Satyam expands in China as costs rise in India

Indian outsourcer Satyam Computer Services Ltd. is expanding in China to address the local market and hire qualified staff for its global business, a company executive said Wednesday.

Satyam of Hyderabad, India, announced Wednesday that it is setting up operations in Guangzhou, China. While the new software development centre at Guangzhou will be relatively small and focused on the southern China market, Satyam plans a large software development campus in one of the second-tier cities of China, said Virender Aggarwal, Satyam’s director and senior vice president for Asia Pacific, Middle East, India and Africa.

The company intends to use the planned software development campus as a base to target global customers, as staff costs in India rise, Aggarwal said.

The company has set up operations in Malaysia and hired hundreds of people locally, but China is one of the few locations worldwide where the company can hire qualified software development staff in the thousands, according to Aggarwal. “I can’t give a figure of the number of staff we will hire in China over the next few years, but it will be in multiples of thousands over the next three years,” he said.

Currently, Satyam has 270 employees in China of whom 250 are employed at a large software development centre in Shanghai. The company also has an office in Beijing and a small software development operation in Dalian. About 96 per cent of the company’s employees in China are locals.

Satyam is unlikely to expand in Shanghai because staff costs in the city have been rising, Aggarwal said.

China is emerging as an alternative location to India for offshore outsourcing. “By building a base in China and training staff, we don’t think we are helping [the Chinese], as they are going to build their software development capabilities in any case,” said Aggarwal. Indian outsourcing companies have very little choice but to expand in China as staff costs are going up in India, he added.

India’s IT and business process outsourcing (BPO) services industry could earn revenue of US$60 billion by the year 2010, growing at over 25 per cent a year, according to a report released in December by the National Association of Software and Service Companies (NASSCOM) of Delhi and management consulting firm McKinsey & Co.

However, the sector could face a shortage of 500,000 staff by then unless remedial measures in public education and corporate training are taken quickly, according to the report.

A number of Indian outsourcing companies, including the country’s largest outsourcer Tata Consultancy Services Ltd. of Mumbai, have set up operations in China to tap the local market for IT services and provide local service for the operations of some of their multinational clients in the country.

India’s second largest outsourcer, Infosys Technologies Ltd., announced in August last year that it was increasing staff in China from 250 to about 6,000 over the next five years.

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