The Hindu : Business : HCL set to enter China

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Saturday, Sep 08, 2007
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HCL set to enter China

Pallavi Aiyar

Close to finalising three partnerships with Chinese firms

Company will
sub-contract
operations
Cross-Himalayan IT engagement is heating up

DALIAN (CHINA): HCL Technologies is the latest Indian IT heavyweight to set up shop on Chinese shores. The company is close to finalising three collaborations with local Chinese partners in the fields of enterprise software, engineering and application testing, according to its President Vineet Nayar.

Late entrant

HCL is a latecomer to the Chinese market. India’s big four — Tata Consultancy Services (TCS), Infosys, Satyam and Wipro — have already established a presence in China, apart from a slew of smaller companies such as iGATE Global Solutions, Newgen Software and Zenzar Technology.

However, Mr Nayar is confident of success in HCL China’s differential approach that will focus on partnership. “We do not want to do it alone. We want to sub-contract our operations, thereby circumventing a cultural clash and other issues. We will define clear deliverables and time lines and team them up with our processes and systems,” he said in an interview to The Hindu on the sidelines of the World Economic Forum here.

HCL China will look in the first place to service its existing MNC (multi-national company) clients.

For these clients, an HCL presence in the mainland will be appreciated in that it helps them diversify their risks.

The Chinese market for software will be the next target. Although in the past this potentially lucrative market has proved tough for Indian companies to break into, Mr. Nayar believes that as more and more Chinese companies attempt to develop a global footprint, they will require global IT solutions. This is business he wants HCL to win.

Large market

The final reason for HCL’s expansion into China, says Mr. Nayar, is the result of the fact that the policy environment for IT in India is no longer conducive to growth.

The increasing number of taxes, he says, are choking profitability and pushing companies to look elsewhere for growth options.

China, with its large market and labour pool and low costs, is the natural choice.

Indeed, HCL’s China foray comes at a time when the other Indian IT majors are planning to expand their China operations.

Infosys Technologies has announced plans to open two development centres in China that will employ 6,000 people, while TCS has recently set up a joint venture with three Chinese partners and Microsoft Corp.

The TCS joint venture 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.

Earlier this year, Satyam Computer Services also began construction of a major software development centre in the Chinese city of Nanjing which when complete, will be the company’s largest such centre outside of India, employing 2,500 people.

HCL will begin more modestly. It has already established a programme office in Shanghai that can seat 150 employees.

In time, it will look to expand to Beijing and Dalian.

And while it is difficult to say with certainty how successful HCL will be in scaling the Great Wall, what is clear is that the cross-Himalayan IT engagement is heating up.

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