A year and a half ago, Girija Pande began bringing programmers to China's honeymoon capital, Hangzhou. It was only fitting as Pande's company, billion-dollar Tata Consultancy Services (TCS), was itself having a bit of a honeymoon with China.
That honeymoon doesn't look like it's about to end.
Tata, a major global technology consulting firm, is mostly known for its development centers in India, where it is headquartered, but has its 24,000 employees scattered over 53 countries. By comparison, the headcount of its Chinese subsidiary, TCS China, seems tiny at 150 – but it's slated to grow fast. Pande is the regional director for TCS in the Asia Pacific, and the chairman of Tata Information Technology, based in Shanghai.
"This is already probably the fastest ramp-up anyone has had on the IT services side," Pande said. "And we hope to do much more. We are very clearly projecting to hire many more people – we will be doubling our employee base in China in next twelve to eighteen months." TCS is India's first global billion-dollar software organization, but it will have a pitched battle on its hands if it wants to make a similar mark in China.
TCS competitor Infosys, which has over 23,000 global employees, has also opened an IT development subsidiary in Shanghai, with a US$5 million investment. The company expects to employ 200 professionals and offer programming services to both Chinese clients and to multinational companies doing business in China.
BearingPoint, Inc, with 16,000 employees around the globe, is also in the race. The company has recently opened its first Global Development Center in Shanghai. It already has more than 200 employees, and plans to grow it to 400 to 450 by this summer.
According to Ling Sheng Chen, managing director of BearingPoint China Global Development Center, China offers all the cost advantages of India, plus the opportunity to really make a mark on the country.
"The Chinese software industry is still relatively young and in a rapidly growing stage," Chen said. "BearingPoint has a vision to grow our Global Development Center so that it will be the number one player in that country. In China, we have the opportunity to become the number-one player. In India, our chance of becoming number one is a pretty long shot."
BearingPoint and TCS have different plans for the market, however. TCS is starting out with Asia-focused development work: working on Chinese versions of international software projects, serving Japanese and Korean customers, and doing work for Chinese firms.
By comparison, some 80% of BearingPoint's development work is for its international clients, working on global development projects. Chen added, however, that the opportunity to enter China's growing market for services was a very attractive aspect to building its Global Development Center in Shanghai.
With the Chinese economy growing at 9 percent a year – and more and more Chinese companies entering the global marketplace – it's a good time to have them as customers.
Meanwhile, the Chinese business environment is also changing for the better.
"The physical infrastructure is exceedingly good," Pande said. "It's brand new, and the Chinese have spent billions of dollars creating a physical infrastructure that must be seen to be believed."
Pande said that he was also pleasantly surprised by his programmers' English-language skills.
"The people who we have hired have a reasonable level of English-language skills, because for the last 15 years, China has been switching over to English and the people coming out of it universities are reasonably conversant with it," he said.
However, he added that the programmers sometimes lack the process knowledge that Indian companies have developed over the last few years. "We have a very large training program to bring them up to scratch on our way of writing software," he said.
Pande also explained that there are still regulatory and compliance issues when setting up an offshore facility in China, though the regulatory climate is steadily changing for the better.
The regulatory climate is one reason that Stephanie Moore, an analyst at Cambridge, Massachusetts-based Giga Information Group, recommends against moving software development maintenance to China just yet.
"The market is too immature," she said. "And the problems associated with this immaturity – a lack of English language skills, the legal and regulatory environment and lack of intellectual property laws – make China too risky today."
However, she added that for Japanese and Korean companies China is a much more viable option primarily due to the language affinity and the close proximity to China.
Partly as a result of this, Boston technology research firm Gartner Group predicts that China will almost catch up to India in total outsourcing revenues by 2007: US$27 billion for China, US$30 billion for India.
China has already sent a strong message to the world with environmental enhancements ranging from intellectual property reforms to tax breaks for foreign direct investment. For TCS, all this is money in the bank. "Our experience has been exceedingly good, with over US$20 million in orders pending," said Pande.
If the regulatory climate continues to improve, more and more companies will be following TCS, BearingPoint and Infosys to their own Chinese honeymoons.
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