2004-11-26

Indian Software Firms Tap China

Low Costs, High Skill Sets Fuel Business Cooperation between the Two Countries For U.S. companies still struggling to compete with cheap foreign labor in industries ranging from textiles to computers, it sounds like a double-outsourcing nightmare. But the trend toward Indian-Chinese business cooperation is likely to continue, analysts say, particularly in information-technology services.

Some powerful Indian outfits such as Infosys, Tata and Satyam Computer Services Ltd. are putting down their roots in China. Infosys Technologies Ltd., one of several fast-growing Indian software-outsourcing companies, is now setting up shop in China. It is an example of how companies in rapidly industrializing India and China are increasingly putting aside old, nationalistic rivalries to tap each other's markets and compete more effectively with Western rivals and a regional director of Tata, said that "China will be a useful source of skills for Indian companies".

Both countries also are focused on boosting overall bilateral trade, particularly of higher-end products: few days ago, India's Ministry of Commerce and Industry said the value of India/China trade hit $10.8 billion during the first 10 months of 2004, up more than 82% from the same period last year.

The reasons why the Indian companies chose china to expand their business are: they feel they need to be physically closer to their existing Western and Japanese clients who are now selling more products inside China. The idea is that Chinese programmers are best-suited to deal with material written in Chinese and can better customize programs for the heavily regulated Chinese market, including the accounting and billing software used by Western companies; and the wage costs for software engineers are rising about 15% a year in India, but increasing just 4% in China. That makes China an alluring alternative to India for all types of programming, not just software built specifically for a customer's China business.

Some big Western companies already have started doing work in China similar to that done in India. China is "the only country that comes close to India in cost, quality and scale", "the English-language skills of Chinese engineers also are improving rapidly, and Chinese infrastructure -- including roads and power supply -- is often superior to that in India", the Infosys' head of sales and marketing for greater China said. China is emerging as the lead top challenger in overseas IT outsourcing.

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