharti, the pioneer in this aspect (was later adopted by the likes of Vodafone, Idea Cellular), new telcos are likely to outsource their all IT operations, including setting up of IT networks and managing services. Leading Indian IT vendors such as Wipro, Infosys, Tech Mahindra are running against each other and the likes on IBM (contribution from India to its global revenue has soared in recent times). Most of these new telcos have already shortlisted IT vendors and are in different stages of talks.

According to reports :

  • Unitech deal (valued around US$ 600 million over 10 yrs) is expected to be finalized in May.
  • Swan Telecom (expected to be worth US$500 million) is looking at 2Q to finalize vendor.
  • ByCell Communications is evaluating proposals from vendors and likely t o decide on partner(s) soon.

Aircel, a regional telco that revved up plans to become a full-fledged national operator in 2009, has recently awarded a nine-year contract to Wipro. Deal was valued to be US$600 million.

China Inc. looking outward to ink multi billion dollar deals:

Chinese government has taken extra steps to help companies win deals from US and Europe.

Bloomberg reported on 27th April ’09 : “Chinese delegation in Washington, D.C. for a forum had signed 32 contracts totaling US$10.6 billion. The forum was hosted by the U.S. Chamber of Commerce and China Chamber of Commerce for Import and Export of Machinery and Electronic Products. Among the U.S. signatories are IBM, Cisco Systems, Hewlett-Packard, Dell, Microsoft, Oracle and Sun Microsystems. “

February ’09 update : “A trade delegation of about 200 Chinese entrepreneurs led by Commerce Minister Chen Deming arrived in Germany yesterday as the first leg of their four country tour. Following Chinese Premier Wen Jiabao’s Europe tour earlier this month the trade delegation will also visit Switzerland, Spain and Britain and is expected to sign a series of deals worth up to $15 billion. The delegation consists of joint ventures, state-owned and private companies and plans to sign deals for automobiles, machinery, aircraft engines, railway equipment, and foodstuffs.”