Impeccable parentage and the backing of the Chinese government have given TCS China a head start. Operations head Johnson Lam explains how the company hopes to capitalise on its advantages

Johnson Lam is that quintessential nice guy. Courteous, deferential and with the kind of clean-cut, boy-next-door demeanour that inspires trust and invites likeability. With over 25 years of senior management experience in companies such as AT&T, IBM and GE, in industries as varied as telecommunications, banking, aerospace and IT, Lam has seen more than his share of people and places. In this interview with Christabelle Noronha, he talks about the opportunities and the challenges of functioning in a market with extraordinary potential, and some problems as well.

Five years back, TCS became the first Indian software company to open a wholly owned foreign enterprise in China. Has the first-mover advantage helped?
TCS has been present in the Asia Pacific region for the past 20 years. We have 14 offices in 12 of the major economies of the region. We started our operations by setting up in Shanghai in 2002. Today, we have offices in Hangzhou and Beijing, where we are headquartered, and we have close to 1,150 employees; that number should climb to 5,000 by 2011. Our Shanghai office has 250 people, our delivery centre in Hangzhou has 650 and there are 250 TCSers in Beijing.

Our China strategy has been three-pronged. Our ‘China for global’ thrust is primed to service our global customers through our operations in China. This has enriched TCS’s value proposition with our existing customers and strengthened our relationship with them. We meet their China needs, use multilingual capabilities by hiring locally, and offer collaborative solutions that can mitigate regional geopolitical uncertainties. The second component of our strategy is termed ‘China for APAC’, whereby we leverage our China experience to expand into neighbouring markets such as Taiwan, South Korea, Japan and Hong Kong. The third part is ‘China for China’, wherein we address the needs of the local market and help local businesses with global ambitions expand outside China.

We were the first Indian company to get the CMMI and PCMM certification. This has been beneficial to us, especially in our focus markets, which have critical applications for banking, finance and insurance. Our vision is to be a role model IT services company in China.

How well has TCS succeeded in its China objectives? How has its focus evolved over the years?
Our ‘global delivery centre’ supports multinational customers in the US, Europe and the APAC region. Our current customers include a host of GE businesses — GE healthcare, GE energy software, GE energy engineering, GE transportation, GE hydro, GE real estate and GE fleet — as well as Motorola, i2, ABB, Singapore Airlines, AIG, CFETS, Yolo, Bank of China and others.

We also have substantial domestic contracts, including a $100-million deal to provide solutions to the Bank of China and a multimillion-dollar contract to implement a comprehensive international trading system for the China Foreign Exchange Trade System. We have been able to make inroads in the banking and financial sector, which is an area with strong growth potential in China. In December 2006, China fully opened up its banking sector to foreign competition and this has created even more opportunities.

The TCS joint venture — where TCS has a 72.22 per cent stake, 27.78 per cent is owned by three Chinese parties nominated by the Chinese government. Microsoft is expected to join the JV with 10 per cent stake. The JV is promoted by the Chinese government through NDRC, a powerful ministry that was formed out of the Planning Commission, which has put us in a unique position to tap into the domestic market.

How does such a relationship benefit the Chinese government?
While the joint venture provides TCS with a prized break into China’s domestic market, the Chinese government wants this to be a role model for the Chinese IT industry, one that sets the standard for local IT companies. Also, for the Chinese, a partnership with TCS is a learning opportunity in terms of the quality and processes that we bring to the table.

The Tata Group’s policy for its overseas ventures is to make them local companies that are run by locals, with only a few personnel from outside. How does TCS’s China operation measure up on this parameter?
About 90 per cent of TCS China’s associates are Chinese.

The Chinese domestic software market is pegged at $35 billion. How much of this big pie is TCS looking to secure?
According to Gartner, a research agency, Indian companies could account for up to 40 per cent of the domestic Chinese market for software. Personally, I think this is a conservative estimate. In the banking, finance and insurance sector we have the potential to take over the majority of the market. As for our capabilities, a report by IDC, a market intelligence firm, has rated the TCS core banking product as the number one core banking product in China.

Tell us about the more interesting and prestigious projects that have come TCS’s way in China.
We are focusing on banking and financial services, manufacturing, retail, telecom and government industry practices. Our customers include Motorola, Bloomberg, AIG, Alcoa, Eaton, GE, Intel, Johnson Controls, Matson, and Proctor & Gamble. Among our China customers are CFETS, Bank of China, Huaxia Bank and B&Q. We are doing a core banking implementation for Huaxia Bank and Bank of China.

In the context of TCS planning to raise its headcount significantly, what’s the HR situation like in China in terms of skilled personnel and training facilities? Does the IT industry suffer from high attrition rates like in India?
The Chinese software industry has been growing at around 30-40 per cent annually, but despite this it remains fragmented and lacking in scale. There are 8,000 IT companies in China, but just ten of these have an employee strength of more than 1,000. The number of fresh engineering graduates produced by China’s universities (6.5 lakh) is higher than in India (4.5 lakh) or the US (1.2 lakh), but a mere 10 per cent is employable since they cannot communicate in English and have limited domain expertise. To make matters worse, there is a serious shortage of mid-level project management talent. Finding the right people, thus, has become one of our biggest challenges.

Give us a perspective on the Sino-Indian collaboration in software, and what it can mean for China’s software industry?
A market intelligence study has predicted that by 2011 Chinese cities will overtake their Indian counterparts as the preferred destination for global offshore, back-office functions. In the high-end, value-added services slot, India will retain an advantage for a while. But, over time, China’s evolution into an IT power is assured. It is the only country comparable to India in terms of size and the cost of its skilled labour force.

Uploaded in February 2008