Posted by: Bruce Einhorn on November 14, 2006
Are Indian IT companies outgrowing India? In high-tech hubs like Bangalore, it’s getting harder and harder to hire new engineers or keep existing ones. That’s one reason that up-and-coming China-based companies argue that that they have an advantage as they compete against Indian heavyweights for outsourcing business. “There’s a shortage of human resources in India,” crows Liu Jiren, the chairman and CEO of Neusoft, a software services company based in China’s northeast that has about 10,000 workers. Adds Liu of the India-based industry leaders: “Their salaries are increasing very fast.” Meanwhile, more companies are turning to Neusoft, which plans to double its headcount in two years as it adds more engineers in Dalian, the city in Liaoning* that is the center of outsourcing for customers in Japan and Korea. “Dalian is booming,” says Liu. “It’s just like Bangalore.”
A big flaw in Liu’s argument, of course, is that there’s nothing stopping Indian companies from taking advantage of lower-cost locations in China, too. See this BusinessWeek story on the Indians in China, for instance. Tata Consultancy Services, the Mumbai-based IT giant, is looking at China. (Note: BusinessWeek is finally giving up on Bombay as a name. Our editors are sticking with Bangalore, though.) Yesterday I spoke with the CEO of TCS, S. Ramadorai, during a stopover in Hong Kong for a big Citibank conference with Bob Rubin and other high-powered speakers. Like other big Indian companies, TCS has been moving very slowly in China but now Ramadorai is upbeat about the place thanks to a new joint venture with Microsoft and the city governments of Beijing and Tianjin, and he expects to increase the headcount from 500 today to 5,000 within a few years. Ramadorai argues that TCS engineers will be the ones to build up China’s outsourcing business. “We are pioneers in building a core competency,” he says. “That’s how we built our industry in India. We view the Chinese foray in the same spirit.”
And what about Liu’s contention that there aren’t enough workers to go around in India? Even as TCS builds its numbers in China, Latin America and other locations outside India, Ramadorai says that TCS still has room to grow at home. “If we just stick to Bangalore, Mumbai, Delhi or Chennai, the numbers are very limited because everyone is competing for the resources,” he says. “But if you go beyond that to the tier-2 cities, there are so many where there is a number of colleges” producing engineers. And he says that TCS also is looking beyond the engineering schools to hire graduates with degrees in math and physics. “There’s a lot more [in the] availability pool,” he says.
Indian companies like TCS are expanding into smaller cities at home and moving faster in China, where they’re going up against ambitious local players like Neusoft that don’t have the industry experience but do have the local roots. Should make for an interesting battle.
* Originally I wrote Shandong. Thanks to readers who pointed out my goof.
BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.