With top Indian software giants like Tata Consultancy Services, Infosys and Wipro setting up and expanding operations in China, the domestic players have started feeling the heat.
"Chinese software companies are looking to speed up their development in a bid to grab a larger slice of the global information technology market and to fend off threats from their Indian counterparts," state-run China Daily reported on Tuesday.
HiSoft Technology International Ltd, a top Chinese software service company announced yesterday that it had acquired two rivals -- Beijing-based Ensemble International and Hong Kong-headquartered Teksen Horizon Systems.
The companies declined to reveal the value of the deal, but said it was the biggest merger so far in the software service industry.
"Chinese software companies are quite small and weak, but as more international companies are getting into this market and bringing us challenges, we must make ourselves stronger," Li Yuanming, chairman and chief executive officer of HiSoft, said.
With the acquisition of the two companies, HiSoft has taken the number of its employees to 1,800, making it one of the top three such firms in China. Li said his company must move fast to prepare for challenges, with acquisitions being a reasonable step to take.
Dong Lu, associate with Granite Global Ventures, said with the Indian giants building up their presence in China, many Chinese companies are already increasing their expansion pace.
Microsoft is pushing Wipro to form a joint venture with companies in Beijing, a move supported by the Chinese government and the Beijing Municipality. The aim is to expand the city's software industry, the paper said.
In mid-2005, Tata Consultancy Services and Microsoft were selected as partners to form a joint venture company in Beijing for IT outsourcing services and solutions for global and domestic market. The venture is expected to come up in 2006.
Infosys, which has over 46,000 developers worldwide, wants to have a 6,000-strong team in China, the paper said.
The Indian companies, with their advanced expertise and huge development teams, are formidable competitors for domestic firms, which usually have only hundreds of people on staff, the report noted.
Heng Choon Lim, vice-president of strategic planning at HiSoft, said his company wants to have 3,000 workers by next year.