TCS tangos with the dragon

MUMBAI: Tata Consultancy Services Asia Pacific Pvt Ltd, a subsidiary of Tata

Consultancy Services, announced that it had signed a Shareholder Promoters

Agreement with Beijing Zhongguancun Software Park Development Co., Uniware

Company, and the Tianjin Huayuan Software Area Construction and Development

Company, to establish China's first industrial scale software company.






The joint venture, Tata Consultancy Services (China) Co., will provide IT
outsourcing services and solutions to the Chinese domestic market as well as the

global market.






The third signatory of the MoU on June 30, 2005, Microsoft Corporation, will
participate in the joint venture as a strategic investor within one year after

the venture is established.






Tata Consultancy Services will have the majority equity stake of 72.22 per cent
and management control of the joint venture company. The company will be located

in Beijing's Zhongguancun Software Park and is expected to start operation in

September this year and will provide IT services and solutions to China's

domestic market as well as major markets particularly Japan as well as the rest

of Asia-Pacific region, US, and Europe. The other three Chinese entities hold a

combined equity stake of 27.78 per cent.






In future, when Microsoft joins the venture, it will be with a 10 per cent
stake. The equity ratio will change and TCS will retain 65 per cent stake, while

the Chinese entities will hold 25 per cent. TCS is investing around $15 million

in the venture, of it $12.6 million immediately.






“With this venture we are targeting the emerging domestic market in China. In a
year's time, if all goes well, we also have an option to merge our wholly owned

subsidiary into the joint venture,” said S. Ramadorai, CEO & MD, TCS.






Currently, TCS wholly owned subsidiary has around 500 employees in China.





“In the next four years, the headcount for the joint venture could touch 5000,”
informed Ramadorai. He also informed that a majority of these will be locals.






TCS CEO Jonathan Lam will head the venture.





The company is quite bullish about its prospects in the Chinese market and hope
to gain a considerable share of the domestic market, estimated to be around $30

billion annually. It is targeting growing verticals like banking telecom and

financial services.






"This venture is a significant business opportunity, which is China-centric from
a resource perspective, has global appeal in terms of its customer offerings and

is capable of creating a Chinese domestic business of increasing scale," added

Ramadorai.






There is also an exit clause for the rest of the players and TCS has the option
of buying out rest of the stake in the future.






© CyberMedia News