TCS turns leading employer in China

MUMBAI: Tata Consultancy Services, Asia’s largest IT services firm, and Microsoft will join other Chinese firms in creating a software company that will seek to build a larger scale business in China. TCS announced on Monday that its subsidiary, TCS Asia Pacific, had signed a shareholder promoters’ agreement with Chinese firms Beijing Zhongguancun Software Park Development, Uniware, and the Tianjin Huayuan Software Area Construction and Development, to establish a software company.

S Ramadorai, MD and CEO, TCS, said the Chinese partners will formally apply for the business license on Tuesday in Beijing and the company will be able to start operations by September. TCS will hold 72.22per cent stake, while the Chinese partners have 27.78per cent. However, when Microsoft joins the venture next month, TCS will reduce its stake to 65per cent and the Chinese counterparts will offload 2per cent and Microsoft will get 10per cent.

As per the JV, TCS will develop software by using Microsoft technology. However, this is not mandatory, said Mr Ramadorai. The rationale behind going to China is to service the domestic market as well as the Japanese and the Far East markets. The company plans to develop China as one of the global delivery centres. S Mahalingam said the company has invested $12.6m and will take this investment to $15m when Microsoft joins.

The Chinese counterparts are expected to help the company by providing infrastructure support, easy access to Chinese universities for hiring, government approvals and brand recognition. Mr Ramadorai also hinted that at a later stage, the company could either buy out both the partners or list the organisation.

Currently, the Chinese unit of TCS employs more than 500 people and the company plans to fold this unit into the JV at a later stage. Mr Mahalingam said that when the TCS subsidiary will be folded into the JV, the TCS stake may rise, but it will now fall below 65per cent in any case and the management control will stay with the company.

TCS is aggressive on hiring Chinese talent. Mr Mahalingam said they haven’t faced any shortage of English speaking population in the country. “In four years time, we want to ramp up to 5,000,” said Mr Ramadorai. The company has appointed a Chinese national, Jonathan Lam, as the CEO of the JV in China who is relocating from the US. Commenting on the IT market in China, Mr Ramadorai said that the Chinese IT market is pegged at $30bn. Also, attrition rates in China are higher than in India, at 15per cent, while salaries are comparable, he added.

In another deal, TCS has signed a $33m with a Saudi Arabia-based telecom company to integrate their billing and CRM processes. The process has to be delivered in 18 months.