China is far from the promised land for Indian giants
The crowd of Indian technology companies seeking opportunities in China could profit from a visit to the Shanghai software development offices of MphasiS, a medium-sized Mumbai-based IT services company. What they hear there could send them racing back home. “We have not cracked China,” admits Jerry Rao, chief executive of MphasiS, which has IT services and call centre affiliates in India, the US and Mexico. “In Shanghai, we have 100 developers, mostly Chinese, but should have 400. Scaling up has been an unexpectedly large problem,” he says.
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MphasiS was among the first wave of Indian technology companies that ventured into China either as the IT partners of multinationals or via small local acquisitions. The strategy was centred on mitigating rising wages and other costs in India, spreading geographical risk and using China as a launch pad into Japan and South Korea.
MphasiS, which employs 9,000 worldwide and earned sales of $126m in the year to March 2004, bought the Shanghai centre from CapitalOne, the US credit card issuer, in October 2002.
The aim was to bypass the time-consuming hassle of setting up a technology company in a country marked by uncertain regulations. Buying an existing unit would also allow MphasiS to expand quickly and benefit from the huge rise in demand for software-related services within China, as well as from global companies looking for an IT partner in the world's fastest-growing economy.
The reality, however, has been disappointing. “We've fallen behind our expectations. One hundred software developers is a trivial number for us,” says Mr Rao, who is also chairman of Nasscom, the Indian IT industry association.
Tata Consultancy Services, Infosys, Wipro and Satyam, the big four Indian IT companies, typically add several thousand staff each quarter to their India operations, but their China presence remains small. MphasiS takes on 700 employees every three months in its IT and call centre units in India.
At issue for these companies is China's relatively immature IT services market, which means there is no fluid labour market for Chinese-speaking programmers. Companies such as MphasiS cannot quickly and inexpensively employ locally in response to a sudden burst of project-based work, which is a feature of the industry. In particular, there is a lack of suitable local applicants for jobs as project managers and quality control managers, say Indian IT executives in China. In India, such people, typically with 5 to 12 years experience including stints in the US, are paid premium salaries. MphasiS has been forced to send five project managers from India to Shanghai, raising the company's operating costs there.
A lack of bilingual Chinese IT professionals, for jobs such as team leader, is also holding back expansion. One English and Chinese speaking programmer is required to oversee a team of four local developers who speak only Chinese. Because there is only a small number of bilingual programmers, they can command a salary premium of 30-40 per cent. “We can take them on but that would wreck our cost model,” says Mr Rao.
These labour market deficiencies have not gone unnoticed among customers in the US, which is the biggest market for Indian IT. Whereas clients already in China might allocate work to MphasiS's Shanghai centre, those new to outsourcing in general and China in particular are nervous. “The client from Texas says ‘no' to China and prefers to deal only with [our office in] Bangalore,” says Mr Rao.
Mr Rao is dismayed by the slower-than-expected growth in China, but not defeated. He says there are two big reasons for staying put.
From a marketing perspective, MphasiS believes it is important to have a presence in China during this lean phase. Secondly, MphasiS is learning about the China market for the future, in the belief that it will eventually become lucrative. MphasiS's caution is shared by some of the next wave of mid-sized companies drawing up China strategies. Patni Computer Systems in Mumbai has spent two years studying the market but is still undecided, which is notable for a company that appears to have a strong case for a presence in China: Hitachi, the South Korean electronic goods manufacturer, and clients from Japan accounted for 4 per cent of Patni's sales of $326m in the year to March 2004.
Patni's biggest China fear is scaling up. In January, the company recruited 480 junior programmers in India. “Judging by the experience of others we would never be able to do that in China. There's a lack of traction as well as an issue over the quality of software professionals,” says Deepak Khosla, a senior executiveat Patni.
“Our approach is based on what's good for customers, and not being able to recruit in bulk and quickly is obviously a major issue,” he adds.
The irony is that the ambivalence of companies such as Patni and the less-than-exciting experience of early entrants such as MphasiS may still have only a faint impact on those examining entry into China.
This is because domestic cost pressures in India are increasingly forcing companies to turn to China as a necessary, if perhaps premature, addition to their operating base. “Just as companies in the US and Europe view their subsidiaries in India as lower cost options to serve clients, India could look to [lower cost] China,” says Gartner, a technology consultancy.
Cognizant Technology Solutions, also among India's top half dozen IT companies with sales of $585m in 2003-04, admits various cost factors have driven it to “China's door”. Foremost is soaring salaries and high attrition, driven partly by the arrival in India of IT consulting giants such as Accenture and EDS. Each departure at GE's call centres in Delhi costs the US company $5,000 to fill.
