A Different Kind of Tech Import

So often have we marveled at how well Indians have done in science and tech
in the West, and how poorly science and tech has done in India.

While most languished here, others went out and ‘in the right environment’
produced Nobel-class ideas, and patents, and Pentiums. So, the schooling and
math were right. But higher up in our own ‘system’, something went wrong.
And we would bid our best and brightest farewell.

But we’ve begun to bring into India some of that environment. Our software
companies do that in a small way. Their offshore work in India is influenced by
what they absorb globally from clients, customers and competitors.

But the global R&D tech and processes have also flowed in through another
route. The 50-plus foreign-owned India development centers. From TI over 15
years ago in Bangalore, to Cadence and its design automation software work at
NEPZ, to Oracle (2,000 developers) and Intel (1,000), to Veritas’ little-known
400-person center in Pune. Twenty of these MNCs employ 25,000 developers,
bringing in a billion dollars to cover costs (the value of IPR developed is
several times that figure).

Even at the ‘low end of the value chain’, MNCs have helped launch
concepts that are now big business: the large-scale call center, for instance,
pioneered by GE in India.

About 35,000 employees work in over 50 MNC software centers. That’s
excluding the IT-enabled services, the call centers and the back-office ops.
Beyond the big names like GE are dozens that we don’t hear about. HP’s
700-person company in Bangalore handles transactions for HP globally. At Chennai,
a Ford center handles IT, engineering design and global back-office services.
Amex has a 1,000 people in a Delhi center for financial services ops, as do
other banks.

This leaves some software majors worried. Will more prospective clients come
in directly with their own centers instead of outsourcing to them? Perhaps, and
this does mean some margin pressure. But there are good reasons for India to be
happy with the MNC centers. FDI is the obvious one: investment in
infrastructure. Then, the training and experience and the induction of new
technologies.

But there’s a bigger reason for us to want the MNC IDCs here: captivity. A
company outsourcing to an Indian supplier can re-explore Ireland or Philippines
or China at the next US "wartime travel advisory", or the next cheaper
quote. The deeper the customer’s roots in India, the less likely that is. With
local investment, infrastructure, and employees, that Fortune 500 company will
stay on. And understand the market and the climate better–and probably laugh
at that next US advisory.

pkr@cmil.com