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New Subsidiary Increases CSC's Foothold in China
 Western companies have rushed to sell everything from soft drinks to cars in the growing Chinese market, but information technology in China has been a tougher sell. CSC's new office in China will try to capitalize on an educated workforce and a growing need for IT services in the financial services, manufacturing and government sectors.
CSC launched CSC Technology Co., CSC's first wholly owned Chinese subsidiary, in Beijing this summer. The new group increases CSC's presence in China, which began when it acquired a majority stake in CSA Holdings Ltd. in 1999. CSC Technology Co. initially will focus on increasing CSC's financial services business in China. "We're going through an expansion, and the financial services market is heating up in China," says Tim Hilbert, vice president of CSC's Financial Services Group in Asia.
Support for local and multinational companies
China is deregulating its financial services market as a condition of entry to the World Trade Organization. A significant number of domestic financial services companies hope to combat competition from large multinational firms by adopting Western technology and business practices. "The local companies have to improve their customer services and back-office technology to compete effectively," Hilbert says.
The Beijing office will continue to provide solutions to the multinational companies that enter the China market and will reach out to new market sectors. The business development team will focus in particular on generating systems integration and consulting opportunities in the government and manufacturing sectors. China has the advantage of low costs, high education, high productivity and excellent technical infrastructure. Moreover, Hilbert says, the subsidiary is able to hire Chinese staff who speak Korean, Japanese and accent-neutral English, which will help CSC to better serve clients in multiple countries.
CSC expects to hire approximately 100 people by the end of the current fiscal year, which concludes April 1, 2005. This workforce currently focuses on financial services products but will develop a broader focus as CSC's business in China matures. CSC will continue to work closely with CSA, which has roughly 240 people throughout China; the CSA team will deliver outsourcing, desktop support, and hardware and software systems integration. "It doesn't make sense for the CSC team to create a new delivery team," says Alan Lau, managing director of CSA PRC (People's Republic of China).
Navigating a new business climate
"The business climate and culture in China is different from Western practice, even from the rest of Asia," Lau says. The Chinese business culture is skeptical of services in particular, he adds; for example, local companies traditionally hesitate to buy maintenance service for their equipment but use the limited funding for more equipment purchases. However, Lau says that the business environment in China is improving, and the concept of support and service fees is more acceptable to local executives or party leaders because services bring business value.
Chinese businesses also resist infrastructure outsourcing because they prefer to retain possession and control of IT equipment such as servers on site. That focus on physical assets conversely may open up an opportunity for other types of outsourcing, such as application outsourcing.
"These businesses place less emotional attachment on intangible assets," Hilbert says. "The application space will open up quicker than the infrastructure space because it's easier to let go of. Retention of experienced application support and development staff in the heated China market will also be an inducement to outsource application work."
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