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October 18, 2005 6:04 pm

India sees eastern opportunity

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After the US and Europe, is China the new frontier for India’s ambitious information technology companies?

Indian technology executives were in Beijing last month trying to persuade officials from state agencies that China could quickly gain IT capability by partnering with Indian expertise and experience.

India’s target is a share of the $30bn technology products and services market.

“How can we ignore China’s domestic market?” asks Rajiv Mody, chief executive of Bangalore-based Sasken. Its partnerships in China started four years ago with joint development of handset technology with Huawei.

Sasken’s experiences illustrate the many points of sensitivity in the growing bilateral technology relationship.

Foremost is the opportunity for collaboration, rather than competition, which Chinese premier Wen Jiabao said should be the bedrock of ties during a visit to Bangalore in April.

However, some senior Indian civil servants remain deeply distrustful of Chinese efforts to learn from its Asian economic rival as a way of furthering their own IT capabilities. Huawei’s application to expand its software development activities in Bangalore encountered fierce resistance from Indian security officials during a meeting of the cabinet secretariat in July.

Sasken has also hit challenges that may curb Indian companies’ enthusiasm. Unlike most of the Indian IT industry, which provides services, Sasken develops products and so is vulnerable to abuse of intellectual property.

Mr Mody says there is a lingering fear that Chinese partners will “mysteriously close down and surface elsewhere with a version of the jointly developed product.”

He also worries about attracting and retaining high-calibre Chinese staff, whose reputation for quitting is now exceeding the alarming record of attrition at India’s booming call centres. Sasken employs 22 engineers in China, most from India with expertise in telecoms. But it lacks Chinese project managers, a critical hole in the managerial pyramid that will hurt large volume-driven Indian services companies.

India’s two biggest such companies are Tata Consultancy Services and Infosys Technologies. Each has ambitious plans built around a large local workforce.

They propose partnerships with Chinese universities to design courses relevant to IT and offer strong brands, which the companies believe will help attract the cleverest Chinese engineers.

Infosys is building a $15m software centre in Hangzhou with space for 6,000 programmers. James Lin, chief executive of Infosys’ local unit says that China has an extraordinary supply of engineers.

“We can service global customer from China, as well as clients in Asia. We want to develop China into our largest global service delivery centre after India,” he says.

China’s huge domestic market is, of course, the reason for the recent interest. In September, two dozen Indian companies were in China exploring opportunities, each carrying a trump card.

After meeting Zhang Geng, chief of the administrative commission at Hangzhou hi-tech park, Rajendra Pawar, chairman of NIIT, an IT educator that has been in China for nine years, said: “We know the Chinese want to learn from us. The best way they can do this is by allowing us to collaborate on IT projects that they procure from state or provincial agencies.”

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