The Hindu Business Line : TCS to merge China operations

Bigger market
The Chinese domestic IT market is estimated at $40 billion against India's $8 billion.
With the joint venture in place, the number of TCS employees in China will grow.

Recently in Singapore

Tata Consultancy Services Ltd will merge its China operations into a new joint venture company it has formed with three Chinese partners and Microsoft, according to Mr Girija P. Pande, Head & Regional Director, Asia Pacific, TCS.

"Within one year, we will merge our company into joint venture," he told a group of visiting journalists in Singapore last week. TCS was among the earliest Indian information technology companies to enter the China market when it set up operations in 2002 through a wholly owned subsidiary. It has 25 active customers in China. More recently, it bagged the mandate to partner with the Chinese government agencies to set up an IT company that is meant to be a role model for the growing Chinese software industry.

TCS will hold a 65 per cent stake in the joint venture — TCS (China) Co — while three Chinese companies — Zhongguancun Software Park Development Company, Uniware Company and the Tianjin Huayuan Software Area Construction and Development Company — will hold 25 per cent and Microsoft the balance 10 per cent.

Tata Consultancy Services Asia Pacific Pte, a TCS subsidiary, signed a shareholder agreement in July 2006 for establishing the joint venture and obtained the license last month.

According to Mr Pande, the joint venture hopes to get some of the Chinese domestic market, which, he estimates, is five times that of the Indian market and growing. The Chinese domestic IT market is estimated at $40 billion against India's $8 billion.

He said that with the joint venture in place, the number of TCS employees in China would grow from 650 now to about 5,000 in five years.

China overtakes

The joint venture would not confine itself to the Microsoft platform alone. This centre would help the company to tap the Asia Pacific market.

In the last two years, according to Mr Pande, China has overtaken India in the number of IT graduates thus offering the company the scale to increase its operations. The wage differential is still in India's favour, while the attrition rate is also higher in China than in India. TCS has bid for two large IT contracts in China, including one from the Bank of China.

Mr Pande also said that TCS was close to finalising another acquisition in Australia. The acquisition was of a "reasonable size" and would happen soon, he added.

He said that TCS had set up a centre for banking technology in Singapore, in a bid to tap the growing business opportunities in the country. The Singapore Government was keen to promote the country, as a centre for wealth management and banks look to IT companies for providing near-shore solutions. The company had set up a 50-seat centre in Singapore. TCS, Mr Pande said, was also looking to increase its business in Japan.