Asia Times: India's IT hopes: From megadreams to deliverance


	August 16, 2001	atimes.com

India/Pakistan

India's IT hopes: From megadreams to deliverance
By Sandeep Shenoy

Despite the gloom surrounding the technology industry in the United States with the plummeting stock market, Indian Information Technology (IT) companies still exude a seemingly unrealistic confidence.

According to India's apex software industry organization, the National Association for Software and Services Companies (NASSCOM), compared to US$6.2 billion in 2000-01, IT revenues will grow to $8.5 billion in 2001-02.

But India has bigger dreams. A study by McKinsey and Company for NASSCOM showed a potential growth of the IT industry to $90 billion in revenue by 2008, employing more than 2 million people. A bonanza of this scale could well propel India into the league of world's most powerful economies.

To convert this megadream into a reality, however, India has some unique advantages and some major challenges that it must overcome. For now India has the lead compared to most other nations. But it must pay close attention to what must be done to miss the potholes and stay ahead.

The 1990s were a lucky period. They saw India's IT industry grow at an average rate of 42 percent annually, riding on the acute need felt for software talent to fix the Y2K bug (Year 2000 computer problem), and then for the dotcom frenzy in the United States before the net economy bubble exploded. The true beneficiaries of this madness were the IT companies and professionals who gorged themselves with high-paying contracts and salaries until the end of 2000.

Indians are uniquely equipped to be good IT professionals. Besides communicating well in English - a necessity - they are the products of some of the best technical finishing schools. Indians also have a firm foundation in mathematics necessary to create the most efficient algorithms for computers - built out of a cultural and a religious emphasis for contemplation and inquiry and a proud legacy of mathematical discoveries since the ages.

Indian professionals also belong to a generally free, open and tolerant culture and thus adjust to similar Western values and work environments without a glitch - a necessity when working with their American and European counterparts.

India has a major advantage in its ability to churn out very large numbers of software professionals through its thousands of engineering institutions. Buoyed by the success stories of the Indian diaspora in Silicon Valley in California (where there are altogether more than 20,000 millionaires), even greater numbers of Indian youths are aspiring to join this industry.

The strength in numbers is also being exploited in another area, called IT-enabled services. These services are labor intensive and are outsourced to India because of cost advantages. Call centers, payroll management and data entry work are some examples.

The 12-hour time difference between US and India provides some advantages as well. For some US corporations, product support role is often taken over by their Indian subsidiaries during the night when their offices in America and Europe are closed. It also allows round-the-clock development by teams of engineers in the US, Europe and India working eight hour shifts for a faster time to market.

The network of technocrats from overseas Indian community, such as the Ind-US Entrepreneurs based in the US, are mentoring aspiring Indians to start their own software companies in India's silicon cities of Bangalore and Hyderabad.

But there are many challenges as well. India's IT companies for now are mostly focused on manufacturing software, which are outsourced by technology corporations from the developed countries. Indian engineering schools do not conduct cutting-edge research compared to their counterparts in the developed world, mostly because of a lack of funds. For decades, India has lost its best research talent to universities in the US. While many of the most prestigious corporations in US owe their existence to the entrepreneurial spirit of this talent, India has benefitted little. This trend still remains to be reversed.

Since Indian engineers remaining in the homeland are good mainly at a lower-rung implementation level work, Indian IT firms have not been able to produce or market significant branded software products of their own.

Contrast this with the Israeli IT industry. Israeli universities produce a large number of high-level researchers who are encouraged and provided with generous loans to start their own companies. Israel's success can be gauged from the fact that more than 150 of its IT companies are listed on American stock exchanges, as compared to only a handful from India. The success of so many Israeli start-ups should be a wake-up call to India to elevate the level of research conducted within its academia and do more to provide incentives to keep its best talent within its shores or lure them back from overseas.

The Indian IT industry's second lucrative source of income, besides manufacturing software, is to act as "body" shops supplying their software professional employees on temporary contracts with corporations in other countries who do not have adequate programmers. There are limitations to this approach, however. The best professionals are often lured by corporations to which they are contracted to become permanent employees and given an opportunity to migrate abroad. Both the US and more recently Germany allow permanent residence - a magnet for Indians aspiring for a better life. This lost workforce is hard to replace since it takes years of training and experience to make each such professional. The domestic IT Industry is having a hard time finding worthy replacements at the rate at which it is losing its cadres.

If Indian software companies must be recognized as serious players, they must aggressively expand their operations to their offshore markets. They have to become multinationals themselves. This is a major challenge because Indian companies have little experience with managing complexities that occur in overseas operations. Secondly, investments and acquisitions overseas require a level of risk-taking with which the Indian business community is not yet comfortable.

India can become the reigning IT superpower. The challenges are enormous but this is one opportunity the country should not miss. Only a collective effort by India's government, its IT industry, and its professionals and organizations around the world can turn the dream into reality.

((c)2001 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

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