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Patience Is Virtue in China, India IT Learns

As chief executive officer of one of India's most powerful IT services companies, S. Ramadorai is accustomed to managing a company growing at warp speed. At the helm of Tata Consultancy Services (TACSF), he manages a workforce of 75,000 people and is currently absorbing about 25,000 new employees each year. However, there's one place where Ramadorai has learned to be patient: China.

Among Indian companies, TCS has been a China pioneer. When Ramadorai launched the Chinese operation three and a half years ago, TCS was one of the first Indian IT companies on the mainland. But progress has been slow: Today, TCS has just 500 people at its wholly owned subsidiary located in the eastern city of Hangzhou. A workforce that small is pretty much just an outpost at a company as vast as TCS.

Ramadorai promises that the TCS China will start to speed up. The company has become a joint-venture partner with the city governments of Beijing and Tianjin, both of which have IT parks where they want TCS to take the lead in setting up software development centers. And TCS has landed Microsoft (MSFT) as a partner in the joint venture, too. (The breakdown of the JV: The Indians own 65%, the Chinese have 25%, and the Americans 10%.)

Commitment to Expansion

The JV has now received Chinese government approval and will be up and running soon, Ramadorai says. He plans to merge the Hangzhou subsidiary into the JV and increase TCS's headcount in China tenfold, to 5,000, by the end of the decade. "We will be one of the largest in China," he promises, boasting that the expansion "shows our long-term commitment to that country."

As Chinese President Hu Jintao prepares for his Nov. 20 arrival in India, the first visit by a Chinese head of state in 10 years, many other Indian companies are eager to show their long-term commitment, too. Indian companies such as Infosys (INFY), Wipro (WIT), and Satyam Computer Services (SAY) all now have China operations.

Like TCS, most of the Indian companies today have fairly small operations in China. But, like TCS, most have plans to grow quickly in order to serve both multinational clients in China and local Chinese companies.

Moving into the Hinterland

Having set up their first China locations in the past few years, they are now looking at moving into the Chinese hinterland to reduce costs and make use of a cheaper workforce. The Indians also hope to use China as a base to win business from Japan and South Korea (see BusinessWeek.com, 3/8/06, "India Turns to the Middle Kingdom").

One item likely to be discussed next week by Chinese and Indian diplomats is the difficulty that Chinese companies have lately encountered in India (see BusinessWeek.com, 10/18/06, "Chinese Companies Not Welcome in India?").

While he does not deny that Chinese companies such as Huawei and ZTE have encountered difficulties trying to expand their business in India, Ramadorai contends that India's software services providers have not had an easy time breaking into China, either. "Indian companies have problems understanding what the opportunities for access into China are," he says.

"Investment Mode"

That might explain why Indian outsourcing specialists have been slow to take off in China. Consider, for instance, Infosys. With a subsidiary in China, Infosys has set up software development centers in Shanghai and Hangzhou with over 250 employees.

Regions : Asia