Infosys Refreshes Its China Strategy, To Focus on Internet Services Segment

The country’s second-largest IT services company aligns service offerings to meet local client needs.

Infosys, India’s second largest IT services company, is sharpening its China strategy by bringing in specific focus on the internet services segment, which is driving the consumption of technology services and products at the moment.

The Bengaluru-based tech firm also plans to streamline its operations and service offerings in the country to align with the local Chinese market, said chief executive officer, Salil Parekh. “We are servicing both local and global clients from there. The tech disruption in China is in the way they are building their internet ecosystem. We play a small part in that segment today, but that’s where the larger growth will come from, in the future,” Parekh told Business Standard.

According to a recent Forrester report, China is expected to spend around $235 billion on technology goods and services in 2018, ahead of Japan’s $222 billion. Despite the immense growth potential, China continues to be a drag on the performance of the Bengaluru-headquartered company, apart from the domestic India business.

“In China, we have different types of businesses. Some of those have been more challenged but even there, we are starting to see trend lines shift,” said Parekh. Parekh added that there are plenty of opportunities in China, apart from the US market, where the technology environment is going through massive transformation. “We are quite happy that we have a large presence (in China), but we just have to streamline it now to make sure it’s aligned to the Chinese market.”The APAC business contributes to about 13 per cent of Infosys’ overall revenues though a bulk of it comes from the English-speaking Australian market.

According to Infosys’ annual report for FY2017-18, the company’s Chinese subsidiary posted Rs 760 million in losses, whereas the losses from the Shanghai subsidiary stood at Rs 960 million. In the June quarter, the company had specifically mentioned on the need to focus on stabilising its China business.

Analysts note that within the APAC businesses of IT giants, Australia grabs a major share due to the ease of business and English-speaking clientele, though China and Japan offer much greater business potential. With a predominantly hardware and manufacturing-based industry, China offers huge scope for software service providers. Most tech companies, however, take the joint venture or partnership route to make inroads to the otherwise difficult market.

“We are on our own in China. Today, the big markets for technology are Western Europe, North America, and Australia in APAC, where Infosys is concentrating more. We are now starting to see more growth in Japan and South-East Asia,” added Parekh.

Infosys has a strong presence in China, with a headcount of around 4,000 employees located across four centres, including one campus. Almost 90 per cent of its staff operating in the country comprises local Chinese, who cater to local clients.

As a part of his plan to globalise the company’s workforce, Infosys’ erstwhile CEO Vishal Sikka had in 2015 announced to more-than-double the firm’s China headcount to 10,000 in the next couple of years. However, this has seen a very limited success. – Business Standard