MUMBAI: Software services giant, Infosys Technologies Ltd said that it had applied to the Chinese government to set up a software development centre for 200 professionals in Shanghai.
Analysts said the move would give Infosys, the country's largest listed software services exporter, a toehold in a rapidly growing market that has the potential to emerge as a future challenger to India's booming software industry.
It would also help the company diversify its sources of revenue away from the U.S., which currently accounts for some 60 percent of its income, they said.
Infosys, which also on Friday posted a 33 percent jump in profits to three billion rupees ($66.1 million) for its second quarter to end-September, has committed an initial investment of $5.0 million to its proposed Chinese subsidiary.
"The idea of going to China is to tackle the local market, Asia-Pacific market and look at the world market," said Mohandas Pai, chief financial officer of the Bangalore-based company.
China is expected to spend $9.4 billion on technology services by 2006, up from $3.74 billion in 2002, according to research house IDC.
Other leading Indian firms such as unlisted Tata Consultancy Services, the country's No.1 software services exporter, and Satyam Computer Services, the No. 4 exporter, have already set up shop in China to tap its strong hardware base and high PC penetration.
"Besides serving the multinational clients who have moved to China, these companies can also use China as a sourcing base for servicing the East Asian market," said Kiran Karnik, president of the National Association of Software and Service Companies, India's leading software lobby.
China, already a hot destination for foreign investors, became more popular with multinationals after it made sweeping changes in 2002, a year after it joined the World Trade Organisation (WTO).
"China's entry into the WTO offers great opportunities for Indian IT companies," said a recent study by the Indian industry association, adding that Indian firms were well positioned to provide services to sectors including banking, securities, telecom, energy and utilities.
Analysts applauded the move by Nasdaq-listed Infosys to China.
"It is a clever move. Shanghai has great infrastructure and there is a time-zone benefit as well," said Jaideep Goswami, a software analyst with HDFC Securities.
© Reuters