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The negotiations for the creation of a mega-software outsourcing company by Chinese companies, India's software giant Tata Consultancy Services (TCS) and Microsoft are expected to be concluded in one month, giving China's ambition to develop its software industry a big boost.

 

Grabbing the Chinese domestic market has been an ambition for TCS, so in order to get easier market access, it decided to form a joint venture with companies backed by the State.

 

"The biggest benefit for us is to get a bigger access into the Chinese market," said V. Rajanna, general manager of Tata Information Technology (Shanghai) Co Ltd.

 

TCS, one of the world's largest offshore outsourcing companies in the world with over 40,000 engineers, set up its operation in Shanghai in 2002 and has about 175 employees working there currently.

 

The Chinese Government, which has been working to grow its software outsourcing business and domestic software industry internationally, has set up India as one of its examples. Hundreds of Chinese software company executives have flown to Bangalore to learn from, or cooperate with their Indian counterparts.

 

Early last year, it started to seek joint venture opportunities between Chinese companies and one of the Indian software giants.

 

Microsoft, which wanted to strengthen its partnership with China and is a customer of TCS, prompted both parties to negotiate a deal. The negotiations started in August.

 

According to a report by the Beijing-based Economic Observer newspaper published on Monday, TCS is expected to take a 65 percent stake in the proposed venture, with Microsoft and three Chinese firms designated by the National Development and Reform Commission (NDRC) sharing the remaining amount.

 

The joint venture aims to have 8,000 developers in five years, which will further expand to 10,000 in seven years.

 

The biggest Chinese software outsourcing company today has about 2,000 people.

 

Huang Yong, president of the Hong Kong-listed Chinese research house CCID Consulting, said the joint venture can be a win-win-win cooperation for the three participants.

 

China can learn from TCS' expertise in offshore outsourcing and software development management, TCS can share the opportunities in China and take advantage of China's talent pool, and Microsoft can elevate its relations with the Chinese Government and bring its supplier closer to its existing development organizations in China, Yong said.

 

The Economic Observer reported 90 percent of the work of the proposed firm will be export-oriented, but that was denied by Rajanna, who said the focus will be both on the domestic and overseas markets.

 

(China Daily January 4, 2006)