Tata to Expand in China to Capture the Growing Needs for Information-Technology Services of Domestic Chinese Companies
According to a recent report by Wall Street Journal, Tata Consultancy Services Ltd. plans to more than quadruple its work force in China over the next five years to tap rising demand for outsourcing services in the country.
India’s top software exporter in terms of revenue plans to increase its China staff to 5,000 by 2014 from 1,100 currently, said Girija Pande, executive vice president and head of Asian-Pacific operations. TCS has a total work force of more than 140,000 people in 42 countries.
“China is a big market. We are trying to grow there,” Mr. Pande said.
TCS, like its Indian peers, has faced slowing revenue growth amid the global economic slowdown as major customers, based mainly in the U.S. and Europe, shelved many projects and sought lower rates for products and services.
Now the company is looking to reduce its dependence on the U.S and Europe, which contribute more than 50% and about 30% of revenue, respectively. It wants to increase its presence in growing markets such as Asia-Pacific and the Middle East and Africa, which account for about 7% of its revenue.
Chinese companies in recent years have been increasingly willing to turn over some tasks to external service providers to reap economies of scale and lower costs.
According to consultancy firm IDC, offshore software-development revenue from China is expected to more than double to $6.78 billion in 2013 from $2.72 billion in 2009.
Mr. Pande said more Chinese companies will be looking for support in information-technology services as they globalize.
He said the Indian company has already provided services to Lenovo Group Ltd. and Huawei Technologies Co.
During the three months ended June 30, Asian-Pacific markets contributed about 5% to TCS’s total revenue of $1.48 billion. The core revenue contributors in the region were Australia, New Zealand, Japan and Southeast Asian countries.
Mr. Pande said China, Australia and Southeast Asia would continue to drive the company’s growth in the region, but that China would have the fastest growth rate in the next few years as the revenue base there is still small and information-technology spending is climbing quickly.
The Indian company entered the China market in 2002 and has a stake of about 66% in a joint venture, TCS China, that it formed with three Chinese companies in 2006. Microsoft Corp. joined the venture in 2008 with a share of 8.7%.
TCS has a strong presence in China’s financial sector. Its clients include Bank of China Ltd., Ping An Insurance (Group) Co., Huaxia Bank and China Foreign Exchange Trade System, a unit of People’s Bank of China, Mr. Pande said. TCS provides core banking services to Huaxia Bank and trading services to China Foreign Exchange Trade System.
The company is striving to broaden its client base in China, and TCS is in talks with some Chinese telecommunications companies and domestic airline operators, Mr. Pande said. He declined to give details.
Currently, half of the company’s China clients are multinational companies, including Motorola Inc. and Johnson Controls Inc. With the increase in its staffing levels in China, TCS aims to increase revenue from domestic clients, Mr. Pande said, but he declined to give targets.
The company operates four global delivery centers in China, including Beijing, Hangzhou, Shanghai and Tianjin. It has one sales office in Shenzhen. Mr. Pande said TCS will probably increase the capacity of its existing delivery centers to meet growing demand for information-technology outsourcing services in China.
Sixth Annual Global Sourcing Summit Leverages Explosive Growth in Chinese Market to Connect IT Buyers and Service Providers
At a time when high-tech companies are increasingly looking to the East for new growth markets, the sixth annual Global Sourcing Summit offers unprecedented access to the rapidly growing Chinese outsourcing community in Xi’an, the dynamic city distinguished as one of the four capitals of civilization of the ancient world.
Themed “New Opportunities for the Changing World,” the free program is organized by Shaanxi Province Government, supported by the Ministry of Commerce, Ministry of Industry and Information Technology and co-sponsored by the International Association of Outsourcing Professionals (IAOP). The event will connect international companies that are looking to streamline their businesses to meet growth and cost-saving objectives with Chinese service providers. Similarly, international IT and outsourcing professionals may also find increasing opportunities from the vast outsourcing and IT needs of Chinese enterprises looking to do the same.
“China is becoming both an outsourcing client and customer at the same time,” said Zigeng Wang, director of the Xian software park. “And we are seeing many international small and medium-sized companies becoming aware of China’s convenient set-up processes and favorable government and financial incentives.”
Organized into a series of keynote speeches and five individual sessions, the program covers topics such as Internet applications and open-source developments, client liaisons and service centers, and Sino-Japanese outsourcing talent development. “The idea is to give international IT professionals a firsthand look at the Chinese outsourcing community, government policy trends, and opportunities presented in the Chinese economy,” stated Wang.
