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Pallavi Aiyar

Bags major deal, aims to be 5,000 strong in 5 years

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Beijing Feb. 13 After almost two years of negotiations, Tata Consultancy Services announced the inauguration of its joint venture in China on Tuesday.

The joint venture, a partnership between TCS and three Chinese partners, is being billed by TCS as a `role model for the Chinese IT industry'.

Speaking at a press conference in Beijing, Mr S. Ramadorai, TCS CEO, said that the event marked an "historic day in the coming together of the Indian and Chinese IT industries".

The TCS joint venture, in which Microsoft is also expected to take a 10 per cent stake, plans to employ at least 5,000 people over the next five years, a number that would represent a considerable scaling up from the company's present strength of 800 employees in China.

The Chinese software industry has been growing at around 30-40 per cent annually in recent years but in software exports the mainland lags behind its southern neighbour.

In 2005 total revenue earned from software exports touched $ 3.59 billion according to the Chinese Ministry for Information Industry.

India's exports in contrast were worth $ 17.2 billion for the year needing March 2006.The Chinese software industry remains fragmented and lacks scale. Only about 10 Chinese IT firms amongst some 8,000, employ more than 1,000 people.

The TCS joint venture will thus be one of the largest software companies in China once it reaches its 5,000-employee target. "We will be unique in terms of scale and size," Mr Ramadorai said.

The new venture is widely expected to enable TCS to finally break into the meaty $30-billion domestic Chinese IT market, a market that has in the past proved elusive for Indian IT companies.

Already Mr Ramadorai announced that the new joint venture had bagged a multi-million dollar contract to implement a comprehensive international trading system for China Foreign Exchange Trade System (CFETS), a sub-institution of the People's Bank of China.

To be located in Z-park

Usually, foreign-owned companies are kept out of the really large, lucrative deals at the state-owned enterprises.

This is where the new TCS joint venture, with its Chinese government backing, looks set to make a break through.

If it is successful, it could fundamentally change the nature of the Indian IT game in China, which has thus far been restricted to the servicing of multinational or regional clients.

The new joint venture company will be located in Beijing's Zhongguancun Z-park. TCS's wholly foreign-owned enterprise, which set up shop in the southern Chinese city of Hangzhou in 2002, will be folded into the new joint venture company, Mr Ramadorai said.

TCS's announcement came less than a week after Satyam Computer Services Ltd, began construction of a 2,500-seat software development centre in east China's Nanjing city, a sign that real Sino-Indian collaboration in software may finally be taking off.

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