According to Narayana Murthy, founder of Infosys Technologies, China represented both a large market opportunity as well as a source of talent for Indian IT companies like Infosys. Infosys entered the Chinese market in 2003 by establishing a wholly owned subsidiary to take advantage of lower costs and proximity to other Asian markets, though it initially faced challenges related to bureaucracy, intellectual property protection, and cultural differences. Infosys planned major investments in China over the following decade to develop delivery centers and capture a larger share of the rapidly growing Chinese IT market.

2. "Both from the market point of view because
there are so many MNCs operating in China, and
due to its huge domestic IT market, corporations
like Infosys must have China on their radar
screen. Furthermore, I think China is also a
market for talent because as a talent source
China is pretty good except the English part, but
they are improving very rapidly.”
- Narayana Murthy, Chief Mentor, Infosys
Technologies, in 2004.

3. Journey of Infosys A
Indian Giant
1981 Infosys Incorporation
1987 First International office in the US
1993 Completed IPO(Rs.85/share)
1995 Set up development centers across India
1996 Set up first office in Milton, Keynes, UK
1997 Set up office in Toronto
1999 Annual revenue of US$ 100 million

4. Cont. ….
Listed in NASDAQ offered 2.07 million ADR’s at US$ 34 each
Opened office in Germany, Sweden, Belgium, Australia
Set up two development centers in the US
2000 Annual revenue of US$ 200 million
New office in Hong Kong
Global development centers in Canada and UK
Three development centers in US
2001 Annual revenue of over US$ 400 million

5. Cont. ….
Office in UAE and Argentina
Development center in Japan
2002 Revenue touched US$ 0.5 billion
Office in the Netherlands, Singapore and Switzerland
2004 Revenue crossed US$ 1billion
2006 Revenue crossed US$ 2billion

6. Reasons For Entering into
China
Salaries of Professional's
Witness a Shortage of 250000 workers in IT industry by 2009
Comparable and competitive manpower with those in India
Help to enter into neighboring countries' like Japan, Hong Kong, Taiwan, Australia and
ASEA countries
Rapid growth in Chines economy
Foreign companies entering China looked at established players in the software industry
Chines IT service will grow to US$ 27 billion by 2007 of which Indian IT companies wre-
expected to account for 40% of this market

7. Cont. …
Recognized that other Asian markets like Korea, Taiwan and Japan which
were under served and America and Europe were excessively focused
China became member of WTO
Chinese company spending increased in IT technology by 30% annually
Rongji also said ‘ You are number one in terms of software, we are number
one in terms of hardware…. Together we make the world’s number one.’
Salaries in China in this sector grew at 4%and in India 25%
Manpower cost in Shanghai was 40% lower than in Banglore

8. Cont. …
Chinese Are well versed in other Asian
languages like Korean, Japanese, Thai

9. Background
One of first client was US based Reebok company
Products introduced in 1980s like proprietary banking software
Acquired domain knowledge in retail, finance, distribution and
telecommunication
In 1987 40:60 joint venture with Kurt Salmon Association in which
stake was increased to 50% by 1993 and in 1995 agreement was
terminated and solely operated.
Problem mainly was Indian government on foreign trade
Worldwide sales headquarter was in Fremont, Califonia

10. Cont. …..
Sales office in
Canada, UK, Belgium, Sweden, Germany, Austra
lia, Japan, India.
In 2000, 78% revenue from North
America, 14.8% from Europe, 1.4% India
Global Delivery Model (GDM)

11. Entering China
Established a branch office in China but was not able to obtain the required permission
from Chinese government and faced several bureaucratic hurdles.
In China transparency was not very high
It was easy for straightforward company
In 2003 established wholly owned subsidiary in China
Seamless Global Delivery Model
Positioned it as premium end-to-end service provider
Services provided aid implementation of enterprise solution packages in area of supply
chain management, CRM enterprise application integration and enterprise resource
planning.

12. Cont. ….
20000 sq.ft office space and 100 professionals
Initially invested US$ 1 million and planned to
pump US$ 4 million
2005 signed letter with Shanghai Zhangjiang
(Group) Company and in its IT park

13. Problems Faced in China
Got permission only in JV with the government
First year net loss of Rs. 80 million
MOU between Infosys and Chinese Government for training students from
China in Madras and in China programs like Instep with Tsinghua University
Different regions and provinces, mayors and communist party leaders can
provide the IT firms with incentives superseding MII
Incentive based on size of the investment and whether it is seen to be of
strategic value
Laws and regulation and their interpretation change from time to time

14. Cont. …
No sophistication in the financial market and financial regulation and supervision
No proper Chinese strategy with an institutional mechanism to support Indian enterprise
in the country
High financial risk
High piracy rate of 91%
Does not have a very good track record as far as intellectual property rights
Copyright policy was amended in 2001
Important to maintain relationship with government official

15. Cont. ….
Tax structure is not uniform across the country
Too much too much red tape involved in the
repatriation of profits
Changes in foreign exchange policy and change in
political scenario
Duty calculation on exports where not clear and
imports where some times retested and changed
from province to province

16. Future Plan
By 2010 planned to invest US$ 65 million
accommodating 6000 employees
25000 sq. m. Shanghai Center with US$10 million
and Hangzhou center in an area of 100000 sq. m.
In 2007-08 revenue projected was US$ 50 milion
Contribution in revenue from China would account
10% of its total revenues by 2015

17. Thank You