14: Investing in Asia. Comparing Opportunities in India and China with Simone Ciampi, GM of Exprivia in Asia
A comparative analysis of market opportunities and challenges in India and China by Simone Ciampi, GM Asia of Exprivia.
📝 Words: 2419 | 🕰️ Estimated Reading time: about 10 mins
Hey Kula readers,
This week we had the pleasure to discuss with Simone Ciampi, GM Asia of Exprivia.
Exprivia is a prominent Italian digital technology firm with a global footprint, offering comprehensive digital transformation solutions. They specialise in IT infrastructure, cybersecurity, ERP/SAP projects, innovation, and digitalisation for international clients in Asia, with a strong presence in China and India. In India, Exprivia is also planning to establish a Global Competence Center to enhance services and drive value within the group and testing the market for their Healthcare, Aerospace and Energy solutions.
Delve into the strategic insights of Simone Ciampi, as we explore the evolving landscape of business between Europe and India. From his early days managing international relations to leading initiatives at Exprivia in Asia, Ciampi shares his experiences on the China Plus One strategy and the critical timing for entering the Indian market. Discover how Exprivia is leveraging local expertise to foster growth and why India's robust market and technological advancements present a golden opportunity for European companies looking to expand their footprint.
Read till the end to discover more about Simone’s story, the opportunities of expanding business in India, and how a Global Competence Center can help companies in doing so.
Key Takeaways
🌏 Global Competence Centres: Also know as Global Capability Centres or CCC. They combine back-office operations, corporate business support, application development, maintenance, and IT infrastructure services in one location. This setup not only aims at cost efficiency but also focuses on innovation and excellence.
🌐 GCC Growth: India's Global Competence Centres are booming, with over 1,600 already operational and projected to reach around 1,900 by 2025. This growth underscores India as a hub for innovation and technological advancements, attracting multinational companies to consolidate their operations and tap into a skilled workforce.
🔄 China + 1 Strategy: The strategy involves diversifying investments beyond China to mitigate risks and reduce reliance on a single market. With 40% of Exprivia’s clients already operating in India, the country is proving to be a compelling alternative that offers both a significant market and competitive labor costs.
🇨🇳🆚🇮🇳 China vs India: While China's market is becoming saturated and less attractive due to political and economic shifts, India is emerging as an attractive destination due to its large, growing middle class, robust IT sector, and favourable government policies. Investing in India now could mirror the growth opportunities seen in China two decades ago.
Simone’s Story: from Florence to Shanghai
Simone Ciampi, General Manager of Exprivia Asia, holds a Master’s degree in International Relations, and he has been living in Shanghai, China, since 2009. He has acquired a deep understanding of Asian business environment and cultures which has allowed the development to Exprivia’s business, first in China and now in India. Thanks to his network of professional contacts, he has recently been elected Vice-Chair of the ICT Working Group of the European Chamber of Commerce in China.
Simone Ciampi built an international career starting with International Relations in Florence. His journey took him to Spain, France (Paris-Sud University), and China, where he gained valuable experiences.
In Shanghai, he earned a Master's in Economics at Shanghai Normal University in 2009 and worked at the Italian Trade Agency during the Shanghai World Expo 2010. In November 2010, he joined iKaro IT Solutions, which was later acquired by Exprivia, where he became Chief Operating Manager and now serves as General Manager of Exprivia Asia, bringing nearly 15 years of experience in China.
Exprivia has expanded into India, particularly Pune, to establish a Global Competence Center.
Learn why companies are shifting to India and why now is the perfect time to invest in the Indian market.
Global Competence Center
What is a Global Competence Center?
In an increasingly global business environment, large corporations often seek more efficient ways to manage their international operations. One effective strategy is the establishment of Global Competence Centres (GCCs). According to the McKinsey Digital report, these centers consolidate various operational and IT support functions into a single facility, helping to streamline processes and reduce costs.
The Role of GCCs
A Global Competence Center is essentially the operational brain of a multinational organization. It combines back-office operations, corporate business support, application development, maintenance, and IT infrastructure services in one location. This setup not only aims at cost efficiency but also focuses on innovation and excellence. GCCs drive automation, enhance analytics, and support productivity across global operations.
Global Competence Center Trends and Growth
Leading multinational technology companies like Microsoft, GE, Facebook, Bosch, SAP, 3M, Oracle, Volvo, and SKF have opened GCCs in India, employing a significant number of researchers. These centres go beyond cost savings; they are hubs for advanced innovation that are difficult to replicate in their home countries due to manpower and regulatory constraints.
