TCS looks to China and India

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.

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* Originally I wrote Shandong. Thanks to readers who pointed out my goof.

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Reader Comments

Ed

November 15, 2006 01:57 PM

Dalian is in LiaoNing province not Shandong.

herr

November 21, 2006 01:29 PM

Dalian is in Liaoning, not Shandong

vijay kurhade

February 10, 2007 05:37 PM

Todays world is of colloboration, too much rivalary and too much competitions is bad for everyone here. Indian and China has to work together, Chinese companies should start hiring professionals from India as India now have a good knowledge of IT industry, processes and more important exposure to client interaction and culture.

Yes India and China has to collaborate and take advantage and support each one.

Thats what US and EU has been doing for last so many decades.

Sharing is more Powerful than Owning. We has more clout than I.


INDCHI - Collaborate and flourish,
Argue, fight and perish
thats how future will be.

Trudy Han

February 14, 2007 09:48 PM

Since you do not know Dalian is a city in Liaoning
province, which means you do not know Dalian, then say nothing of outsoucing industry in Dalian. Then base on what that you can comment on what Liu Jiren said?

Borrrrring

February 22, 2007 02:00 PM

Ok
Is it just me or is every1 also getting bored of this bruce guy. First off, either this guy must have a problem with India, which he could not solve or he is jus a pure ignorant idiot. Wow man, like i understand India has some drawbacks, but from some of the articles i have read that Bruce has written, he seems to think Indians walk around with currly toed slippers and carry baskets of snakes. Another thing, is this guy on a payroll of some Chinese govenment or what? We are talking business buddy! China has quantity and India has quality. Hence u see all the dollar stores and walmarts filled with chinese stuff and cool clothings and jewelery made by indians. Moreover, doesn't Bruce know anything bout business, like come on dude, china has a big communist problem and a big corruption problem, which also turns many businesses away from China. Furthermore, even though china churns out more scientists, india brings out better businesses (TATAS, BIRLAS, AMBANIs, RUIAs,Wipro, INFOSYS, etc). Business earns money, not chemistry and biology. Evindence of that can be seen from the fact that there are greater amount of Indian businesses in Fortune 500. But whateva, Bruce is really borring and HIGHLY BIASED. I hoped businessweek.com would have picked a non biased writter but o well.

Naveen Jayasundaram

January 2, 2008 04:45 PM

It's been a little while since this article was published but I thought I'd comment anyway on the poorly researched and flawed post titled "Borrring..". Before personally bashing Bruce, the author should have gathered some (any) data to backup his claims.

Firstly, India, like China, also has a huge corruption problem and an equally heavy political beauracracy - the two countries actually slot very close together on the world corruption perception index. As far as exports go, China currently trounces India, in terms of market share, in nearly every segment of the textile & clothing industry (74% China, 10% India) and I doubt all of that is from low-cost products sold at dollar stores and Walmart. I'd suggest reading the official trade report prepared for Congress on the very topic @ http://www.fas.org/sgp/crs/row/RL34106.pdf.

Both countries face significant challenges - infrastructure, inflation, education. How well they live up to these will determine their positions in IT, services, manfacturing, whatever else in years to come.

I also believe two other things are critical...
- Diversification beyond a specific core competency in both economies
- Recognizing that competing on cost alone is the surest way to fail in the long-run

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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.

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