India’s IT capital Bangalore, which is keeping US President Obama awake at night, literally began its high-tech journey on a bullock cart.
The first satellite dish in the country that helped a technology company set up round-the-clock communication link with its US offices arrived on a bullock-driven cart in 1985.
It also helped Texas Instruments (TI) become the first multinational to set up a software design centre in India and pioneer the country’s IT revolution 25 years ago.
TI’s communication director, K S Narahari, who stumbled upon this photograph recently, is not sure what prompted TI to use a handcrafted bullock cart to carry a state-of-the-art satellite dish to its office at Sona Towers on Miller’s road.
But undeterred by the country’s prevalent means of transport, other big-name tech companies followed TI, and a sizeable chunk of India leaped forward from the bullock-cart era to information-technology age. “India was an attractive destination as it had a good pool of engineers who were available at nearly one-fifth of US salaries,” says Praveen Bhadada, manager of Zinnov consulting.
The sensational success of the tech industry in India has also made it a highly visible target for anti-outsourcing campaigners from Obama to Ohio governor Ted Strickland, feel many experts.
The who-is-who of the global tech industry have turned India into their second home. Every fourth employee of IT giants IBM, Oracle and Accenture is in India. Cisco has built its second headquarters in Bangalore and has reportedly shifted 20 per cent of its top executives to the city. Alcatel-Lucent is planning to invest $500 million to set up its global services base in India.
Last week, Capgemini announced that it will make India its global innovation hub. By the end of this year 35 per cent of its employees will be based in India. TI’s largest office outside USA is in India. Other global brands, Microsoft, Yahoo, Adobe and Google have a similar story to tell.
India’s technology industry grew slowly in the 1980s and 1990s. Most companies either did piece-meal, low-technology work or body shopped their employees to clients abroad. But after the liberalisation of the economy in early 1990s, several Fortune 100 companies gradually woke up to the low-cost talent pool available in the country and started setting up captive units. “This was a key event that started building brand India,” says Amneet Singh, vice president, Everest Research.
The Year 2000 or Y2K crisis was the next key milestone in the growth of Indian IT industry. Due to a limitation in software it was predicted that most computers would recognise the 2000 as the year 1900 and trigger a widespread breakdown of all industries that ran on computers — from airlines to banking.
To fix the problem, businesses had to get their entire software rewired. The process was laborious and expensive. It was also tailor-made for Indian companies who could deploy their armies of low-paid engineers working in India on the task.
The year 2000 set in peacefully and opinion is still divided if it was Indian engineers who stalled the crisis or whether the problem itself was overstated. But the crisis helped Indian companies build their credentials as trusted and economical service providers who could do large scale projects.
But India was still far from emerging as a tech dynamo. “Nobody had an idea about the technology revolution in the making,” says Amneet Singh. It took another crisis to give Indian firms their big break.
Outsourcing a boon
The dotcom crash and the recession at the beginning of this decade triggered a tidal wave of outsourcing and the Indian tech industry went on steroids. The number of MNC units in India more than tripled from 150 in 2000 to the present 650, says Praveen Bhadada.
About 2,30,000 engineers are working on multinational technology projects in India, making them the largest high-tech workforce outside USA. China with a similar tech work force of 1,80,000 engineers is a distant third. Other emerging countries like Philippines and Ukraine are reportedly 10 years behind India in high-tech work.
“Of the 650 multinational centres in the country, about 10 to 15 per cent are doing highest level of technical work while the majority is still focused on enjoying the cost benefits offered by the country. But the innovative companies have become a role model for others,” says Praveen Bhadada.
The technology revolution, more importantly, transformed home-grown IT companies such as Infosys, Wipro, TCS, HCL and erstwhile Satyam into global players.
For example, founded in 1981, Infosys took 19 years to touch $100 million annual revenue. But riding on the outsourcing wave its revenue grew by 40 times to reach four billion dollars by 2008.
Other Indian firms grew at a similar speed. The Indian IT industry expanded from $150 million in 1990-91 to the present $50 billion, redefining India’s stature in the world and triggering a backlash against outsourcing in the West.
“On the downside (of India’s growth), it has become a political nightmare and the culture clash, while much better than it was 10 years ago, will never really go away altogether,” says, Esteban Herrera, vice president, Horses for Sources.
Indian companies also transformed the outsourcing industry, by shifting work to India and driving down the cost. Before Indian firms arrived, “Deals were huge, lasted a very long time and tended to favour the seller. Delivery was on shore,” says Esteban Herrera.
“Competition from Indian firms made the industry better. It became more global, more customer-friendly, far more efficient, more flexible and cheaper,” he adds.
The Indian success triggered a stampede among outsourcing leaders to expand in India. IBM’s India employees grew 15-fold from 4,900 employees in 2002 to 73,000 in 2007.
Whether Obama likes it or not, India’s future in high-tech work is unshakable. “Of the global 1,000 R&D spenders, only 270-280 are in India,” says Praveen Bhadada. “There is lot of room for expansion,” he adds.
“There is room to grow the outsourcing business by 20 to 30 times,” says Amneet Singh. “The catch is Indian firms have to become more innovative than they have been so far,” he concludes.