• In Conversation

Peter Yip is the Founder and Vice-Chairman on the board of CDC Corporation, a U.S.-based global provider of hybrid enterprise software and services, IT and business services, online games, internet and media services. Being one of the first Chinese business leaders to float a software and internet firm on the NASDAQ, Yip opened the door for other Chinese entrepreneurs to list their ventures in the U.S. capital markets. Yip talks to Entrepreneur about doing business in China and the importance of India in his scheme of things.

Entrepreneur (E): What are the differences between entrepreneurs in India, China and the U.S.A.?
PETER YIP (PY): The Chinese economy opened up only 20 years ago. Since then, a huge shift has taken place in the mindset of Chinese businessmen. For most of them, business is all about making money. Most enterprises are export-driven. Industries built between 1960-1980 were fundamentally lower cost manufacturing units, making electronic toys and other electronic components; they weren’t technology-related ventures.

On the other hand, India has many soft and creative industries, because Indians have been exporters for the past hundred years. Indian entrepreneurs are comparatively more global. Chinese entrepreneurs only concentrate on finding customers for their manufactured products. They lack exposure and many of them cannot speak English. There are a lot of Chinese visiting the U.S.A. but they are mainly tourists or students.

In the U.S.A., there is a history of entrepreneurship, entrepreneurs are more confident and availability of money makes things a lot easier. Every sector is advanced and many entrepreneurs are creating new products and ideas. It’s a universal center of innovation where a number of venture capitalists are present. So, in the U.S., entrepreneurship is much more sophisticated compared to China while India is somewhere in between.

As an investor I would prefer India over U.S.A. as the evaluation is reasonable here. In the U.S., there is too much money chasing too few quality deals, so the evaluation is high.

E: Which are the companies in India that excite you?
PY: We have recently invested in a company called Ebiznet in India. On our own business front, we have moved from a major R&D center to the value chain, managing several marketing procedures for the entire South East Asian region from India. CDC is different from other investors as we are an evergreen fund, whereas a lot of other funds have a 7-10 year life span and need to sell. But we don’t need to sell, so we can be long-term investors and that is what differentiates us.

As long as a company has the right plan and is looking at the right kind of products and offering them to customers, we are ready for a long term investment with it. We are mainly looking at establishing a strong long-term business relationship. Establishing a business can take time so an entrepreneur needs to come up with solutions that truly offer value.

E: Regarding management methodology, what are the key points the U.S. and China can learn from India?
PY: China has more to learn from India than the U.S., especially the globalization aspect and the Indian best practices. Indians have done a good job when it comes to outsourcing and China will have to learn how to move offshore. Chinese businesses can no longer afford to hide behind government policies and the only option for them is to be bold.

E: If an Indian software company wants to expand to China, what would be the target areas and problems to focus on and what would be the opportunities available?
PY: To capture the IT industry, Indians have to localize a lot in China. There are also many Chinese engineers looking for jobs so there is plenty of cheap labor available in that country. So, being cost-effective, you won’t be able to compete with Chinese counterparts.

The reason for the success of the U.S. is that the product-consumer ratio is smaller; but when it comes to India or China, one product can have several buyers. I think many of them are already beginning to learn from companies like Wipro, Infosys and Tata, which have ventured into China. Some of these companies are on their own while others partner with locals. Having operations in China would also help in servicing the eastern market including Japan, because many Chinese speak Japanese as well.

Lastly, you need to be patient in China and learn to navigate the government machinery as it is a controlled society and not as open as the U.S.A.

E: What has been your experience of doing business in India?
PY: India could be the fastest-growing market for us. We have people who are more than just developers; they are helping us implement a product map. For instance, our new product with Microsoft is completely manufactured in India and we didn’t need any inputs from the U.S.

E: What are the main challenges that entrepreneurs face in India?
PY: Our biggest challenge has always been to find the right partners and focus on executions. Of course, we all like to focus on the way the world economy is recovering because our market is global. The world is interconnected today. India and China are becoming big players on the global platform, and all companies have to work keeping in mind the world economy. We can no longer run a company on a quarter-to-quarter basis. It’s important to tap all resources and recognize the market requirement.

Customer demands and complains are usual, but you must be able to find an appropriate solution. In a way, all companies should focus on working round the clock and try to maximize opportunities. Like India, China would be a big challenge for other countries to get a foothold in. Although the Chinese have started speaking in English, at most times they fail to relate to western cultures. Because the Chinese usually never spend much time overseas, they are deeply rooted to domestic values and interests. Thankfully, they have now started to become more open-minded.

E: What are the unique points of doing business in India?
PY: India’s diversity is very interesting; every city/town is different from the other with a number of languages and dialects being spoken. The history is fascinating and there’s a lot to learn. It’s a country comprising 1.2 billion people, which is enough to explain its massiveness. There is a wide disparity between the rich and the poor, much like China. The situation is somewhat similar to the one depicted in the movie Slumdog Millionaire although it was slightly exaggerated in the movie, I think.

Also, in India’s democratic political setup, you have choice and freedom. China, however, doesn’t have freedom. The Chinese government indulges in cosmetic thinking and there are huge censorship rights owned by them. India fascinates me, and I want to come back here all the time.

©Entrepreneur October 2010

Tags:
CDC Corporation, China, India, IT, Peter Yip, services, software