MindTree to reduce focus on China market

Says regulatory, policy issues hindering growth plans there

At a time when the Indian IT services majors such as Infosys, Wipro and TCS are strengthening their presence in the Chinese market, mid-tier IT services firm, MindTree, is changing its China strategy. The Bangalore-based company is planning to deprioritise focus on China as a market of opportunity.

“China is an extremely cost sensitive market and it is difficult to do business there from a language point of view. There are business and cultural nuances in each market. It is a very difficult environment in China, both business wise and culturally,” Rostow Ravanan, CFO, MindTree told Business Standard.

Besides, the company also feels that the various regulatory and policy issues are also hindering its growth plans in the Chinese market. “I don't know whether these problems can be called as protectionism, but there are lots of issues related to policy and regulations. For an Indian company working with a Chinese customer, it is difficult to remit money out of China to India,” Ravanan added.

MindTree entered the Chinese market in 2009 by bagging an outsourcing deal from Huawei and opened a centre in Shenzhen. According to MindTree officials, other than Huawei project, the company has a sales office in China. It also employs developers who focus on the domestic Chinese clients. But, the person didn't give specific data on revenues, clients and employees in China.

It is not that only MindTree has been slow in growing there. So far, none of the Indian IT majors have been able to get a strong foothold in the Chinese domestic market as a services provider. While Tata Consult-ancy Services (TCS), Infosys and Wipro have presence in China, it is more as a delivery centre for its global clients than China as a market opportunity.

Earlier, N Chandrasekaran, CEO and MD of TCS had said they have been trying to scale in China but the efforts were taking a long time. Meanwhile, Wipro had said it plans to expand presence in China by doubling the head count to serve their global clients having operations in China. Similarly, Infosys Techno-logies had said it would invest around $125-150 million for a new campus in Shanghai.

In April 2011, the company had announced the restructuring of its businesses to achieve the goal of one billion-dollar in revenues. As part of rejig, MindTree had said it will focus on five major verticals like banking and financial services, retail and travel, manufacturing, media and will reduce exposure to other sectors over time.