In 2012, a new generation of experienced, well-positioned leaders will be cultivated in China's IT industry through a series of mergers and acquisitions driven by the combined effect of shifts in the global climate and government support at home.

Software enterprises in China face a common problem nowadays. Most are hindered by their small scale and urgently need the support of larger companies for further development in this industry. This has led to a situation in which the combined income of the top 100 domestic software enterprises is still lower than that of a single well-developed international brand: IBM.

To further strengthen their position in the market, more international companies in the computing industry, such as Intel and IBM, have bulked up through frequent acquisitions of other software companies in recent years to optimize structure.

Despite many challenges, China's software and information service enterprises still have experienced spectacular development in the past 10 years, achieving an annual increase of 38 percent. The total volume of this industry reached 1.3 trillion yuan ($204 billion) in 2010, 23 times that of 2000. What's more, it is estimated to exceed 1.8 trillion yuan in 2011.

The widespread use of network, software and information services in China has brought about deeper integration between software technology and the Internet as well as closer ties among Internet corporations and software enterprises.

Since the Internet is becoming the major platform on which software is being developed, deployed and operated, more domestic companies in this industry have begun to focus on offering personalized and dynamic services.

In order to achieve the transition, companies are encouraged and required to constantly develop technologies, innovate new business models and acquire core technologies, thereby providing the best possible products and solutions for users.

In addition, Internet corporations, such as Google and Baidu, have broadened the scope of their business by developing their own software, such as search engines and other supplementary software.

Software enterprises, such as Microsoft, are likewise tapping into the Internet market. The boundaries between these two types of companies are becoming increasingly vague.

The widespread use of networks not only reshapes this industry but also, more importantly, creates greater demand for software and information services.

New markets for software are being found in traditional industries, the modern manufacturing industry and the service sector, which need advanced software to manage their businesses on a daily basis.

Companies dealing with finance, medical services and telecommunications have an even bigger demand for software products and information services. This is expected to be the major driver of growth in the industry in 2012.

Recognizing the urgent need and great potential for software and information services, government entities at all level have responded by introducing more preferential policies to boost this new and promising industry based on new developing characteristics. A series of national policies favoring the software industry has been released and was amended in 2011. It continued taxes cuts and other existing preferential policies, and it was expanded to cover virtual services, such as software technology.

Governments have realized that the new generation of information technology based on network applications, such as cloud computing, Internet of Things and smart net, will fuel innovation in this industry. To take advantage of this trend, financial supports for these next-generation technologies will be increased in 2012, and more than 660 million yuan will be allocated.

The guideline for this industry, the 12th Five-Year Plan on Software and Information Services, has been in force since 2011, leading to new favorable policies. For example, there is funding support for software development and applied software solutions for other industries, which can promote the convergence of the manufacturing and information industries.

zhuchengpei@chinadaily.com.cn

(China Daily 06/15/2012 page15)