A joint venture between Chinese and Indian software groups is being heralded by analysts as a golden opportunity for the two nations to benefit from each other's experience.
The biggest Indian software and IT service provider, Tata Consultancy Services (TCS) Co, and three Chinese partners announced on Monday that they will establish a joint venture named TCS (China) Co.
Eagle Zhang, a senior technology industry analyst in Beijing, believes the emergence of an industry leader with 5,000 software developers could accelerate the consolidation of the outsourcing market in China, and help develop expertise on the management of large outsourcing companies.
In China, there are hundreds of software outsourcing firms, but the largest only has about 2,000 developers.
In a labor-intensive business like software outsourcing, TCS benefits from its more than 50,000 staff worldwide.
Chinese firms, which admire the success of Indian software companies and have been trying to learn from them, will have a real chance to develop their skills through this joint venture.
The joint venture, which TCS will have a 72.2 percent holding in, with the rest split between the three Chinese firms, is expected to start operations from its Beijing base in September.
It was reported previously that the joint venture will kick off with 5,000 engineers, 20 percent of whom will come from India.
US behemoth Microsoft, which promoted the foundation of the joint venture, is scheduled to pay US$2.1 million for a 10 percent stake later this year and the stakes of TCS and the three Chinese companies will fall to 65 percent and 25 percent respectively.
Microsoft has been trying to help Chinese software companies by providing them with service contracts and training professionals for them.
The tactic is part of the US giant's strategic plan in China.
The Sino-Indian joint venture is another such effort from Microsoft, which is already a big customer of TCS and hopes to bring software companies in the two countries together.
TCS, which already has engineers in Shanghai and Hangzhou, is expected to gain a bigger share in the Chinese and Japanese markets with the support of the Chinese Government and its new local partners.
"This venture is a significant business opportunity, which is China-centric from a resource perspective, has global appeal in terms of its customer offerings and is capable of creating a Chinese domestic business on an increasing scale," said S. Ramadorai, CEO and managing director of TCS, in a statement.
Two of the three partners Beijing Zhongguancun Software Park Development Co and Tianjin Huayuan Software Area Construction and Development Co are the developers of two government-backed software parks in the Beijing and Tianjin municipalities.
The other one, Uniware Co, is a software service company in Beijing, which originated in a national laboratory.
(China Daily July 26, 2006)