VZCZCXRO1869
RR RUEHCN RUEHGH
DE RUEHCG #0709 3481036
ZNR UUUUU ZZH
R 141036Z DEC 07
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 1384
INFO RUEHCG/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0193
RUEHCN/AMCONSUL CHENGDU 0007
RUEHGH/AMCONSUL SHANGHAI 0004
RUEHSH/AMCONSUL SHENYANG 0020
RUEHGZ/AMCONSUL GUANGZHOU 0141
RUEHHK/AMCONSUL HONG KONG 1156
RUEHIN/AIT TAIPEI 0057

UNCLAS CHENNAI 000709 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EFIN EINV CH IN
SUBJECT:  INFOSYS FOUNDER ON IPR IN CHINA, HIRING IN U.S. 
 
REF: SHANGAI 785 
 
¶1.  (SBU) SUMMARY.  In a wide ranging discussion with us, Founder 
and Chairman of the Board of Infosys Technologies Narayana Murthy 
discussed the state of Infosys, with particular emphasis on its 
expansion plans outside of India.  Murthy told post that his 
company's expansion into China has been hampered by his clients' 
concerns about China's poor intellectual property protections.  He 
also said Infosys plans to dramatically expand its hiring of U.S. 
graduates from its current level of 300 per year to 3000 students in 
¶2008.  Murthy acknowledged that the appreciation of the Indian rupee 
has hurt his company, but did not appear overly concerned.  END 
SUMMARY. 
 
LACK OF IPR PROTECTIONS HURTS CHINA BUSINESS 
-------------------------------------------- 
 
¶2.  (SBU)  When we asked about Infosys's expansion into China, 
Murthy admitted that it is not going as well as he hoped.  Murthy 
said his clients, particularly European and American ones, are 
reluctant to have their work done in China due to their concerns 
about China's poor intellectual property protections.  He explained 
that "we have to spell out all of the locations where we'll do their 
work in our Master Agreements" and that clients are initially 
reluctant to allow China to be included.  Murthy said it takes time 
-- four to five years -- to overcome that reluctance.  He said he 
understands his clients' misgivings, pointing to a recent visit he 
took to China.  Stepping out of his central Beijing hotel to go for 
a stroll with Peter Bonfield, CEO of British Telecom, the two turned 
the corner and encountered a sidewalk vendor selling pirated 
Microsoft and Windows products.  Murthy said that Bonfield jokingly 
asked the vendor if he had Finacle (an Infosys banking software 
product) and the vendor replied "I can get it for you tomorrow." 
 
¶3.  (SBU) Murthy said that right now Chinese leadership does not 
understand the impact of their weak intellectual property rights 
protections.  But he was optimistic about the long-term potential, 
saying that "there is nobody better than the Chinese at solving a 
problem once they are serious about it."  Murthy also described 
challenges on the human resources front in China.  He said qualified 
graduates are available, but those who have sufficient English 
skills command a high premium.  He also said retention is more 
difficult in China than in India, as Chinese professionals are more 
willing to leave for a higher salary where Indian ones value 
institutions a bit more. 
 
INFOSYS TO HIRE TEN TIMES MORE U.S. GRADUATES 
--------------------------------------------- 
 
¶4.  (SBU) Murthy said Infosys is planning a major expansion of its 
U.S. hiring.  He explained that they have been hiring around 300 
U.S. graduates per year for the last few years but that they plan to 
increase that to 3,000 in 2008.  To date, Infosys has brought its 
U.S. hires to its Mysore campus for their five months of new-hire 
training.  But Murthy said they are planning to set up a U.S. 
training center to deal with the major increase in U.S. staffing. 
Murthy said ninety-five percent of the U.S. hires will work in the 
United States, with a small number sent to work in other countries. 
 
 
PHILOSOPHICAL ON THE RUPEE APPRECIATION 
---------------------------------------- 
 
¶5.  (SBU) Murthy was philosophical when discussing the effect of 
rupee appreciation on Infosys.  He admitted that it has a negative 
impact on the company's profitability, but said "one of our founding 
principles is to focus on things that you can control" and that the 
currency appreciation is "a macroeconomic effect which we have to 
live with."  He said it gives Infosys an opportunity to try to 
improve how it goes about doing its business.  Murthy told us that 
stepping back and looking at the phenomenon "as an Indian," it is a 
benefit since India imports more than it exports.  Murthy added that 
the impact on a big firm like Infosys is relatively small and that 
he feels for smaller businesses, especially textile firms, whose 
tight margins are really squeezed by the rupee's appreciation. 
 
HOPPER