China's software industry is not a threat to Indian IT firms, according to a study by two Chinese scholars.

Chinese and Indian software industries have different beginnings. Besides, the Chinese industry has a distinct structure and role in the country's economy that is quite different from India's export-driven software industry, says the study conducted by Ted Tschang of Singapore Management University and Lan Xue of Tsing Hua University.

The more technology-intensive ones among Chinese software companies are spin offs from government research institutes and universities. This hardly happened in India, say Tschang and Xue.

Beijing University and Tsinghua University are well known for their involvement in many software start-ups. The company Human Technology, for example, was set up by chemistry graduates from Tsinghua, who managed to produce educational software. Over 60 per cent of the firm's employees are also from the same university!

Indian universities, on the other hand, are not known to inspire students to begin start-ups, especially in the software business. Even premier institutes like the IITs and IIMs tend to churn out graduates who work for big companies elsewhere.

Chinese firms continue their relationship with research institutes and source lots of fundamental technology from them. Indian firms, in contrast, source the bulk of their technology and techniques from multinationals.

China's product-focused firms are geared towards the domestic market. Indian firms focus on services exports.

China is expected to be the second fastest growing country for IT services in the world, although it lags behind matured IT services economies, such as US, UK, Japan and Australia.

Analysts predict that Chinese IT services market will reach $4.9 billion in 2003, an 18.1 per cent increase from 2002 revenue of $4.2 billion. IT services revenue in China is projected to reach $8.9 billion in 2006, a compound annual growth rate of 19.6 per cent.