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For Indian IT biggies, China is hot
Bruce Einhorn, BusinessWeek | March 24, 2006
It's fair to say that Hari Natarajan is obsessed with Microsoft. A vice-president at Satyam Computer Services, one of India's biggest outsourcing specialists, Natarajan is in charge of the company's strategic-relationship unit with Microsoft. Or, as he puts it, "I breathe, eat, and drink Microsoft every day."
And what occupies the Microsoft-focused thoughts of Natarajan these days? Easy. Satyam and Microsoft are partners in a new joint venture designed to develop the software-services market in China. Right now, China isn't much of an outlet for Indian outsourcers like Satyam. But Natarajan and others at Satyam are determined to change that.
That's one reason Satyam and other Indian companies have been busy putting down stakes in China. Infosys has acquired 50,000 square meters of land in Shanghai and 300,000 square meters in Hangzhou, and is building new centres in both cities.
Tata Consultancy Services has reached a deal with Microsoft and the Chinese government to launch a new joint venture in Beijing this year. And on March 1, Zhang Guangning, the mayor of the southern Chinese city of Guangzhou, visited Satyam headquarters outside of Hyderabad in southern India. While there, Zhang and Satyam's managing director, B Rama Raju, signed a deal to set up a Satyam operations center in Guangzhou.
With China attracting tens of billions of dollars in foreign direct investment each year, there's a growing list of Western multinationals that need outsourcing help for their Chinese operations. And Chinese companies themselves are starting to realise that they not only need to upgrade their IT systems, they need outside help to do the work for them.
One of the early Indian movers into China was Bangalore-based Infosys. Early this decade, following visits to Infosys headquarters by then-Premier Zhu Rongji and Li Peng -- China's longtime No 2, who at that time was head of the National People's Congress -- the Indian company announced plans to open an office in Shanghai.
Why the renewed commitment to China? According to Girija P Pande, Asia-Pacific director for TCS, Indian companies have to build up their workforces there. The business model depends on it. "This is a business of skill and scale," he explains.
"There aren't many countries with both. In Asia, you have India and China." Of course, companies like TCS are already employing tens of thousands of Indian engineers. That leaves China as an untapped talent pool. "So China becomes important as well," says Pande.
Not everyone is so sure. A December report from analysts at Merrill Lynch noted that China produces 400,000 new computer-science graduates a year, compared to 181,000 IT-engineering grads in India. China also boasts far better infrastructure, the Merrill analysts reported, and less red tape than India.
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