China: The last frontier for India’s outsourcers

October 14, 2010

While India’s IT services and outsourcing firms have managed to build a global foot print in just about every corner of the world, there is one market just over the Himalayas that seems almost as insurmountable as the mountains themselves: China. In fact, a recent article in the Financial Times pointed out the following barriers faced by Indian IT services and outsourcing firms when in China:

China-The last frontier for India’s outsourcers

  • Language Barriers. The use of English as a medium has allowed Indian IT services and outsourcers to build their global footprints but in China the use of English has been an obstacle.
  • Cultural Affinity. India’s cultural affinity with the West and the English speaking world in particular is in marked contrast to the more inward looking world of China and Chinese culture.  
  • State-Influence. Indian IT services and outsourcing firms are more accustomed to operating in the more flexible entrepreneurial environment of India rather than the heavily state-influenced Chinese market.
  • Attrition Rates. N. Chandrasekaran, the chief executive of TCS, pointed out that attrition rates are actually higher in China than in India – further making it difficult to establish a large footprint in the market.
  • Personal Networks. The importance of guanxi or personal networks in China further complicates the ability of Indian IT services and outsourcing firms to find and leverage opportunities in the Chinese market.
  • Business Style. Pramod Bhasin, the chief executive of Genpact, pointed out that India’s entrepreneurial style of doing business tends to not easily gel with the more deliberate business culture of the Chinese.

Nevertheless, India’s major IT services and outsourcing firms have already established a presence (albeit small compared to their presence elsewhere) in China
which they also plan to grow:

  • In September, the China Daily reported that Wipro will double the number of employees in China from a current headcount of 600 to 1,000 by the end of 2011. It was also noted that Wipro views the Chinese finance, manufacturing, media entertainment, technology and telecom sectors as promising. However and while Wipro has two service centers in China, one in Shanghai and another one Chengdu, China Daily noted that Wipro does not have plans to expand their presence to other Chinese cities.
  • Last December, the South China Morning Post reported that Tata Consultancy Services (TCS), which had 1,200 employees in China at the time, was planning to have about 5,000 employees by 2014. It was also noted that Wipro currently has service delivery centers in Beijing, Shanghai, Tianjin and Hangzhou and that they forsee double-digit growth of more than 20% for 2010 in China.
  • In July of 2009, the Hindu Business Line noted that Infosys had 1,053 employees in China according to its 2008-09 annual report. During the year, Infosys China had serviced 71 clients and generated revenues of Rs 129 crore but they also had a net loss of Rs 11 crore.

Hence, there is still plenty of room for growth and plenty of time for Indian IT services and outsourcing firms to learn and to better understand the intricacies of the Chinese market. Moreover and as Pramod Bhasin, the chief executive of Genpact, noted in the Financial Times, successful USA companies in China such as Accenture, IBM and McKinsey became successful by eventually establishing Chinese identities and hiring Chinese workforces. In other words, if Indian IT services and outsourcing firms are to succeed in China, they must first succeed at becoming Chinese.


Comments

3 Responses to “China: The last frontier for India’s outsourcers”

  1. Graphic Design on October 15th, 2010 12:29 am

    China is the future. The huge population alone makes me think that this is a great frontier to break into.

  2. Roy W. on December 15th, 2010 12:37 pm

    “In other words, if Indian IT services and outsourcing firms are to succeed in China, they must first succeed at becoming Chinese” — This is indeed very true. Understanding the local culture and being able to work with local people is key to success in China. I believe Wipro, Tata and the likes will find the way to learn so and operate successfully in China. Their success is important to a healthy IT market in China.

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