A second concern is the patchy quality of labour lower down among the 290,000 new engineering graduates looking for IT jobs each year. This means companies need to spend more on training.
Cognizant plans to raise its training budget to 4 per cent of sales, which Lakshmi Narayanan, chief executive, says is “tolerable so long as we can improve productivity”.
He says there is no question of the “long-term case for China”, where Cognizant plans to raise its presence from a standing start now to 250 staff by 2006.
“But unless there's improvement on several fronts at home in the next two years, we'll be going to China for reasons to do with India rather than with China,” Mr Narayanan says.
印度IT业的中国情结
对于到中国寻求商机的大批印度高科技公司来说，拜访一下MphasiS在上海的软件开发办公室也许会有好处。在那里听到的事，可能会令它们飞奔回国。“我们尚未攻克中国市场，”MphasiS首席执行官杰瑞?拉奥(Jerry Rao)承认，“在上海，我们有100名开发人员，大部分是中国人，但我们需要的是400名。扩充规模的问题之大出乎意料。”MphasiS是总部在孟买的一家中等规模信息技术(IT)服务公司，在印度、美国和墨西哥都设有IT服务及呼叫中心分支机构。
MphasiS是第一波投资中国的印度高科技公司之一，这些公司要么作为跨国IT合作伙伴，要么兼并本地小公司，从而进入中国。投资中国战略的核心目标，是减轻印度的工资与其它成本上涨的压力，分散地域风险，以及把中国作为进入日本与韩国的跳板。
MphasiS在全球有9000名雇员，在截至2004年3月底的一年中，销售额达到1.26亿美元。2002年10月，该公司从美国信用卡发行商CapitalOne手中买下它现在的上海中心。
难以捉摸的监管环境是中国的特色，在这样一个国家设立科技公司既麻烦又费时。MphasiS采取收购的做法就是为了避免大费周折。购买一个现成的公司也使MphasiS能够迅速扩张，并得益于下述因素：中国对软件相关服务需求出现巨大增长，而且跨国公司正在这个全球发展最快的经济体内寻求IT合作伙伴。
然而实际情况令人失望。“我们没有达到原来的期望。100名软件开发人员对我们来说太微不足道了，”拉奥先生说。他还是印度IT行业协会印度国家软件和服务公司协会(Nasscom)的主席。
印度IT四巨头，即塔塔咨询服务(Tata Consultancy)、Infosys、Wipro以及Satyam，通常每个季度都要在自己的印度业务部门中增加好几千名员工，但它们的中国业务机构规模一直很小。每个季度，MphasiS要在其印度IT及呼叫中心招收700名雇员。
对这些公司来说，问题在于中国的IT服务市场相对不成熟，这意味着没有一个流动性好的劳动力市场来招募说中文的程序员。MphasiS等公司无法迅速、低成本地在当地进行雇佣，以应对基于项目的工作量的突然激增，而这种工作量的突然激增正是该行业的一个特点。在华的印度IT企业高管表示，特别是在项目经理和质量控制经理等职位上，中国缺少合适的应征者。在印度，这样的人通常有5到12年工作经验，其中包括在美国的相关工作经历，他们的薪水很高。MphasiS已被迫从印度向上海派遣了5名项目经理，这样便提高了公司在中国的运营成本。
在团队领导人等职位上缺少双语的中国IT专业人士，这也制约了业务扩张。一名能讲中英双语的程序员被要求管理一个由4名只讲中文的本地开发员组成的团队。由于讲双语的程序员很少，所以他们能比一般程序员多拿30%至40%的薪水。“我们可以雇佣他们，但那会破坏我们的成本模式，”拉奥先生说。
美国是印度IT业最大的市场，那里的客户并非没有察觉中国劳动力市场的缺陷。尽管已经在华经营的客户也许会把工作分派给MphasiS的上海中心去做，但刚开始进行一般外包，尤其是刚接触中国的客户都很紧张。“某家德州的客户对中国说‘不’，只愿与(我们在)班加罗尔(的机构)打交道，”拉奥先生说道。
拉奥先生对在华业务的增长比预期要慢感到沮丧，但并他并未气馁。他说，坚守在此有两大原因。
MphasiS认为，从营销角度来看，处于目前这个低迷阶段，在中国拥有一席之地非常重要。MphasiS正在学习了解中国市场，为将来做准备，因为它相信，这个市场最终将会有利可图。下一波正在拟订中国战略的印度中型公司中，有几家也具有MphasiS这样的谨慎态度。孟买的帕特尼电脑系统公司(Patni Computer Systems)已经花了两年时间研究这个市场，但仍未做出决定，这点非常值得注意，因为它似乎有充分的理由在中国开展业务：在截至2004年3月底的年度中，帕特尼的销售额达3.26亿美元，其中日立(Hitachi)等日韩客户占了4%。
帕特尼对在华开展业务的最大顾虑是扩充规模。1月份，该公司在印度招募了480名初级程序员。“根据其它公司的经验来判断，我们在中国根本无法做到这点。中国的软件专业人员缺乏吸引力，而且素质也成问题。”帕特尼的高管迪帕克?科斯拉(Deepak Khosla)说。
“我们的做法是以对客户有利为依据的，而无法大量、迅速地招聘人员显然是个大问题，”他补充道。
具有讽刺意味的是，帕特尼等公司的矛盾心理，以及MphasiS等先期进入者不那么激动人心的经历，对那些探求进入中国的公司可能仅仅会产生微弱的影响。
这是因为印度国内的成本压力正日益加大，迫使各家公司转向中国，将之作为运营基地的必要补充，尽管它或许还不够成熟。科技咨询公司嘉特纳(Gartner)指出：“正如美国与欧洲的公司把它们在印度的分支机构看成为客户提供服务的低成本选择，印度可能也在指望(低成本的)中国。”
康尼赞科技(Cognizant Technology Solutions)是印度顶尖的6家IT公司之一，2003至2004年度销售额达5.85亿美元。该公司承认，各种成本因素驱使它走到“中国的门前”。其中最首要的因素在于工资不断攀升且人员流失率很高，这种情况部分是由埃森哲(Accenture)与EDS等IT咨询业巨头进入印度所造成的。通用电气(GE)驻德里呼叫中心每次人员离职，都会使这家美国公司花费5000美元来填补空缺。
另一个担忧是，在每年寻找IT工作岗位的29万名新工科毕业生中，较低端的劳动力质量参差不齐。这意味着企业需要花费更多资金用于培训。
康尼赞计划将培训预算增加至销售额的4%，首席执行官拉克什米?纳拉亚南(Lakshmi Narayanan)表示，“只要我们可以提高生产率，这一水平就还可以承受”。
