A commond question about China software industry is: while China leads India on hardware, manufacturing and many other aspects, why is she behind India on software? After all, Chinese are smart people too. Well, the main reason, I think, is China has domestic demand for software, while India has to compete with the western developed countries (US, UK) for the projects. Or put it in another way, when Chinese companies enjoyed the relatively “easy money” for relatively simple domestic projects, Indian companies are swimming in the ocean, fighting with bigger fish such as IBM to get the food. The result? 20 years later, when Chinese companies are still swimming in the Eastern China sea, their Indian counterparts already landed in New York, LA, and London. This is not to dismiss the effort of Chinese software companies’ growth, which I will talk about later. Let me talk a little about Chinese domestic demand for now.

In the late 80s, there were need for companies and goverment agencies in the accounting area. The companies wanted to use computer to keep track of things. The goverment wanted to standarize things so that their life will be easier (collect tax etc). Two guys (incidentally, both accounting major) started developing the software: Wang Wenjing founded UFSoft in Beijing and Xu Shaochun founded Kingdee in Shenzhen. Later on they both evolved into ERP software vendor. It’s a natural extension from accounting to ERP, because ”accounting” covers a great deal of the business: from planning, budgeting, to sales, revenue and cost. Today both companies are leaders among domestic ERP vendors; and UFSoft is bigger than Kingdee. But foreign vendors such as SAP and Orcale are getting the high end of the markets, due to their product strength and better relationship with multinational companies.

We know ERP certainlly is not the only game in the town, but China software companies essentially did start on this application. Some other companies such as Hangzhou’s Sunyard developed software for the banks; Dong Ruan (NeuSoft) started software outsourcing in Shenyang and Dalian. They both grow into big players. Meanwhile, there are many smaller shops which has 20 to 100 people and they develop custom software and provide consulting services for specific industries.