India Software Inc—Wooed by all

An interesting highlight of Nasscom 2004 was the segment on country forums. Unlike previous years, most sessions ran houseful. Keen interest was expressed by several Indian companies in expanding business to countries other than the US. More importantly, several MoUs were signed. Stanley Glancy examines what some of these countries have on offer

That India has arrived on the global scene is a fact that is no longer disputed. After basking in the shadow of multinational conglomerates for long, India Inc. is finally making its mark in international markets. While the US continues to be a key market, most Indian software solutions and services providers are now looking at different markets such as the UK, Australia, Japan, China, Malaysia and Taiwan.

While some have acquired other firms to strengthen their expertise in a particular vertical, others have acquired firms to gain an entry into markets that were hitherto unexplored or inaccessible. The interesting thing is that the focus is no longer on English-speaking countries alone. A key strategy for Indian IT majors has been to harness local talent to tap domestic markets.

What other market access strategies should one adopt? What are the opportunities for BPO, e-governance and IT companies in each country? These among others are some of the key areas of concern. Below, Express Computer tries to provide an idea about the ICT market scenario in some countries.

UK

Building bridges of partnership

It could be the language factor or the colonial connection. But after the US, the key geography for most Indian companies has been the United Kingdom, which has metamorphosed into one of the most successful investment locations within the European Union (EU). Today, Britain is the second largest recipient of foreign direct investment (FDI) globally. According to an UNCTAD world investment report, the UK’s FDI stock rose to $683 billion in 2002, much higher than other leading European economies like France, Germany and Holland.

One key reason has been the high amount of investment by Japan and the US, which stood at 63 percent and 39 percent of all investments in the EU respectively. In 2003, Britain won 19 new investment projects from India. Today, there are more 350 Indian companies in the UK in the IT sector alone. According to expert studies, Britain now rivals the US as a premier destination for Indian investments overseas. Key sectors in which Indian companies have invested include information technology, Internet and e-commerce, software services, electronics and telecom.

Other attractions for Indian companies include one of the largest and most open markets in Europe for software and computer services. Also, unlike other European countries, two-thirds of spending in this sector in the UK has been on services rather than on hardware. Britain is also considered to be one of the world’s leading e-economies.

Canada

Maple magic beckons

That Canada is keen on strengthening ties with India was made amply clear when a private sector trade delegation led by Canada’s international trade minister Pierre Pettigrew recently visited India. The agenda was to lay the foundation for future agreements and open doors to more business. Canada is an attractive destination for India Inc. The maple-leaf country provides a gateway to key markets around the world, especially the North American Free Trade Agreement (NAFTA) market. Businesses in Canada can also leverage the strong historical trade ties with countries on the European continent.

FDI in Canada has more than doubled since 1990. In 2002 it reached $255 billion, which is certainly more than many countries in Europe or the Asia-Pacific. Most of these investments have been in knowledge-based industries such as electronics, communications and chemicals.

Compared to other developed countries, doing business in Canada is cost-competitive. Corporate tax rates have been falling consistently over the past few years. By 2008 Canada’s average corporate tax rate is expected to be 6.6 percent below the US rate. Canada also has the lowest overall labour cost. The cost to companies for statutory and other benefits is 26 percent of salary and wages. Canada’s R&D tax incentives significantly reduce the net cost of undertaking research. The country offers highly-trained human resources, excellent infrastructure—including the world’s best communication connectivity—and a favourable tax regime. What more can one ask for?

Malaysia

Need office space?

Though competitors in many areas, India has enjoyed a trade relationship with Malaysia for quite some time now. This was further strengthened when Malaysia’s Multimedia Development Corporation, developers and managers of the country’s multimedia super-corridor, signed an MoU with Nasscom, extending the existing relationship for another five years.

The MoU with Nasscom aims at contributing to the growth and development of IT trade between the two countries, and at helping Malaysia explore opportunities in the ITeS-BPO and entertainment sector for mutual benefit.

As per the agreement, India and Malaysia will forge a closer relationship through exchange of information, especially in the areas of IT, ITeS, multimedia and entertainment. Joint R&D projects, trade missions, joint addressing of relevant regulatory and global policy issues related to ICT are the other key areas on the agenda.

Taiwan

The island boasts a complete industrial infrastructure and production chain for semiconductors. But its greatest advantage is its strategic location at the crossroads of three leading Asian economic regions—North East Asia, China and the ASEAN countries.

Nasscom and Taiwan’s Institute of Information Industry recently signed an MoU to further trade and business relations between Indian and Taiwan in the IT sector and to promote joint marketing of IT software and services to countries like China and Japan. The two countries will especially focus on high-growth, technology-intensive domains like embedded software, chip designing and product development.

Hong Kong

Gateway to China

Hong Kong signed the Closer Economic Partnership Arrangement with the Central People’s Government last year, thus enhancing its role as the gateway to mainland China. Since then it has been focusing on becoming the preferred destination for the Asia-Pacific operations of most companies. Other than obvious advantages like access to all major business areas across China in less than four hours, the Hong Kong Special Administrative Region (SAR) government has also promised zero taxes and a flexible legal system.

The SAR government has invested almost $2 billion in Cyberport, its new IT hub for content development companies. Through its Invest Hong Kong project, the government is looking at roping in Indian content companies to start operations there. By way of incentive, it has made free the services offered by Invest Hong Kong.

stanley@expresscomputeronline.com