Fast forward

As far as the world’s largest software outsourcing company is concerned, only China and India have the right combination of people and know-how to become powerful and profitable players in the outsourcing industry. But Tata Consulting Services (TCS) is under no illusions as to how far China trails India in IT and outsourcing services.

TCS has some 85,000 employees spread around 47 countries and revenues of almost US$3 billion. The largest Chinese equivalent, Shenyang Neusoft, has about 8,000 people and revenues last year of US$340 million.

With China pumping out a million new engineers every year, though, it has potential. India produces 400,000 engineers a year.

"China is quite important," said Pradipta Bagchi, senior general manager for corporate communications for TCS in Mumbai. "One, we do a lot of work with global customers over there. Two, it is a good mix in terms of language capability… Third, the Chinese market is a great business opportunity."

TCS first entered China in 2002 and, while revenues from the region are still about one tenth of its revenues from the US alone, growth is rapid. The company had about 800 employees at the beginning of the year but a new venture announced in February by TCS China, in which TCS has a 65% stake, could see its presence expand several times over.

The joint venture didn’t have an easy birth. Launched in 2005, it took more than a year to work out the details that finally saw three Chinese companies – supported by the National Development and Reform Commission – take a 25% share. Microsoft came in late last year, buying 10% of the venture. TCS China’s first major project is a tailor-made foreign exchange trade system for the Bank of China.

As part of its plan to build China’s "first large scale outsourcing technology company," as Bagchi put it, TCS China wants to virtually import an entire industry into the country.

"China could be the next India because they have the talent pool. They have the mastery of skills required to take on the IP outsourcing jobs," said Adinamozhi Sundaram, who heads TCS’s Hangzhou center, the oldest and largest in China. He has been living in Hangzhou for about four years and talks with some warmth about the good reception the company has received from the local government. He believes this has made it possible to plant the seeds of what is now a growing industry in China.

But the challenges are almost as large as the opportunities.

China graduates plenty of new engineers but there are few people with commercial experience and TCS wants to hire more than 4,000 in the next couple of years. It is difficult to find employees equipped with both the English level and the experience required to lead a project.

TCS faces further obstacles in developing a local market – foreign multinationals account for the largest chunk of business – and higher costs than normally found in India.

"The biggest challenge is to scale up," said Sundaram. "There are opportunities here [but] we need a critical mass."

For Bagchi, however, it is China, India or nowhere. "If you want 4,000 people or 5,000 people in a year, there’s no other place in the world to do it other than India or China," he said.