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China's software outsourcing industry is expected to shorten its gap with India in about three years with the advantage of a huge domestic market and a rich talent pool, experts said at the two-day Global IT Outsourcing Summit 2003 which opened in Shanghai yesterday.

But the lack of ability to explore the high-end market and the absence of senior software project managers could hamper the rapid development of Chinese software exports, they noted.

"Although China's software industry has just taken off, it is going to largely catch up with India in 2006 given its huge domestic market," said Girija Pande, Asia Pacific director of Tata Consultancy Services - a subsidiary of India's largest software firm.

"But China needs to nurture large-size companies to be capable of handling the whole solution of complicated software, instead of only handling low-end orders," he added.

Pande said most Chinese companies doing outsourcing work employ fewer than 100 workers, too small compared with their counterparts in India. China generated about US$1 billion from software outsourcing last year, only a 10th of India's.

However, the past few years have seen China's software outsourcing business starting to boom.

In shanghai, it is gaining momentum as many multi-nationals have shifted orders to the city from countries like India and Ireland.

By the end of last year, Shanghai has got 1,207 software companies with a total revenue of some 11.7 billion yuan (US$1.4 billion).

The city's software exports were valued at US$175 million last year, up 2.4 times from that in 2000. That accounted for about 12 percent of the country's total.

Microsoft and Hewlett-Packard have opened global software research and development centers in Shanghai.

Ericsson has also set up a telecommunications software research and development center.

Shanghai pudong Software Park Co Ltd, the city's software export center, is aiming to become the world's top R&D center in 2010, said Hu Hongliang, its general manger.

"We will finish a 580,000-square-meter software export center housing 20,000 staff in the park in 2006 with exports volume hitting US$300 million," he said. "In 2010, the exports could touch US$3 billion while there will be 100,000 engineers involved in software outsourcing work."

Last year, 29 companies in the park had combined software exports of nearly US$100 million.

Tang jun, president of Microsoft (China) Co Ltd, said Chinese firms must explore the market in the United States and Europe if they want to develop further.

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