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China IT Market a Hard Nut to crack for Indian Companies: Infosys

The Indian IT industry, which has of late been eyeing the Chinese market, will have to sweat to gain entry here, a top Infosys official has said.

Penetrating into tier two banks in China, however, is possible as they are looking for alternatives beyond global companies, said Infosys China CEO Rangarajan Vellamore.

“The knowledge base of the Indian companies is strong, but the customer base of the Chinese companies is very strong in China. The question is how to penetrate the Chinese IT markets, which are not enamoured by the big names of India,” he said.

In order to address the $35-billion trade deficit, India has been insisting that China open its IT market more for Indian companies.

Chinese officials have maintained that there are no built-in barriers and the Indian companies have to compete in the market.

“There are some unwritten barriers in penetrating … and government projects. However, there is a lot more that can be done before hitting those barriers,” Mr Rangarajan said.

Almost all top brands of Indian IT firms are present in China, but they mostly service the multinational companies.

“Market entry strategy is about positioning as an alternative to global IT providers, which are well entrenched in Chinese markets,” he said.

Infosys China itself has been experimenting with various models with some success.

“We have to build case examples. Records elsewhere do not hold good in China. You have to start step-by-step with required investment and persistent campaign to demonstrate we can do better,” he said.

India’s over $100 billion software industry is focussed on the US as a major chunk of revenue comes from this market.

Chinese IT market in comparison is far smaller and profit percentages are not high.

“If you look at the Chinese IT industry per se, overall addressable market spending is about $150 billion on the IT space. It is about $14 billion per annum is the addressable space which is not big for Indian firms, he said.
The addressable market size of US market is about $600 billion and the Indian companies reaped more benefits there as they expanded on hardware, he said.

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