Is China a real threat? Finally, is there anything that the country can learn from the China experience, and should we collaborate with that country, known for its capabilities to replicate things faster than anyone else? 

These and related issues were thrown up during the discussion anchored by Congress Party economic advisor Jairam Ramesh. The event—Cyber Media’s 20th Anniversary Celebrations and the Dataquest Awards Night on December 20, 2002. The venue—Delhi’s Hotel Grand Intercontinental. The conclusion—to get India really wired up, it’s devices, access and the right applications that will really call the shots...

India cannot just look at the outside world to solve its problems, and what’s needed is to look within the country and tap the domestic market—both on the software and hardware fronts. What, however, can trigger off growth is a shift in approach—from focusing on penetration and density to accessibility and relevant applications. According to WorldTel chief and Dataquest Lifetime Achievement Award 2002 winner Sam Pitroda, "While applications in the West are designed to improve productivity in the corporate sector, India needs to develop tools to improve productivity in the social sector. Also, there is a need to look at new ways of connecting to the Net and accessing information through means other than PCs. The focus should shift to access to access devices."

But accessibility to access devices alone cannot make IT as desirable as a TV or a cellular phone in the country. Mass application and richness of the content should be the #1 focus area and here the IT industry need to play a crucial role. The issue is about triggering of mass usage, which will in turn create the market for access device and help bring price points at an affordable level for the common Indian.

China factor
While all agreed that China is a difficult market to make money, they also were unanimous on the fact that if scalability, cost and infrastructure are key to the business and India wants to access Japanese or Chinese-speaking world, entering Chinese market makes sense. But more than that there is a need to get out of the China fear psychosis and mindset that the natural competitive advantage for India is in the knowledge intensive software area. If Moser Baer can do it, why can't other Indian companies? The conclusion: If China is good at hardware, let it be the benchmark and competition at the same time, because there is nothing that India can actually lose if it makes sure that the country remains ahead of China in the software space which is going to be a big driver for hardware.

Excerpts from the session, which saw the Who’s Who of Indian IT, including Sam Pitroda on a video-link from Chicago, taking part...

Jairam Ramesh: What does 2003 hold for the Indian IT companies and the future direction of the growth? I just want to kick off with two questions. First, the point that Azim Premji had raised about the extent that India sustain its global position in the IT industry in the absence of a viable hardware base.

The second issue that I would like the panel to take up is China itself. I think there is a fair amount of complacency both in political circles as well as in large sections of Indian industry. So what do we do? There are two approaches. One is the TCS approach: "accept that China is a competitor but engage the Chinese cause China is a big market." This second school of thought suggests that we should not worry about investment or engagements in China. Rather, they want to go out there and compete independent of China because they think by helping the Chinese they would be only cutting their own losses.

Ajai Chowdhry (HCL InFOsysTEMS): I agree with you and although I have been discussing the issues like excise duty and sales tax, I think its time we need to put all that behind and as an industry spend more time creating contents. That is really where we need to go now. We need to go to the smallest city in this country and create new markets by using different content than what we have done till now. You have to take hardware, do something about its pricing, do something about making it easier to use and take it to people and make them understand in the language they understand. I think we should stop just asking the government to do all. The industry also needs to do work.

JR: While it took 14 years from 1982 for the country to get color TV at Rs 10,000, today around 5.5 million color TVs are sold in India. Can I ask Satish Kaura if there are any lessons that the India IT hardware industry can learn from this TV revolution?

Satish Kaura (Samtel GROUP): If we are talking about hardware, we are talking about the importance of manufacturing for the economy and the need to be globally competitive in manufacturing. The question is what we need to do to achieve this? The McKinsey-CII report talks about the lessons from China that can help us unleash the potential for competitive manufacturing. The lessons are same for hardware. The moot point is to create a very large market—creating volumes—and then take it forward. When we look at high technology manufacturing, as opposed to manufacturing of toys or leather goods, I think India has a very good chance of being competitive. The need is to create an environment and there political initiative definitely will help. Hardware should become part of the Indian manufacturing industry.

JR: Sunil are there any key lessons in telecom manufacturing that we can replicate for building a manufacturing platform for IT industry.

Sunil B Mittal (Bharti GROUP): As far as manufacturing in telecom industry is concerned, there is one area where India did lose out. We had a good start. We saw five or six vendors coming into this country setting up shops but the scale and procedures of DoT did not allow them to flourish in this country. Most of them have departed. Alcatel’s largest manufacturing unit is in China. We could not get it here. I think one good area where telecom manufacturing is being supported is the software side. Over the period of time hardware has become less than 30% of the capital expenditure in teleocm—with 60 to 70% coming from software.

