Indian IT majors are gearing up to scale the Chinese software wall. They are building a stronger bond with the Communist government, restructuring subsidiaries and hiring in larger numbers to tap the $18-billion IT market.
Infosys, which started its China operations in 2003 and hired only 2,000 people till then, is planning to add 1,000 more over the next one year. TCS is looking to take its headcount to 5,000 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.
Wipro, the last of the big-three services firms to enter the market, now calls China ?strategic? and company executives are making frequent visits to the country and the geography is reviewed in board meetings often.
Says Wipro?s joint CEO of IT business Suresh Vaswani, ?China will be a strategic driver over the next 3-5 years.?
“We are beginning to execute our plans,? he adds.
The firm has two centres in China ? in Shanghai and Chengdu City. Almost all employees are locals and the number of Indians does not exceed 10. Wipro hopes to pick up domestic system integration deals in the months ahead targeting the larger banks, utilities and energy companies, and technology firms. Infosys is going after financial services and manufacturing. Infosys CFO V Balakrishnan told FE the company crossed $30 million in Chinese revenues in FY10. ?We have broken even there,? he says. Infosys has centres in Shanghai and Beijing. It has invested close to $20 million in China over the last three years.
TCS has already seen some traction in the Chinese banking segment. India?s biggest IT services exporter will reportedly open a new delivery centre in Shenzhen, its fifth facility in China after Beijing, Shanghai, Hangzhou and Tianjin. TCS did not give out details of its Chinese operations, despite FE waiting for a week for its responses.
While executives from top-tier companies continue to be guarded with their comments on China, their tone during the last quarter suggests they are getting more comfortable dealing with a country that is culturally and structurally miles apart from the rest of the world. Indian companies have thus far tapped the country as a delivery centre for global clients wanting to outsource work and as a near-shore facility for Japanese customers. They may have burnt fingers in the domestic market because of tough local competition ? there are about 12,000 boutique IT Chinese services firms, according to management consulting firm Zinnov. ?These firms pick up business at dirt-cheap rates ? as low as $7 an hour for some service lines like testing. They are not worried about profitability. They want top line growth,? the chief strategy officer of a top tier firm said. Some of the domestic deals Indian firms have bagged, therefore, may have come at ridiculously low margins.
While domestic business for Infosys is improving, volumes are still tough to come by. Says CEO Kris Gopalakrishnan, ?The challenge is building the brand of Infosys. The firm is still not very well known and we have to understand Chinese business, the way it is done.? The powerful Chinese government can act tough if you displease it. ?They may not help you win a deal, but can ensure you don?t get any deals at all if you fall out with them,? an executive who is studying China closely says. Just the way Google found out.
Indian firms are also making other ?China-specific? investments. Wipro?s Suresh Vaswani says the firm is developing a Chinese-specific bid management capability. The company has also restructured the geography?s reporting pattern.