Indian IT companies are finding the going tough in the world’s second largest economy due to a combination of brand perception and emergence of local service companies.
Going tough
Some of the IT companies like Wipro and TCS are finding the going tough in the $7.5-trillion economy as companies like HiSoft and VanceInfo Technologies are now taking over outsourcing contracts from Indian majors.
Indian companies, which get 60 per cent of their business from the US, have not yet found favour in China’s changing economic paradigm. “Daimler has seen its revenues in China jump six fold since 2007 - reaching more than €11 billion. For Yum Brands, the owner of Taco Bell and KFC, China is a larger market than the US,” said Peter Schumacher, CEO, Value Leadership Group.
This changing economic paradigm is resulting in a change in the outsourcing business dynamics, and according to Sundararaman Viswanathan, Manager-Consulting, Zinnov, increased localisation requirements have added to their woes.
Indian companies accept that the going has been tough. “China is brand conscious and if you are an Indian company, it is difficult,” T.K. Kurien, CEO of IT Business, Wipro told Business Line . India’s largest outsourcer TCS, last year opened its sixth development centre in China but despite making inroads, according to Ajoy Mukherjee, Executive Vice-President and Global Head for HR, it takes time to establish in a new country.
“Whether we have achieved what we want to, the answer is not yet,” he added.
Key issues
Issues such as language, cultural barriers in China still exist.
“There is a learning curve in setting up a new facility and doing business in China involves time and costs, which companies may avoid depending on their strategy,” said Sanjoy Sen, Senior Director, Deloitte India. Sanjay Dhawan, Leader - Technology, PwC India, agrees and adds that increasing attrition of almost 30 per cent is a problem faced by services companies in China.
“While that may be the problem across the board, Indian IT companies have not focussed on China market and only recently they have tried to reduce their dependency on the US/UK markets,” added Dhawan.
Others opine that the Rupee-Dollar cost arbitrage advantage enjoyed by them in the US is not the same in China.