Outsourcing: Raju Reddy, Chairman And CEO Of Sierra Atlantic (Part 6)

By guest author Tony Scott

The Growth of India and China Domestic IT Markets

Tony: Are you seeing the growth of China and India domestically make an impact on your company, and how you are structured?

Raju: I must say that one thing that is very different today is that the China and India domestic markets are becoming very important markets for a lot of our customers. In fact, we recently reorganized our company along the lines of emerging markets and then the major markets, as we call them – North America and Europe. And then our outsourced product development services is set up as a third entity that crosses all geographies. Emerging markets today make up about 12% of our revenue, up from maybe 5% a couple of years ago.

Tony: So today you are doing work for North American and European companies, delivered from China and India, as well as doing work in China for Chinese companies, and in India for Indian companies.

Raju: Exactly. Some of our customers, especially companies that are a billion dollars and above, probably don’t need any or as much help in selling into China and India. But companies even at the $100 million level or even a couple hundred million frankly, don’t have the infrastructure in place in China and India. Certainly for anything below $100 million it would be very rare that they did. But at the same time they have an increasing number of customers from those parts of the world, or their North American customers have operations in China or India that need local support.

That was not the case three years ago. We are saying that it’s not all about cost arbitrage. Okay, there is cost arbitrage, and people want to get their work done cheaply. But I think there is a big opportunity in taking U.S. companies or European companies and helping them to grow their top line by tapping into the growing market potential in China and India. That’s becoming an important part of our value proposition. It’s not all about simply taking existing work and doing it at a low cost.

Tony: How are you helping companies to improve their top line and helping with their operations?

Raju Reddy: One company out of Boston we are working with is in the infrastructure space and  storage space. We are helping with lot of the presales and some of the post-sales work, too.   We are also helping a publicly held software company with revenues of just under $100 million with their activities in China. We met the CEO and two people from that company when they visited our offices in India about two weeks ago, and now the CEO talking about starting a sales center in India with our help.  So things like that are happening. Frankly, they weren’t even about growth potential in India before, but now they see there is a significant IT market in India and China.

Tony: Absolutely. For China’s IT market, the most recent numbers I saw estimated growth rates of 12%–15% a year over the next five to ten years. And India is not too far behind China in the growth. So they are significant markets.

Raju: Yes, and I read somewhere that IBM, for example, now has about 50% of the IT services market in India.  It’s interesting; all of the Indian companies were late getting into that market.

Tony: Amazing – late into their own backyard.

Raju: Just over the past year, there have been bids out of about one billion dollars for one project in India, so we are not talking of small-time bids.

In India there is big initiative called UID – Universal ID; it’s kind of a like a Social Security number. We don’t have such a national identification system in India. Now, the government is initiating this; it’s driven largely by homeland security issues. It will cost about $4 billion–$5 billion. So, there are very large technology investments that are being made at both at the federal and state levels.

Tony: It’s very much the same in China – huge telecoms and IT infrastructure projects at the city, province and national level.

Raju: Yes. But it’s a bit different in China, since the government has a significant role in everything there.

Tony: Especially for certain infrastructure activities. For anything that touches telecoms, my clients are saying it’s getting more difficult.

This segment is part 6 in the series : Outsourcing: Raju Reddy, Chairman And CEO Of Sierra Atlantic
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