China eyes Indian outsourcing cos for software solutions

As top Chinese enterprises such as Bank of China and China Telecom seek to globalise their operations, they are increasingly turning to multinational and Indian outsourcing firms, including IBM and TCS, for deploying and maintaining standard software solutions, giving them an edge over local service providers.

In many ways, Chinese customers’ shift towards global and Indian vendors is reminiscent of how top Indian customers such as Bharti Airtel preferred an IBM over domestic suppliers around two decades ago for modernising their IT and business systems.

While state-owned and local Chinese software services suppliers, such as Digital China Holdings and Neusoft, continue to work with the country’s large customers, IBM along with TCS and others are being preferred for large, complex outsourcing contracts by customers such as China Telecom and Bank of China.

“A fragmented local vendor landscape and a domestic market dominated by wholly foreign-owned enterprise customers means that it will be the major western and Indian outsourcing vendors that will reap the rewards,” said Patrick O’Brien, senior analyst at the UK-based research firm Ovum. “Apart from scale, local service providers also lack experience in handling large outsourcing contracts, something global and Indian firms are really good at,” he added.

While IBM earned nearly $690 million from China’s almost $10-billion IT services market last year, both TCS and Wipro have started making progress as well. TCS on its part, has recently won several large contracts beating local Chinese rivals, including over $100-million deal for implementing a core banking at Bank of China.