Chinese software providers are stepping up efforts to tap rising demand for business software as more and more companies are increasing IT budgets after the economic slowdown.

UFIDA Software Co Ltd, China's biggest management software vendor, said it would acquire new companies in the near future to expand its presence in the enterprise resource planning (ERP) market.

Software provider Kingdee plans to establish two research centers in Shanghai and Chengdu in the next quarter.

"The market has warmed up as companies are showing increasing willingness to pay for IT services," said Zheng Yulin, vice-president of UFIDA. "That's why we are not jamming on our brakes, but stepping on the gas instead."

Even the small- and medium- sized enterprises (SMEs), which were badly hit by the economic slowdown, have begun to revive their postponed IT budgets during the second half, Zheng said.

Cao Kaibin, a senior analyst with research firm CCW Research, said the ERP market would register steady growth, led by a recovering manufacturing industry.

UFIDA has expanded aggressively over the past six months by setting up 16 subsidiaries and employing more than 1,000 technicians, in an effort to go deeper into second- and third-tier cities and cover more SMEs.

Another leading Chinese software provider Kingdee set up nine subsidiaries in the second half of this year. The company has also been building a third software park in Beijing since September after two parks in Shenzhen and Shanghai.

"Noticeably, some large companies, rather than cutting their IT budgets, went on increasing them amid the economic crisis," said Hao Dengsheng, assistant vice-president of Kingdee.

Though overall software sales of the company declined by 4 percent year-on-year to 281.5 million yuan over the first half, software sales targeted at the high-end market grew by over 50 percent, according to Kingdee's half-year financial report.

UFIDA's software sales for large companies were also up 40 percent year-on-year during the same period, said UFIDA Vice-President Zheng Yulin.

The high-end ERP market, which was the main revenue-generator for software companies during the slowdown, will witness more intensified competition, according to Chen Yingli, analyst with research firm CCID Consulting.

"Competition will be fiercer between Chinese and foreign software providers in the high-end market in 2010," said Chen, adding that Chinese providers can stand up to their established foreign counterparts in the high-end ERP market.

According to CCW Research, China's ERP market sales reached 3.5 billion yuan in the first half of 2009, up 12.5 percent year-on-year. UFIDA topped the list with a 25.9 percent market share, followed by SAP with 16.3 percent. Kingdee and Oracle had 13.7 percent and 12.7 percent market shares.