India's TCS aims for rapid China expansion

HANGZHOU, China, Apr 10 (Reuters) India's Tata Consultancy Services (TCS) plans to double its China headcount in each of the next two years, as part of its drive to diversify from its home market, its China chief said on Monday.

The company now has about 400 software engineers in China, including 300 in its main campus in the city of Hangzhou, and another 50 each in Shanghai and Beijing, where it is preparing to staff major new facilities, said V. Rajanna, general manager of Tata Information Technology (Shanghai) Co. Ltd.

''Here every year we are going to double,'' Rajanna told Reuters in an interview at the company's China base in this picturesque city about two hours drive from Shanghai.

''If I grow 100 percent this year, I can hit 800. Next year I can hit 1,600.'' Tata first came to China in 2002 to Hangzhou. It has opened a Shanghai centre more recently, and is preparing to launch a joint venture in Beijing with Microsoft , the world's biggest software company, and three Chinese partners.

Another Tata executive said in March the company planned to add 4,000 to 5,000 people throughout China over the next three to four years, providing services mostly to clients in China itself and to multinationals with major China-based regional operations.

Rajanna said that even with its rapid expansion rate, the three China locations would still be smaller than many of the company's India locations, which average 2,500 people or more.

Tata is moving into China in part to support the local and Asia-based operations of many of its customers, including the likes of Motorola and General Electric , as well as Chinese-speaking customers from Taiwan and Hong Kong.

''A lot of customers are looking at China as an alternate place because they don't want to put all their eggs in one basket,'' Rajanna said.

Tata's rapid expansion in China comes amid a broader build-up in the market by most of the world's major off-shore designers, including Indian rival Infosys Technologies Ltd. , which has its main shop in Shanghai.

The pair of Indian giants also compete in China with a number of major multinationals, including BearingPoint Inc. , Hewlett-Packard Co. and IBM .

The country is host to a number of foreign-funded start-ups as well, including Freeborders, which is racing to become the first such venture to make an initial public offering, and Augmentum, which has plans to build a China-based juggernaut with 40,000 engineers and billion in annual sales by 2013.

The companies -- which are rapidly building up shops with thousands of engineers each -- are all chasing a growing global software export market that in India alone is now worth about .5 billion in annual sales.

China's software export market is now worth a smaller billion, but is growing rapidly as design houses look to diversify from India and serve a growing base of multinational clients with major locally based operations.

Foreign companies like the China market because of its abundance of software engineers and relatively low labour costs.

Most industry executives say salaries for Chinese programmers are roughly the same to slightly less than those for their indian counterparts, but Rajanna said that Chinese salaries are actualy 10-15 percent greater than Indian ones.

The market's major drawbacks are its relative lack of English skills among engineers, who also generally have less experience working in a design centre environment than their Indian and Western counterparts.

Lack of reliable infrastructure and intellectual property theft are also two major concerns in the market.

Reuters PV DB1134