JR: Kiran, do you think that the whole notion that India needs this hardware platform in order to succeed globally is no longer valid?

Kiran Karnik (Nasscom): We definitely don't need to have hardware base but is it is essential. I think it is a mistake to think of hardware just as computers. We got to have access on access and not ownership. Ownership can follow access. If we take care of access to people, we can do a lot for competitiveness, productivity, transparency, and other factors. Recent studies have shown that India can and has done a great deal in terms of increasing competitiveness in manufacturing. We definitely need to build domestic market for both hardware and software. But I don’t think we really need to worry too much if we don’t make it big in hardware in the next four years as long as we make sure to be ahead in the software space.

JR: While we have been talking for five years now, about the need for manufacturing capacity, the need of strategic investment, the fact is that no Indian or foreign company is willing to bet on India as a manufacturing destination.

Gautam Soni (TERI): We ventured into the IT agreement that becomes operative in 2005 when everything becomes a zero tariff. Surprisingly, however, all the inputs for manufacturing would not fall under the zero tariff regimes. How do you then get into manufacturing, unless at least you have level playing field as far as tariff structure is concerned? Beside that, we also have lot of constraints in terms of our infrastructure. You take Octroi, still it takes week to deliver truckloads to Mumbai and back, whereas in China that takes less than a day. China has been able to move so fast because they have created a fabulous infrastructure. The other thing is, we tend to be far more transparent. I think there is too much of bureaucracy in India compared to China, despite the fact that they are a totalitarian economy. The bureaucracy here is very difficult.

JR: One of the traditional views has been not to do business with the Chinese because they are a threat. Rajendra Pawar, do you think there is anything wrong in engaging the Chinese?

Rajendra S Pawar (NIIT): I think we should not be so arrogant. We believe that if we don’t go ahead then they don’t go ahead. That would be height of arrogance. That has been our view and I stated that four years ago. But China can be used, as a manufacturing base as part of your manufacturing strategy, whether you want to access Japan or Chinese speaking world or certain things like telecom software or certain type BPO, where scalability and cost and infrastructure are important. If that can be part of your delivery and manufacturing strategy it makes sense.

Jerry Rao (MPHASIS BFL): My view is similar to Rajendra Pawar. We recently bought a company in China. We do not think it is going to be a great domestic market to make money. We will probably do business with foreign companies in China. They are safer as they pay up bills. We will use China as a base for Japan and little bit for US. They do have specific skills and I do think that individual companies make strategies and not the countries. Most European software failed but SAP succeeded. So a company can succeed. While China has a big market in the banking vertical, it is difficult to make money there.

JR: Rajeev you are very big in China, but numbers seem to suggest you are bigger in India. You are doing more legal business in India then in China. What according to you are the key lessons to be learnt for us to move ahead?

Rajeev Nair (MICROSOFT): I was at the world economic forum, and the point was brought up that Indians have more fascination with China. I really think that we need to have fascination with China. Microsoft does have a large presence. We have a huge R&D center and we do a lot of R&D work out of China.

JR: I was told your dollar business is more in India than in China.

RAJEEV NAIR: That is right, but let me clarify something to you. Because China has become the factory of the world, because they have to invest in so much in infrastructure they are feeding their PC market, they will ship 10 million PCs this year. India will ship closer to 2 million PCs this year-that is a huge difference. We talked of software export; I think they are building opportunity by themselves from a domestic market standpoint to build the skill set within their own country before they start exporting out. And that is something we have to learn from them. People say that it is not important to have a strong hardware market and I think we have to learn something from China in that respect.

JR: Sam we are discussing about India's software and hardware capabilities vis-à-vis China.

Sam Pitroda (WORLDTEL): I think these are very critical issues but we must focus on billion people we have in our country. I think our own market is very large. It is unfortunate that best of brains are solving problems of the west. Export is critical. I mean, in the eighties, we focussed on this STD PCO accessibility model and I believe there are similar models we need to look at going forward in software as well as applications. Mass application and richness of the content should be the #1 focus area. China is a difficult market to make money, but then they are much ahead of us in manufacturing, so let us consider them as a benchmark and also a competitor at the same time. We can't just look at outside world and hope to solve our problems. We need to look within the country. There is a need for a paradigm shift from penetration or density per say to accessibility and relevant applications. While, applications in the West are designed to improve productivity in the corporate sector, India needs to develop tools to improve productivity in the social sector.

Team DQ

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