Chinese Enterprises Look to Indian Outsourcers and MNCs to Modernize Business & IT Systems

Chinese firms like China Telecom and Bank of China are looking to expand their operations worldwide and they are hoping to utilize global and Indian outsourcing firms like TCS and IBM for deployment of standard software solutions. Chinese enterprises are turning to Indian outsourcers in an attempt to gain an edge over domestic service providers.

Incidentally, the Chinese move to make use of multinational and Indian vendors is similar to the period when Indian clients like Bharti Airtel were more interested in doing business with IBM over local suppliers in India. This was a means of globalizing and modernizing their business and IT systems. Now, Chinese companies are seeking to globalize through the same process.

Although local Chinese software service providers and state-owned vendors like Digital China Holdings and Neusoft are being utilized by China's large clients, TCS and IBM and other firms are favored for complex outsourcing deals by clients like Bank of China and China Telecom.

Senior analyst at Ovum, Patrick O'Brien told The Economic Times, China's local vendor landscape that is spread out and a domestic market that is entirely foreign-owned corporate clients implies that the rewards will be reaped by the main western and Indian outsourcing suppliers. O'Brien added that besides the scale of operations, Chinese service suppliers do not have the experience in managing large outsourcing deals. Moreover, this is something that Indian outsourcers are good at.

Last year, IBM raked in almost $690 million from the mainland's $10 billion IT services market. Moreover, Wipro and TCS have been performing well and expanding in China. TCS recently obtained large deals edging out Chinese competitors. This included a $100 million contract for putting in a core-banking tool at the Bank of China.

Before the outsourcing boom, Chinese firms were using homegrown ERP systems. However, that has changed and now most companies are deploying standardized solutions from Oracle and SAP. Chief of TCS Asia said in a comment, this is where Indians have the expertise.

Nonetheless, Chinese banks have made drastic improvements in technology, in comparison to U.S. banks. Just 10% of Chinese banks offer the online banking facilit7 and there is just a single ATM machine in China for 10,400 individuals. This pales in comparison to one for every 735 individuals in the U.S.

There is no doubt that a core banking software on modern platforms from Indian vendors like Infosys or TCS will assist Chinese banks to centralize their wholesale and retail operations. It will also ensure that they are able to undertake more lending spurred by the Chinese government.