China Software: In a World of It’s Own
November 11th, 2009
The November issue of Eurobiz Magazine has an excellent article on the state of the software development industry in China. Essentially, the Chinese government is encouraging an insular business culture whose engineers are not learning international standards for writing, testing and implementing code to become more ingrown. Most of the software development companies in China are job shops of between a dozen and a hundred people, for whom small, low-margin projects are the norm – which suits low-margin service- and manufacturing-clients who have little experience with software projects just fine. The “good-enough” approach fits in just fine with centra-l and provincial-government requirements to control the growth and direction of industries, and to restrict the flow of information. Governments dole out huge subsidies in a short-sighted strategy to grow an industry that is already stunted and will remain fragmented as long as it remains protected.
The Green Dam software is a perfect case in point: the Chinese government had insisted during the summer of 2009 that all computers sold in China have the internet-filtering software on them. Green Dam, though ostensibly private, was heavily subsidized by the central government. A couple graduate students in the States posted an investigation of the software that showed Green Dam was full of security holes and could actually be used to turn the computers that hosted the software into slaves. The American company Solid Oak accused Green Dam of copying programming code from Solid Oak’s own software – and copying it badly, to boot.
China’s trend toward software industry insularity does not bode well for foreign companies invested in China who will have to go the extra expense of using Western branded software with Western-level customization, development, testing, implementation and training costs. The trend also implies a services outsourcing industry that will remain far behind India’s for the coming decade in terms of technical prowess and customer service levels.
Further reading: FT
November 14th, 2009 at 11:09 pm
I too have seen the sort of software houses you are describing, but the large Chinese outsourcing companies doing work for foreign companies operate very differently. These big companies have a host of highly skilled people both outside and inside China. These companies are already competing head to head with the Indian companies on many projects and I fully expect them to continue expanding their range.
November 16th, 2009 at 7:09 am
Hi, China Lawyer;
Yes, there are indeed some larger shops in China doing international business, but of those large shops there are basically two camps: the ones with business from Western companies that also use Indian outsourcers and want to hedge their risks (ie, not wanting to keep all their eggs in one Indian basket); and those that have been tied into the Japanese and South Korean markets for the last ten years. The ones that cater to the East Asian market are finding it devilishly difficult to diversify into the Western market (for technical and marketing reasons), while the bulk of the work for the other group will actually come from multinationals already inside China. Domestic growth for the second group has far-outstripped growth in the international marketplace, especially since the Western economies tanked.
Check out a previous post from a couple years ago, where I visited an Indian and a Chinese outsourcer – both in the Shanghai area – to compare and contrast: http://thisischinablog.com/2007/09/07/no-free-lunch-in-china-it-outsourcing/.