India makes push for IT cooperation with China

Exports of software and IT services from India to China amounted to a paltry 0.05 percent of total exports in the year to March 31, 2002, according to the Delhi-based National Association of Software and Service Companies (NASSCOM). India’s software and services companies aim to change that this week with a strong pitch in Shanghai for IT cooperation between China and India.

NASSCOM is hosting Thursday in Shanghai a one-day summit titled “India and China:Challenges and Opportunities for the IT sector,” to coincide with the official visit to China by India’s prime minister, Atal Bihari Vajpayee, who is scheduled to give the event’s inaugural address. NASSCOM expects Chinese government officials, business leaders from China’s user industries and senior executives of IT companies in China to attend the summit, said Kiran Karnik, NASSCOM’s president.

“The aim of the summit is to strengthen the process of IT collaboration between India and China,” Karnik said. “China’s user industry can gain from India’s expertise in software and services to improve their efficiencies. Indian IT companies can work with China in the area of chip design and telecommunication technology, and use China as an offshore development center to serve the Japanese market.”

India’s minister for communications and information technology, Arun Shourie, and Fan Xiping, director of the Shanghai City Informatization Bureau, are to deliver the keynote addresses at the summit. A delegation of executives of key Indian software and services companies is also in Shanghai.

Indian software and services companies have been making moves over the last few years to enter China, both with an eye to the Chinese market and neighboring markets like Japan. Mumbai-based Tata Consultancy Services (TCS), India’s largest software and services exporter, for instance, set up a software development center in Hangzhou last year, that has about 100 mainly local staff working on projects for local operations of TCS’ multinational clients.

“We are positioned to work with local companies, and do work for local clients as well,” said Atul Takle, vice president for corporate communications at TCS. “We are close to Japan, and work for Japanese clients can be done out of China.” TCS also has offices in Beijing and Shanghai.

Hyderabad, India-based Satyam Computer Services Ltd. set up a wholly owned, subsidiary office in Shanghai in January last year to service local customers and the local operations of its multinational customers. The company is also setting up in Shanghai a software development center scheduled to start operations within the year, according to a company spokesman.

The earliest entrant into China was NIIT Ltd., a Delhi-based training and IT services company, which set up its first training center in Shanghai in 1998 as a cooperative joint venture with Pudong Continuing Education Centre (PCEC), the education arm of the Municipal Government of Shanghai. NIIT currently has more than 100 training centers, covering about 25 provinces in China, and works in tandem with more than 10 universities in China, three software technology parks and local companies.

However, Bangalore’s Infosys Technologies Ltd. has learned about difficulties that sometimes occur when setting up business in China. During a visit to the company’s campus in Bangalore in January last year, Zhu Rongji, then China’s premier, approved Infosys’ proposal to set up an office in China. More than a year later, Infosys has not received approval to set up the branch office structure proposed by Infosys because it is unacceptable within current Chinese rules.

“There is no basic law and structure to set up a branch office in China,” a company spokeswoman said. ” We are told that the concept of branch structure does not exist … and they do not give permission for foreign entities to set up shop using a branch structure.”

Infosys is working with the Chinese to create a basic framework for setting up branch operations, but the process is taking more time than expected, she said, declining to provide details regarding the differences between the branch office proposed by Infosys and Chinese regulations for foreign companies setting up offices in China.

Even as it lobbies with the Chinese government for a branch office, the company, however, continues to do business in China through both direct and indirect contacts, though the delivery is from development centers in India.

Despite issues involving existing laws, the Chinese IT services market is lucrative, expected to reach US$4.9 billion this year, according to Dataquest Inc. figures. IT services revenue is forecast to hit $8.9 billion in 2006 for a 19.6 percent compound annual growth rate.