他说，没有人对“在华开展业务的长期理由”有任何疑问，康尼赞计划加强在中国的业务，到2006年从目前的起步水平增至250名员工。
“但除非今后两年国内的几个方面有所改善，否则我们将前往中国，原因出在印度而不是中国，”纳拉亚南先生表示。
(back)ADB forecasts Asian growth of 6.5% in 2005
Growth in developing Asian economies is expected to slow slightly over the next three years after reaching an aggregate 7.3 per cent in 2004, its highest level since the Asian financial crisis of 1997-98, the Asian Development Bank said on Wednesday.
“There will be some moderation in growth since the cycle probably peaked in 2004,” Haruhiko Kuroda, the new ADB president, said in his foreword to the bank’s latest Annual Development Outlook.
The report, which covers 4bn people in 42 Asian and Pacific economies including China and India but excluding developed nations such as Japan and Australia, predicted annual gross domestic product growth of 6.5 per cent this year and 6.6 per cent in 2006, rising again to 6.9 per cent in 2007.
Although demand for Asian exports from the industrialised world might subside, intra-regional trade, much of it centred on China, was likely to take up the slack.
With the exception of the Pacific island states, nearly all economies in the region grew by more than 5 per cent last year. “Economic prospects for developing Asia remain auspicious over the next three years,” the report said.
Asian growth was underpinned by a “highly favourable” external environment in the form of demand for Asian goods from the US and other industrialised countries, and by buoyant domestic demand. Business investment was robust in many economies, especially in south Asia and the oil and gas exporting nations of central Asia.
In a separate, technical chapter on the merits of export-led versus domestic demand-led growth, the ADB poured cold water on recent rhetoric from countries such as Thailand about the significance of their policies to boost domestic demand.
Examining three decades of statistics, the bank concluded that in the past few years only the export sector had fuelled growth in South Korea and Thailand. It said there was no evidence that export-led strategies contributed to the Asian crisis, and noted that the pre-crisis period was marked by over-expansion in domestic demand and a deterioration of net exports. Sustained expansion needed growth in both exports and domestic demand, the ADB said.
However, in the main body of their report, ADB economists conceded that domestic demand would play a bigger role in supporting economic growth in the three years to 2007.
Turning to global financial imbalances, the ADB said the foreign exchange reserves of the Asian countries surveyed had reached an estimated $1,624bn, with most of the recent increase coming from China.
Aggregate current account surpluses, at 3.7 per cent of GDP, remained high last year, but fell from 4.3 per cent in 2003. With oil prices high and imports surging, the surpluses were expected to decline further to 2.6 per cent this year and 1.6 per cent in 2007.
The ADB forecast a soft landing for China, with growth falling to 8.5 per cent this year from 9.5 per cent in 2004. Indian growth
