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Indian IT companies size up China
Date:2011/1/17      View:951
 
India's information technology (IT) companies started their businesses in China by serving large multinational clients in the country but now they are ramping up efforts to win more domestic companies in order to consolidate their foothold.

Tata Consultancy Services Ltd (TCS), India's largest IT services company by sales, is leading the effort to expand the presence of the Indian IT industry in China - although cracking the Chinese market may not be an easy job.

"Chinese companies are still used to the traditional global brands. They have not yet seen us. So it is also a question of brand-building for us," Girija P. Pande, head of the Asia-Pacific region of TCS, told .

Unlike their Western counterparts, large Chinese companies usually have their own IT department and domestic outsourcing in China has yet to take shape.

"But when they start doing it and focus on their core business, then the Indian companies can bring value to China's domestic outsourcing market," Pande said.

India exported $50 billion in IT services to China in 2009 and industry analysts expect the number to exceed $100 billion annually in the next five years. Chinese Premier Wen Jiabao also vowed to further remove the trade barrier to Indian goods and services during his visit to India in December.

In recent years, TCS has emerged as the largest Indian software business company servicing large Chinese State-run companies. It has established a noticeable presence in China's banking industry. Four major Chinese banks including Bank of China and Hua Xia Bank have been clients of TCS' core banking system.

Pande said TCS needs to further increase its presence in China and added the company is very keen on expanding into the sectors of government, insurance, healthcare and manufacturing.

"I think we have to get more Chinese large companies to see our capability," he said. TCS currently hires more than 170,000 people in 40 countries around the world, but it only has 1,200 people in China. Pande said the company plans to increase its workforce in China to 5,000 people in the next three years.

Pande also pointed out that Indian companies which are used to working in the English market need to shed the mindset that language is a barrier to business in order to have a fully-fledged operation in China.

Since the eruption of the global financial crisis in 2008, India's IT companies have begun to look for business opportunities in emerging markets in order to reduce their dependence on the US and European clients.

Pande said emerging markets now account for 20 percent of TCS' business and the company has been growing by 40 percent for the last seven years in Asia. TCS earned revenues of $6.34 billion in the 2009 fiscal year, about 6 percent of which came from the Asia-Pacific region, where Japan, Australia, and China are key markets.

Wipro Technologies Ltd, a leading Indian software company, is also following TCS' step in expanding into the growing markets.

"China has become our preferred delivery center for our Japanese customers," said Gangadharaiah C.P., vice-president and global head of Wipro Technologies' testing services. "We want to build our biggest research and development center in Asia in the city of Chengdu."

Rajan Kohli, Wipro's chief marketing officer, said that the company plans to reduce reliance on the mature markets in the US and Europe as demand in emerging markets such as China is booming.

"China has yet to be the major market for us, but it will be one of the fastest growing markets for us in the next five years," Kohli said.

In the meantime, China is promoting its own IT outsourcing sector to challenge India's dominant position in the business globally. Chinese companies are now increasingly picking up orders in the US and Europe, both traditional strongholds for Indian companies.

According to a survey by accountancy firm KPMG, China's total outsourcing market will grow to $43.9 billion by 2014, more than double its $20 billion in 2009.

"China will grow and there is no doubt about that," Pande from TCS said. "It isn't an easy task to keep leading the IT industry, but competition keeps us all slim and healthy."
 
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