For a large part of this decade, India?s software behemoths have been struggling to have a good look into the Chinese code-writing kingdom. Local boutique software services, which sprung up in all the major cities of China, have been walking away with the majority of the deals, as Indian firms look in dismay. The Chinese firms, by their size and talent, are probably no match for the Indian IT majors. Back home on the domestic turf they would have eaten some of these smaller Chinese ?dragons? alive. But this is communist China. It?s a different planet altogether, and one can be in it only for the long term.
Hanging on in China is easier said than done though. In fact, the Chinese are not worried about inviting you over. It is only after setting foot that many Indian firms find the going tough. Companies like Infosys, Wipro and TCS that are huge brands in India, suddenly feel like fish out of water. The Chinese do not attach much value to Indian IT brands and slick talk cannot help them get anywhere either.
So it boils down to pure public relations play. The Chinese communists are still not easily convinced about India?s software capabilities, although the world had accepted it long ago. Indian companies have so far looked at China as a delivery centre for global clients wanting to outsource work and as a near-shore facility for Japanese customers. But they have had little resistance to offer the 12,000-odd boutique Chinese IT firms, which close deals at less than $10 an hour. These firms do not look at their profit numbers, as long as volumes are sound. Hence, Indian firms often find themselves outnumbered. The answer to this puzzle lies in adding more employees to take on the Chinese might. IT majors like Wipro and Infosys have started to add significant numbers to their headcount in the hope that they can face off with the Chinese.
Infosys China is planning to add 1,000 more techies over the next one year. TCS China is looking to take its headcount to 5,000 employees by 2014 from 1,100 at present. And Wipro plans to hire another 750 people in the next 15 months, taking its workforce beyond 1,000 in the country. Most of the hiring is being done locally to thwart the local language advantage enjoyed by the boutique competitors. Indian firms are now feeling much more comfortable in China with the new strategy and they hope they can now start to compete on an even keel.
Just the way they do it in India, the IT firms have realised they have to target some of the verticals where Chinese competition can be overwhelmed. For instance, Wipro is sharpening its raid into domestic system integration deals in the months ahead, targeting larger banks, utilities and energy companies. Infosys is sinking its teeth into financial services and manufacturing and TCS has already seen some traction in the banking segment of the country. But one cannot hope to take on the Chinese with just business acumen. Relationships and networking are an integral part of the deal as well. Getting on to the wrong side of the Chinese government is quite easy, but it is very tough to get out of that trough. So, Indian firms are learning fast to walk on the right side.
They are delegating a third of their workforce in China to negotiate with the government.?Also,?some staff is assigned with the task to network and get?to?know?the officials culturally. Just the way India looks at Chinese companies with suspicion, the Chinese government, too, uses special glasses to view Indian firms. Trust is an important element here, but not something that is spoken about aloud. Although the Chinese are getting better at software services, they are still struggling to find good IT managers. The Chinese education system still has its emphasis on learning by rote. The culture of innovation is missing and that?s where India has the edge, apart from being able to speak English comfortably.
But at the same time, India is getting expensive as an outsourcing destination. Indian IT compensation has been inching north and attrition is on the rise again. Wipro said attrition touched 18% last quarter, which is something China does not have to worry about. The Chinese engineers have immense loyalty to their place of work and can spend 15-20 years in the same place much like the Japanese do. They also come much cheaper.
But Indians are fast acquiring the reputation of being patient ?triers? in China. They have been around for a few seasons now and are slowly picking up the threads. What they now need is a pioneering growth story that can ignite the rest. One per cent inspiration, anyone?
dj.hector@expressindia.com