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Ashutosh Sheshabalaya On Indian Issues
The Mystery Of Indian It
Interview with Ashutosh Sheshabalaya

Published in May 1998 issue of ID-Side, Brussels
Why do all large companies - and not only information technology ones - have a software development project running in India ? Is it because it is cheaper, faster, using modern techniques ? Is it because of a lack of resources at home?

All of the above.
Cost advantages in operations and overheads.
Cost advantages in engineer salaries.
In spite of a rapid increase in wages, Indian software engineers are still cheaper on average than a European.
Nevertheless, wage differentials narrow dramatically at the upper end of the skills spectrum.
In short, based on their own profile and positioning, international companies perceive a differing mix of advantages in determining the overall advantage of a presence in India.

For maintenance jobs, companies choose India for inexpensive talent, and one that is available in large numbers. As with everything in India, numbers are especially important, given the structural (and demographically strengthening) shortage of skills in the West. Aptech alone trains 350,000 engineers a year. NIIT's number is even higher, an achievement which won it a place in the Guinness Book of World Records.

At the other end, there are companies which employ the best talents to design newer versions of their products: these may be professionals with expertise in systems software, applications and processes (e.g Hughes, Oracle Corp., ComputerVision), electronic circuit design (Texas Instruments, Motorola and Cadence), and applications developers (Citibank, Siemens, Philips).

For such companies, cost does not figure - or figures far less decisively - in the overall equation. Indeed, before launching the Microsoft development center at Hyderabad, Bill Gates went on the record to state " With the rising cost of infrastructure building, taxes and salary of software engineers, a software centre in Seattle or in Hyderabad costs the same."

In between these two lies the mid-sized mass, which seeks a mix of skills from across the spectrum, and also pays considerable attention to devising the most appropriate cost-benefit ratio, that is vis-a-vis home country operations.

Meanwhile, together, this convergence of companies - across the spectrum - is producing a vertically integrated skills base within India, and this in turn is driving the qualitative transformation of the Indian software industry.

Why are West European managers so discrete about their using Indian software developers ? Most won't admit they do. What is embarrassing them?

In the West, especially Europe, image. Persistence of vision. One has been used to shoes, clothes, even machinery. Never before in history has a high tech, knowledge-intensive sector relocated overseas because of comparative advantage.

I say ‘relocation’ after carefully weighing my own words. Take Motorola for example, whose operation in India is one of only three SEI Level 5 companies in the world. Motorola’s outlook on India is illustrated by its Bangalore facility, which employed 250 engineers in 1995, but has space for 750.

This image problem is reinforced at the other end by the almost total - and possibly fatal - lack of awareness about Western market PR requirements, both on the part of Indian industry in general and Indian companies in particular. This is especially true with regard to Europe.

For US companies, there are fewer image problems given the immediate lead-in provided by the huge Indian software community in the US, and the 'culturally' accepted practice of recruiting (or otherwise using) the best from all over the world. I say 'culturally' because there are today very few US universities which do not have a heavy presence of Indian academics, for decades. This is especially true in Ivy League schools. Harvard Business School, for example, has 18 Indian professors. Such a trend is now seeping across to wider areas. Citicorp's Number 2 is Indian. McKinsey and Andersen are headed globally by Indians.

One very important factor here is the direct link provided to India by Indian-born US citizens who relocate to head the Indian operations of their parents. This is true for IT companies as well as US firms in other sectors; it is much less so for Europe.

In Europe, India's image also remains a serious problem. One just has to see the pictures of India accompanying articles on Indian IT. Cows, autorickshaws, 1950s model cars. The only source which actively portrays India positively (pictures of rockets, satellites, the Tata Safari jeep, the Indian LCA warplane, the Arjun main battle tank, Infosys's glass and steel offices) is the French, especially Le Figaro.

France has always had a positive curiosity about India (Romain Rolland, Malraux were open Indophiles). Indeed, the only Western academic who explicitly asserts that India discovered not only the zero, but also positional notation, the decimal system and the concept of negative number is a University of Paris professor, Denis Guedj.

Arabic numerals are actually Indian, and the Arab word for mathematics equates to the 'science of the Hindus'. Could this explain India's generic talent for software ?

Another possibility. India has always attracted attention due to its 'spiritual' side, its 5000 year culture. Adapting this to the high tech society of tomorrow is much too difficult.

These are some of the reasons why there are either vague generalisations - or ignorance of India, not only about IT but high technology in general. A Le Soir article a few days ago on French remote sensing satellites, for example, did not once mention India. The French themselves (and the Americans) acknowledge openly that the Indian IRS system is not only more advanced than their own - but far ahead of the Japanese and Russians (whom the Le Soir article did mention). There are several other examples in these contexts.

Finally, it is not only West Europeans. Even Indian-owned companies in the US actively seek to deny their roots, and the huge resources drawn from India. See Mastech's home page, for instance, or that of Cadence, Duet Technologies, i2, Interra, CBSI etc.

What about competition from the Filipinos, East Europeans etc. ?

India's software sector is driven by a very long and durable market economic tradition. Just remember the Bombay Stock Exchange is Asia's oldest, and this includes Tokyo. At 25-30 million, there are more Indian citizens investing in stock markets than the populations of Belgium and the Netherlands combined. Unlike East Europeans, moreover, Indian companies have not had the need to 'culturally' learn about the concept of profit, leveraging competitive advantage, or even (some would say, especially) the quick buck ethos.

The Philippines is another story. Most crucially, it has a far smaller population (and therefore skills) base. Though in the late 1980s and early 90s it figured in the competitive scenario, one has to only look at the success of Indian companies in the wider Far East. NIIT, for example, has been accorded Multimedia Super Corridor Status in Malaysia for the MSC's Smart School flagship application. Indian companies have already been managing training at Malaysia's Asia Pacific Institute for Information Technology and at the R&D Center at Singapore Science Park. These are all jewels in the Southeast Asian crown. Where are the Filipino companies here ?

The small population base argument also applies to Israel. However, given their superb marketing skills and their ability to consistently leverage knowhow at the upper end of the spectrum, one of the most interesting possibilities remains a combination of Indian and Israeli companies. This would be worth watching.
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