The Tata Consultancy Service came up with an answer to the endlessly nagging question about why Indian IT companies have failed to make a significant dent in the booming Chinese market.
It has managed to obtain the backing of China’s main planning body, the National Development and Reforms Commission, to launch a joint venture with three Chinese partners.
The TCS strategy is multi-fold. It wants to leverage China’s worldwide influence to obtain contracts in difficult markets like Japan. Its collaboration with Chinese companies and the blessings of NDRC will also help it chase major businesses from both domestic and foreign companies within China.
The new company, christened Tata Consultancy Services (China), has set off with a major contract with the China Foreign Exchange Trade System. Microsoft has signed a MoU with the new company to pick up 10% equity while the three Chinese partners will share 25%.
The NDRC has allowed TCS to hold controlling stakes of 65% in the new company, which is a sign of the faith reposed on it by the Chinese government. TCS edged out three Indian competitors, which possibly includes Infosys and Wipro. The competition involved four top Indian IT companies said a senior TCS official without naming them.
The JV will also use its new-found influence in China to chase contracts from the hundreds of multinationals operating in this country. Japan is a focus area in the initial years of the new company.
TCS chief has clarified that they are not coming to China for any cost advantage or because there is a shortage of skills in India. They are in China because it has a lot of domestic demand and there is a strong presence of multinationals.
TCS officials are giving the impression that they have won some kind of a mandate from the Chinese government to develop the local IT industry. The JV will add momentum to the software industry in China. TCS is confident they can contribute a lot to build capabilities.
TCS will merge its Chinese operations into the new company. It has 800 employees in China and plans to take the number of IT professionals to at least 5,000 in the next five years. The JV is located in Beijing’s Zhongguancun Software Park. The three Chinese partners are Beijing Zhongguancun Software Park Development Co, Uniware and Tianjin.
The new company will provide the entire range of services including solutions in the financial and infrastructure fields that it does from its base in India. It will also seek out new opportunities for business in the United States, Europe and Asia including Japan.