India's No.2 Outsourcer, Infosys, Seeks Entry into Chinese Market

What began as an additional office base for Indian outsourcer Infosys, China's domestic market is now being transformed into a potential outsourcing market for Infosys. Infosys Technologies, India's No. 2 outsourcer, set up shop in China just six years ago. At the time, China was perceived as an alternative to India for offshore outsourcing because of its cheap labor and sound infrastructure.

But now that perception is quickly changing, according to a report by PCWorld. In a strikingly unexampled scenario, more and more firms are looking to outsource to China, although India clearly maintains the lead as the world's top outsourcer. Ironically, however, Chinese companies also require and have a high demand for more IT services. About a third of Infosys' revenues stems from services done for Chinese businesses, while the bulk of its revenues emanates from offshore services.

Infosys China COO, Rangarajan Vellamore said in an interview, "Our goal is to increase our local numbers (in China)," PCWorld.com reports.

According to a senior analyst at Gartner, Indian outsourcing firms have not had much success in making headway into the Chinese outsourcing market, like Hewlett Packard and IBM. These firms have set up a much stronger presence in China in terms of IT services, said Tina Tang. She attributed the problem to the fact that Indian brand names like Infosys have not caught on in the local Chinese market as it has in other global regions like the U.S.

Although major initiatives have not been taken to court Chinese clients, major Indian players are eyeing the domestic market and Infosys is in the process of taking some preliminary measures. One area that Infosys hopes to win over clients in China is the banking sector. Many banking firms operating out of China use an Infosys brand product, 'Finacle', and Infosys is making attempts to sell its banking product to local banks in China.

Apart from that, Infosys is on the brink of offering IT infrastructure management from China, an offering that once solely provided from the subcontinent.

Experts say that it is now common practice for clients to offshore to multiple sites. And this trend is catching on with many outsourcers operating out of both China and India. In the wake of spiking costs and a labor shortage in India, distributing part of the operations to China offers a way of reducing exposure to risk to both clients and outsourcers alike.

Vellamore commented that it doesn't matter where the outsourcing service is performed since multinational firms are interested in getting services done in multiple locations and across multiple time zones.