India and China share more than just a border. While cultural and historical differences have often kept these population-giants at odds in the software development outsourcing market, there are signs that the landscape is changing. Indian and Chinese companies are starting to discover the benefits of working together.
For example, Pune-based Indian software outsourcing company Zensar Technologies Ltd. in August formed a joint venture (JV) with Shenzhen-based BroadenGate Systems Inc. Named Zensar Technologies (Shenzhen) Ltd., the JV is 51 percent owned by Zensar with BroadenGate holding a 49 percent stake.
For BroadenGate, the JV with Zensar helps ease access to the US market. And Zensar can now extend its development operation beyond India, noted BroadenGate founder and CEO Lan Hongbing.
The JV is an unconventional move for Indian companies according to Dion Wiggins, research director at Gartner. Despite claiming themselves as global enterprises, most Indian companies remain ?very-Indian,? he said, meaning they are hesitate to work with non-Indians. These companies are run by Indians and majority of the development jobs are done by Indian developers either overseas or locally.
Partnership makes perfect
Yet very few have built a cooperative relationship with foreign companies, as Zensar has by setting up a JV.
?The JV is quite a smart move and make sense, because both (sides) will make profit,? said Wiggins.
It?s smart because Zensar only leverages the JV on an ?on-demand basis.? The company has a small team of 20 Indian developers in China. The JV will only leverage the partner?s 400-developer crew from BroadenGate in China when necessary, Wiggins added.
The JV strategy is showing results in winning deals. Zensar Shenzhen already has two clients: China Mobile Communications Corp., China?s largest mobile operator and Liz Claiborne, the U.S.-based clothing company. The contract with Liz Claiborne alone could bring in up to US$5 million revenue over the next two years, noted Lan.
Will JVs be a trend? No.
With the success of this JV, does it mean a new cooperative relationship is to emerge between the Chinese and Indian application outsourcing markets?
The answer is no, according to Charles Mok, president of the Hong Kong Information Technology Forum. The organization aims to bring Indian companies into China while helping Chinese to compete in the global market through Hong Kong.
?I think it will remain a niche but not a widespread trend,? he said. ? While a minority choose cooperation, I?m afraid most companies from India and China will remain in competition with each other.?
Since each country has established a strong presence in their own target markets, there is very little they could leverage between each other, stated Mok. Indian companies are already well recognized among European and US enterprises for outsourcing projects -- their main interest is to expand that reach into China.
?They are more likely targeting China as a source for markets, rather than a source of labor,? he said.
Meanwhile, Chinese companies are mature in capturing opportunities from Japan and South Korea. ?In fact, Chinese outsourcing companies already have the largest market share in Japan,? said Mok. Thus they do not need Indian partners to help capture these opportunities.
Will JVs be a trend? Yes.
However, Gartner?s analysts see it differently.
With the ability to leverage each other?s strength, the Zensar JV is expected to bring a new perspective for cooperation between the two countries, noted Sujay Chohan, Gartner?s analyst based in India.
?China?s capabilities in application development will take three to five years to match with the Indians,? stated Chohan. For the Chinese companies, working with Indian companies brings them an opportunity to acquire knowledge and skills, he explained.
More Japanese enterprises are seeking offshore application outsourcing, and the Chinese city of Dalian has been their major locale. the Dalian Software Park noted Accenture, SAP, HP, IBM Global Services and GE Capital have also set up operations in the city to capture opportunities in Japan. Although Chinese outsourcing companies have a strong foundation in the market, the partnership with India will distinguish them from other local and foreign competitors.
Apart from expanding into new markets, building a strong relationship with Chinese companies is also essential for the Indian companies to secure their existing clients, added Chohan.
Currently, most of the outsourcing opportunities in China come from multi-national corporations (MNC). Despite having a good relationship with MNCs, more Indian companies are being quizzed on their China strategy, noted Wiggins.
?Many Western clients are happy with the work from the Indian companies, but they are adding a new requirement,? he said. ?That is the ability to support them in China.?
?If they don?t partner with local (Chinese) companies, they will lose to other Indian companies,? said Chohan. ?The JV is a move to remain competitive in the market.?
The major barrier for building the partnership, however, is the historical differences, said Wiggins. ?The JV needs to compromise with different aspects, like culture and a change in attitude, from competing to cooperating with China.?
Chohan concurred. He noted the culture and historical difference are the major barriers for cooperation between companies from the two countries.
?Historically, the two cultures have very little cooperation,? he said. ?Particularly during the 60s and 70s, when propaganda from the [Chinese] government widened the gap between the two cultures.?
The gap is definitely closing with enhanced political relationships between the two countries, as well as through the overseas returnees of both countries, said Chohan.
(Sumner Lemon contributed to this story)