Growth
GCCs in India have shown remarkable growth over the years:
Currently, over 1,600 GCCs operate across the country
By 2025, this number is expected to increase to approximately 1,900
The market size is projected to reach USD 60 billion by 2025
More than 1.66 million people are employed by GCCs in India
The sector has been growing at CAGR of 10.7% since 2015, especially in engineering and R&D
In 2023, the sector contributed USD 46 billion to the market, with ER&D alone accounting for USD 25.6 billion
Want to learn more on the geographical distribution and sectorial focus of GCCs in India?
Check these reports by 👉 NASSCOM and 👉 PwC
Why Exprivia decided to invest in India?
The reasons are many, and first, it is essential to frame everything within the strategic lens of Exprivia, which aims to become a bigger partner in Asia. Therefore, their ambition is not merely to capture as much of the Chinese market as possible but to become a strong brand at a continental level—a partner to turn to when investing in Asia.
Delving more specifically into the answer, the reasons can be summarised into the loss of attractiveness of the Chinese market and, conversely, the significant growth and great attractiveness of the Indian market.
China's New Business Environment
Market Saturation 📉: Some markets in China have reached a saturated phase. Today, it is exceedingly difficult for new businesses to enter the Chinese market from zero. China is a more mature market now, and it can represent a favorable environment for those who have invested in the past but it has become less attractive for new players.
Economic Reasons 💸: China has become significantly wealthier over the past two decades, and so has its population. The cost of labor, which was once very advantageous for multinational corporations, no longer exists at such competitive rates. Consequently, businesses are looking towards new countries to leverage low-cost labor.
China +1 Strategy 🔀: Many international firms, including Exprivia's clients, have started adopting the "China +1" strategy, diversifying their investments to include other Asian countries to mitigate risks associated with over-reliance on China.
Simone clearly states that the changing dynamics do not imply that China is no longer a target for Exprivia. In fact, China continues to be and will remain a core part of their business strategy. The importance of China in the future is undeniable. However, for a company aiming for growth and aspiring to be a continental partner in Asia, relying solely on the Chinese market is no longer adequate to fulfil these ambitions.
The China + 1 Strategy is used by multinational companies to diversify manufacturing and supply chain operations beyond China, reducing risks from relying solely on one country. This approach involves maintaining operations in China while establishing additional bases in countries like Vietnam, India, Thailand, Malaysia, and Indonesia. These countries offer competitive labor costs, favourable business environments, and strategic locations, providing alternative options to Chinese operations. In this matter, the World Bank chief added “India should cash in on China plus one strategy”.
India’s Increasing Attractiveness
Macroeconomics 📈: With a population of 1.4 billion, India has recently surpassed China in terms of inhabitants, making it a market of enormous size. This, coupled with projections of middle-class growth, represents a unique opportunity for businesses looking to invest.
Large talent pool 🎓: India boasts a well-established education system that produces many skilled professionals across various disciplines, including engineering, finance, and IT. With almost 8.5M graduates every year and 1.5M only in engineering, India talent’s pool is unlimited.
Growth of IT industry 💻: For companies operating in the IT sector like Exprivia, the growth and momentum of this industry represent a real opportunity. According to NASSCOM, the Indian IT industry's revenue hit approximately $245 billion in FY 2023 and is projected to grow to $350 billion by 2025. The IT sector contributes about 8% to India's GDP.
There are also specific reasons related to Exprivia itself, not just the attractiveness of the country. 40% of our clients in China already have at least one facility in India; thanks to them, we have been able to obtain insights into the market, which have aided our evaluations regarding entry. Moreover, they already represent a large customer base to start from; currently, our offices in India are swamped with work, and we need to increase our resources because the demand is already very high. Another positive factor was discovering with the Chamber of Commerce that there are already about 8,000 Italian companies, and this was a pleasant surprise that has directed us even more towards this market. - Simone Ciampi
Cost of Labour 💵 : India offers the most competitive labor costs in Asia, with a minimum wage of INR 178 (US$2.16) per day. Manufacturing strategies must adapt to changing policies and cost dynamics across countries. China's "Made in China 2025" initiative is transitioning its manufacturing focus to high-end products, pushing low-tech jobs to other low-cost nations. Rising wages and geopolitical risks in China are prompting companies to explore alternatives like India and Mexico for lower-cost manufacturing. In the below table you can find a comparison made by Reshoring Institute.
Political Stability 🏛️: The Indian government, ideologically closer to the West, enjoys excellent international relations with all major Western countries. India is the world's largest democracy, and it is highly likely that Narendra Modi will be re-elected as the country's leader, ensuring political stability that further solidifies the nation's reputation and enhances its attractiveness for investment.
Government Incentives and Market Openness 🌏: Business reforms, including tax incentives, simplified compliance procedures, and R&D grants, have enhanced its appeal for foreign investment. The Make in India initiative supports manufacturing and technology transfer, making India an attractive investment destination. Special Economic Zones offer duty-free imports and tax holidays, further boosting India's business-friendly environment. Liberalised FDI policies, allowing up to 100% FDI in sectors like IT and manufacturing via the automatic route, simplify entry for foreign enterprises.
