Asia Pacific is where the growth is, says Girija Pande, and he should know. Mr Pande heads the Asia Pacific operations of TCS and is also the chairman of TCS Asia Pacific, a Singapore-registered entity that oversees the company's businesses in 12 countries, including mainland China, Japan, Australia and New Zealand, and the ASEAN countries. In an interview with Christabelle Noronha and Cynthia Rodrigues, Girija Pande speaks about the opportunities and challenges of doing business in the region and the company's expansion plans. Excerpts:
Worldwide, TCS derives the bulk of its overall business from the banking and insurance industry and telecom areas. In the Asia-Pacific (APAC) region where do you see the most potential for growth?
Our APAC region covers everything east of India. We have 15 offices and three development centres across nine countries. Our offerings include high-end IT consulting and software solutions to global corporations as well as to large local companies. We believe in attracting and developing local talent both in sales and delivery. Close proximity to our customers has enabled us to build long and lasting relationships. In fact, TCS was the first Indian software company to open a wholly owned foreign enterprise in China. Our three development centres in the region are in Hangzhou (near Shanghai), Yokohama and Melbourne.
When we first came here, most of our business involved doing work with multinational companies. When one is setting up operations in a region it is important to have well-known local customers too. So we work with what we call "National Champions". These are local companies going global or regional like the Tata Group. If you operate in India, you don't only do business with multinationals, you also do business with large Indian companies — very similar to our philosophy here. When we first set up operations here we had very few local customers. Our customers included MNCs like GE, Citibank and Morgan Stanley. Today we have six local customers in our top 10 customer list and our target is to get a few more by this year-end.
Our main focus has been on manufacturing, telecom, and the banking and financial services sector. We are also bidding for government contracts (we have some government contracts with Malaysia and others), but our priority earlier was on the three major sectors. We've done some work for the transportation and retail industry as well. We work with one of the largest retail companies, like Woolworths in Australia.
If you look at our Asia Pacific numbers, Australia, Singapore and Japan would constitute about 80 per cent of our business. Last year we grew by 50 per cent (year-on-year). This year we are growing at around 35 per cent and I think we will end this year at around 50 per cent. We established our APAC headquarters just four years ago and we believe we have come a long way in establishing a firm footprint of TCS in the region — far bigger than what our Indian competitors have here.
And how much would this contribute to TCS's overall revenues?
In terms of revenues, TCS divides its businesses into North America, Europe, India and rest of the world, which currently is about 7 per cent. While our APAC revenue may be large in comparison to many companies here, it is not large by TCS standards.
Both as an offshoring hub, as well as a domestic market, China is the next big story for the Indian IT sector. How is TCS positioned?
We see China as a market with huge domestic opportunities. We are implementing a three-pronged strategy to expand business — servicing the multinational customers that have expanded their business in China and need support; create a sourcing base for servicing neighbouring markets such as Japan, Korea and Taiwan, and tap the domestic market which has demand for services and solutions. We currently have over 250 employees in our China operations of which 90 per cent are local Chinese staff. We expect to increase that figure to 350 by March 2006. TCS has signed an MoU with the Chinese government and Microsoft for a new joint venture which will create a broad-based IT / ITES company in China. Our current investment in China is $2 million and which will go up substantially with the JV.
Language, culture and local regulations — the challenges associated with China and the APAC region are many. TCS would, by now, have moved on to a more mature phase in its dealings with this market. Comment.
Working in Singapore is not that different from working in India. I somehow, feel very Asian in this part of the world. There are few differences — it is a common Asian identity. I find amazing similarities in the way Indians and Chinese think (they are as superstitious as we are!). Another similarity is in our family bonds, in the way we treat and respect elders. In China, they have a month called the month of the hungry ghost — in that month they don't buy or sell property, etc. We have the same thing that we call Shraddh in India, and in the same month. It is amazing how similar the two civilisations are. India has had a great influence on ASEAN civilisation.
Culturally we are more aligned to Asia. Multiple language is the biggest issue and knowledge about the Indian IT industry is not so widespread yet. Our staff turnover in China is just 10-11 per cent, whereas the staff turnover ratios in the Chinese IT industry are around 25 to 30 per cent, so we are much lower than industry. There are HR practices you have to put in place, provide people opportunities for growth and opportunities to work in other geographies, etc. One of our local employees from China has just been posted in the US. We have opportunities in Hong Kong, Singapore and Japan as well. So the region has growing opportunities. TCS has also been focusing on creating other intellectual investments by bringing the TCS-pioneered offshore development methodology into China. We are also engaged in training local professionals on software project management in the country.
