There is growing interest in outsourcing software development to China, but some CIOs worry about their intellectual property. Is that perception accurate?
An increasing number of software companies as well as CIOs from a variety of industries are looking to China to outsource some of their software development. Good experiences in India have made the prospect of going far offshore more palatable. And as prices in India and other markets rise, cost-conscious CIOs are looking for even less-expensive alternatives.
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But there is one big red flag that gets raised when executives talk about sending work to China – weak intellectual property (IP) protection. A recent survey by China’s Ministry of Information Industry found that 61 percent of foreign companies operating in China see software piracy as the number-one problem of doing business there. Indeed, the IP issue may be why the Chinese outsourcing industry is facing fragmentation and low market share. In 2004, China captured only $US700 million of the global IT outsourcing market, valued at $US198 billion, and there are virtually no outsourcing players there with more than a few thousand employees. Multinational companies fear that disreputable service providers could resell their software under a different name or even sell the code to competitors.
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