Infosys to invest $65 million in China

Infosys plans to invest $65 million in China expansion and planning to set up new facilities in Hangzhou and Shanghai.

Infosys Technologies said Wednesday that ramp-up in its Chinese operations was happening at a slower pace than expected over clients' concerns on protection of intellectual property (IP) in that country.

Infosys' head of delivery, Mr S. Shibulal, said that clients were diffident to the company's proposition of getting serviced from China over IP protection.

Global clients wary

"The global clients are still not yet convinced about China as an ideal location for offshore outsourcing. We are still trying to convince them," Mr Shibulal said adding that client' diffidence would not have an impact on company's expansion plans.

Infosys, which started operating from China few years ago, has managed to add a little over 700 people there. Infosys plans to invest $65 million in expanding its Chinese operations over the next five years with a targeted headcount of 6,000 and is setting up two new facilities in Hangzhou and Shanghai.

However, Mr S. Gopalakrishnan, President and COO, said the company was unlikely to take a re-look at its Chinese investment plans. During the September quarter, Infosys managed to get its first million-dollar client in China. The company, which clocked revenue of $2.5 million in China during second quarter, posted losses to the tune of over $1.33 million, he said.

Infosys' consulting subsidiary also continued to post losses. "We are still in an investment mode and it may take about two to three quarters to achieve a break-even," Mr Gopalakrishnan said. Infy's consulting business grew 29 per cent to post revenues of $13 million and a loss of $3.3 million.

Good growth

But other subsidiaries, Infosys Australia and Infosys BPO posted good growth during the quarter. Infosys BPO grew 20 per cent quarter-on-quarter to clock revenues of Rs 157 crore. Profit margin for Infosys BPO stood at 23.3 per cent. Infosys BPO added three new clients during the quarter to take its overall client base to 24.

The BPO outfit added 2628 people to take its overall employee base to 9,776 and had an attrition rate of 38 per cent. Infosys Australia clocked revenues of $24.97 million and had a profit margin of 17 per cent.

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