TCS China is the only company assessed at CMMI and P-CMM level 5, and is the first Indian wholly owned foreign enterprise in China. In fact, the Chinese government recognises the pioneering role that TCS has played and has made TCS's managing director and CEO, S Ramadorai an honorary IT advisor to the government of Hangzhou and Qingdao.
How do you handle the recruitment of locals in the APAC region? Do you have any associations with engineering colleges like you do in India?
We have about 2,000 people in the APAC region, 1,000 based in the region and 1,000 who support us from India. We have set up a regional recruitment desk in Singapore which recruits people from all over Asia — the Philippines, Indonesia, Malaysia, Singapore, etc. Last year we recruited about 170 locals. We also have a similar recruitment desk in China, Japan and Australia.
We have done some research work here. We worked on a joint R&D project with Nanyang Technological University, to create a Smart Controller for the process industry in Singapore. We are also in the process of building the brand across the region by participating in exhibitions and seminars and sponsoring Formula 1 events like we did in Melbourne, where we backed Ferrari, one of our global customers.
Tell us about your Australian operations.
We have nearly 600 associates dedicated to Australia. It is a very successful operation. We have a delivery centre in Melbourne and have appointed an Australian general manager (we also have a Japanese GM in Japan and have just hired a Chinese GM in China). So we are a global yet locally focused company in APAC.
Although TCS's connection with Australia has been a long one, the continent continues to remain a small blip on the company's radar. Would the continent have a larger role to play in TCS's scheme of things?
Our revenue's from Australia will cross USD 44 million this year. It is a huge country and its economy is 1/5th that of the UK. We have done quite a few interesting projects there apart from customer sales, and our presence is quite substantial. We are growing by about 40 per cent annually. Last year we grew by approximately 60 per cent. Australia is still a small base for TCS, though revenues from the country may cross USD 100 million in the next two years. We have carried the Tata name to many places, so if other Group companies want to come into Australia, they will benefit from the brand we have created.
What potential do you see from countries like Japan?
We are quite bullish on Japan. The company's operations in Japan are on the verge of take-off for 2-3 reasons. One, Japanese companies are realising the strength and quality of the Indian offshoring model and they have started coming to India, plus Japanese companies are also offshoring to China. We need to capture that business with our China operations. We have already made inroads into Japan with some large and well-known Japanese companies. We are working with Matsushita Group, Toshiba, Shinsei Bank, Nissan and Toyota Finance, which is also our client in the US. Some of these are global players like Toshiba and Nissan with whom we work with in Japan, Europe and the USA.
Do you address different industries in different markets or do you focus on 3-4 specific industries?
It varies from country to country. In Japan our customers are in the manufacturing and banking space, there is no telecom activity yet. In Singapore we are in banking, manufacturing and some telecom. In Australia it is manufacturing, banking, retail and telecom. In Taiwan we have more manufacturing, banking and retail. In China we will set up a much broader based company. China will have engineering, IT services, BPO, etc. The Chinese domestic IT services market is about $30 billion — that is six times the size of the Indian domestic IT services market. So it's a huge market growing at around 23 per cent per year, and we want to have a part of that.
Finally, how do you find it, personally, moving from a multinational banking background to heading a large territory like APAC for an Indian IT company?
When I was at IIM Ahmedabad years ago I was selected for TAS. But I got selected by the bank first and I took the bank job. I was also selected by Tata Exports at the time, so it seems fated that I am finally working for the Tata Group. I used to say that if there was any Indian group I would work for other than a multinational, it would be with the Tatas. I have also known Mr Ramadorai for a long time. When I was made an offer to join TCS and was offered this position, I said to Ram, I don't know much about IT except as a user of IT. He responded by saying, we have 30,000 IT people what we also need is some business users. The last five years at TCS have been a great experience.
Building a new business was a challenge. For me, living in APAC is not that unusual because I have lived for many years in Hong Kong and Korea previously. People say it is different operating in the Asia Pacific but for me it is very similar to India. In fact, India is part of the Asia Pacific for most companies. Look at the different number of states in India, each with their different languages, cultures and people. I always say this, if there is any Asian country that can make its presence felt in the international market, it is India because of our diversity. So it is no accident that TCS is a global company and we have 49 nationalities in our family. A lot of Indians employed with TCS are from different parts of the country. By nature we are a multicultural society, and Asia is very similar.