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IT majors welcome move to China
Priya Ganapati in Bangalore | June 27, 2003 12:21 IST
Prime Minister Atal Bihari Vajpayee's speech in Shanghai on Thursday calling for an Indo-Chinese partnership in infotech has a willing audience among Indian IT companies.
Rather than see China as a threat, IT companies in India smell opportunity and treat China as yet another market to help swell the bottom line.
In his address to the IT summit hosted by NASSCOM, the apex industry association for software and services companies in India, Vajpayee said, 'India and China have come a long way from being poor and industrially backward countries to emerge as leaders in cutting edge technologies, which drive today's knowledge economy. One of the main objectives of my visit to China is to impart fresh momentum to the comprehensive bilateral cooperation, which India and China are seeking to build. If our economic cooperation is to break out of the traditional mould, knowledge-based technologies need to occupy a far more prominent position in our economic interaction.'
Indian IT companies will heed that advice as they look to expand their operations in China.
Tata Consultancy Services, India's biggest software company, plans to hire 150 software engineers for its development center in China.
TCS established its China subsidiary last year and employs over a hundred people. Nearly 70 percent of its employees are hired locally.
"We are looking at China for three strategic reasons. First, to be close to our global clients who are rapidly expanding in the Chinese market. Second, to service the huge domestic market in China. Third, to be ready for China as an offshore destination for projects from Korea and Japan," says Atul Takle, Vice-President (Corporate Communications), TCS.
Vajpayee suggested that India and China collaborate to spread IT education and initiate community level low cost computing, home networking solutions, more efficient use of bandwidth and e-marketing. He urged Indian and Chinese companies to partner in R&D.
Though there is no partnership yet between Indian and Chinese companies in these areas, China's domestic market is what lures many Indian companies.
IT major Satyam Computer Services recently established a development center in China which employs about 30 people.
"The Chinese market has tremendous potential. We have to be present there to get at least a small pie of this market. Many of our global customers who set up operations in China tell us they are looking for support services there. It is definitely a market that will boom in the future," a Satyam executive told rediff.com
Despite the hiccups this is why companies are determined to set up shop in China.
For the last 18 months, Infosys has been trying to establish a development center in Shanghai. But its plans are stuck in red tape despite a personal invitation by then Chinese Premier Zhu Rongji when he visited the Infosys campus in Bangalore in January 2002.
Infosys hopes to make its presence felt in China this year through a subsidiary.
Few other companies are willing to go all alone in the Chinese market. Alliances with local software companies are seen as the safest way to get a foothold in China.
Less than a year ago, when Zensar Technologies wanted to set up a center in China it decided to go in for a partnership with a local company. Zensar established a joint venture with Hong Kong-based Asia Logistics Technologies. ALT specializes in providing supply chain management and logistics technologies solutions and services.
Hanzen Technologies Consulting Limited -- the 50:50 joint venture between Zensar and ALT -- is the first Indo-Chinese software company to start operations in China.
The company established its headquarters in Zhuhai in south China's Guangdong province and is in the process of setting up a 'software factory' that would meet the requirements of neighboring markets.
"The Chinese mainland offers a great business opportunity. Zhuhai is quite small, but it is amazing with its well-equipped technology parks, very good infrastructure and luxurious housing facilities. If a small place like Zhuhai is so good then you can imagine how aggressive and impressive places like Shanghai are," says Zensar CEO Ganesh Natarajan.
Hanzen hopes to combine Zensar's global experience with ALT's Chinese expertise to provide easy localisation and care to diverse customer requirements.
TCS too has opted for alliances with two Chinese companies -- eBIS, a provider of financial services solutions and Zoom Networks, which offers IT and telecom services.
"Chinese companies are still evolving project management and domain skills, which offers potential opportunity for ndian IT companies to enter into joint ventures with Chinese IT companies. This will also provide the opportunity to serve MNC customers of Indian companies who operate in the Chinese IT market. Further, India can engage with China to enhance its manufacturing base and encourage local integration of hardware products. This will help bring down costs significantly, helps domestic players; especially small and medium enterprises provide shorter sales cycle and faster local availability," says NASSCOM Chairman Som Mittal, who is also CEO, Digital GlobalSoft.
While China is one of the largest and fastest growing IT markets, India only exports $4.3 million worth of software to China.
"There is a large untapped opportunity for both countries to gain from collaboration and cooperation," says NASSCOM President Kiran Karnik. "Indian companies can tap the Chinese domestic software market; leverage Chinese talent in the area of chip design and telecommunications technology and set up offshore development centres in China to serve the Japanese market. Likewise, the Chinese can tap Indian potential in software services to their advantage."