India is currently at a crucial moment, having opened its doors to foreign investments and embraced democracy, alongside boasting a vast internal market. This convergence of factors makes it the perfect timing to enter this dynamic market. - Simone Ciampi
What are the main difference between China and India?
Cultural Mentality and Business Environment 💼:
China has historically had a single-party system and a strong cultural mentality of doing business and making money, which has facilitated rapid growth and faster decision-making.
In contrast, India's democracy and diverse religious and cultural landscape may present more varied challenges and slower decision-making processes.
Infrastructure and Development 🚧:
China has experienced rapid infrastructure development and transformation over the past decade, with major improvements in transportation infrastructure like high-speed rail networks.
India, while progressing, still faces challenges in infrastructure development, as evidenced by slower transport options like the Mumbai-Pune route, which impacts business efficiency and connectivity.
Economic and Political Timing 🕰️:
The economic and political timing in each country plays a critical role. China saw significant growth during certain periods, while India is currently at a historical moment with recent economic liberalisation, opening to foreign investments, and boasting a large internal market. We could cautiously say that investing in India today is somewhat equivalent to investing in China 20 years ago, implying that the growth opportunities are immense.
Language and Communication 💬:
Communication in English is more accessible in India compared to China, which can facilitate easier business interactions, especially in sectors like software development where language restrictions in China have posed challenges.
In India's ICT sector, talent is plentiful, but it grapples with familiar challenges similar to those of earlier days in China – workforce quality, communication barriers (though English proficiency surpasses China's), and vendor relationship longevity. However, I see these as surmountable challenges. - Simone Ciampi
Practical Tips for Expanding Business in India
Invest Time and Capital in Market Understanding ⏳: Avoid hasty decisions and invest significant time and resources in understanding the Indian market dynamics through multiple visits and interactions. Comprehensive market research and gaining insights into real business dynamics are crucial before making any investment.
Avoid Hybrid Investments ❌: Hybrid investments are often ineffective and can even turn out to be a waste of time and resources. When making such a significant strategic move, like expanding into a new and diverse geographic market, it's important to do so with decisive investments, both in terms of capital and time.
Establish Strong Partnerships 🤝: Instead of relying on small entities, forge strong partnerships with established and reliable local partners. Building relationships with robust entities ensures stability and longevity in business operations.
Analyse Cost of Business Resources 📊: Evaluate if the cost of business resources in India offers advantageous benefits compared to other markets. Factor in labor costs, infrastructure, regulatory environment, and overall operational expenses.
Seek Insight from Existing Market Players 🔍: Leverage insights from existing customers or market players who are already operating in India. Conduct benchmarking and gain valuable market intelligence through established networks.
Prioritise Information and Market Research 📚: Information is key. Ensure comprehensive information gathering and analysis before making investment decisions. Invest in on-the-ground research and firsthand knowledge of the market landscape.
Adaptability and Flexibility 🤸🏽♀️: Understand that India is a complex and diverse market with evolving dynamics. Maintain flexibility and adaptability in business strategies to navigate the market's challenges and capitalise on emerging opportunities.
What are your thoughts on Simone’s insights?
We hope Simone’s words were insightful and provided you with useful information for considering India as your next strategic move. Do you have additional advices on why investing in India instead of China? Let us know in the comments!
SOURCES:
McKinsey Report: This McKinsey report provides insights into the role and trends of Global Capability Centers (GCCs) in the next normal, emphasizing their importance in innovation and excellence.
PwC Report: This PwC report outlines six imperatives for scaling up the GCC market in India, highlighting strategic growth areas and key opportunities.
Beroe Inc. Whitepaper: This whitepaper discusses the "China Plus One" strategy as essential for achieving supply chain resilience and diversifying investments beyond China.
NASSCOM Article: NASSCOM provides an in-depth look at the future of Global Capability Centers in India, focusing on innovation and the strategic role of GCCs.
Berkeley CMR Article: This article from Berkeley’s California Management Review explores how multinational technology companies leverage India's engineering and research talent through GCCs.
Reuters Article: The World Bank Chief suggests that India should capitalize on the "China Plus One" strategy, noting the country’s potential to attract investments.
Business Standard Report: This report projects that India's middle class will nearly double to 61% by 2046-47, highlighting significant market opportunities for businesses.
India Briefing Guide: This guide from India Briefing discusses India's competitive labor costs and the factors influencing minimum wage across different regions.
Reshoring Institute Report: This report provides a global comparison of labor rates, emphasizing the competitive advantage of India’s labor costs.
Make in India Policy: The official Make in India website outlines liberalized FDI policies, highlighting investment opportunities and government initiatives to attract foreign investments.