Google's recent accusation of a cyber attack by Chinese Government aimed at gathering information on human rights activists, has spread a fear of insecurity among other MNCs operating in the country.
David Drummond, SVP, Chief Legal Officer and the author of the Google announcement said on Google blog that Google faced cyber attacks of varying degrees. He revealed, “In mid-December, Google detected a highly sophisticated and targeted attack on its corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident--albeit a significant one--was something quite different.”
Whereas Chinese Government is seeking companies' support to its Internet controls. A senior Chinese official Wang Chen, the minister of the State Council Information Office announced, “The main security problems on the Internet included "the severe threat to the physical and mental health of minors from Internet pornography. Truly ensuring the secure operation of the Internet and its information flow is ensuring national security and the fundamental interests of the people.”
Although attacks are not new to the company, analysts are of the view that this would not only constrain Google' operations in China but would also pronounce the risk perception among the MNCs operating in China. Amneet Singh, VP - Global Sourcing, Everest Group says, “The risk perception that China has had from IP standpoint, software piracy, and data insecurity is well known. But Google might not have thought that hacking like this would happen. IP and data security would top the mind of companies before they think of setting up their centers here. ”
China in itself is a big domestic market with a GDP growth of 8 percent and offers significant opportunities for MNCs. Google might have ignored the risks involved in working with China and chose to look at the opportunities available. The company has 2000 employees in China with its largest captive centers in Beijing and Shanghai. Other two captive centers are in Hongkong, which is marketing and sales focused office and Guangzhou. Majority of work in these centers are focused on domestic market and some aspects of offshore delivery. The scope of work in these centers is centered around software development and research work in terms of network optimization, according to Singh.
China’s IT-BPO offshoring industry has 100,000 jobs in over 250 centers across four key locations-- Beijing, Shanghai, Dalian, and Guangzhou. The market comprises three kinds of players--local Chinese providers, multinational service providers, and offshore captives of MNCs. Key players operating out of China and corresponding headcount are:
| Local Chinese Providers |
Headcount |
| Neusoft |
12,000+ |
| ChinaSoft |
5,000 |
| HiSoft |
3,500 |
| VanceInfo |
|
| Multinational service providers |
Headcount |
| Cognizant |
1,200 |
| Wipro |
500 |
| Infosys |
700 |
| IBM |
12,000+ |
| Offshore captives of MNCs |
Headcount |
| Citigroup |
2,000+ |
| HSBC |
1,000-2,000 |
Google's revenue from China is small and its exit would not affect the global giant as much. However, Saugata Sengupta, Analyst, Tholons says, Google's new product Android (OS for cell phones) could take the biggest hit if Google quits out of the largest cell phone manufacturer of the world. This would provide a huge opportunity however for Yahoo!, Bing and the Chinese search engine Baidu, which already has around 65% of market share.
The global services industry requires an environment that protects IP and respects data privacy and protection. China’s reputation of ranking low on these factors could prove to be a dampener to its efforts in building a huge services industry.
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