Chinese Checkers

Is it that the growth of the Indian industry will be severely impeded?

Considering that the total market for software and services could be as high as

half a trillion dollars in 2008 and that India’s target for that time frame is

$50 billion, the size of the market is hardly a problem. Not only is the cake

growing it is also getting new ingredients. Convergence technologies are

spawning completely new options for software development where skilled manpower

will be a huge asset. The list is endless–gaming, mobile applications, call

centre operations, insurance claim processing, digitization and many more. So

this cannot be a threat.

Is India afraid that a new competitor will bring down prices in the

international market? Possibly. But does that imply that India’s inefficiency

levels are higher? Are the costs of inputs high? Or is our manpower more

expensive? Or is the cost of finance that drives up our prices? Data on this is

sketchy. There is reason to believe that Chinese manpower is 10-15% cheaper. But

why should that be so? Whatever the reasons, these are pitfalls and threats,

which need to be removed. The China factor can only accelerate the process.

After all, no one can argue that customers will pay for the inefficiencies of

our systems. So this is not just a Chinese threat.

Is the threat then that the Chinese will displace India as the de facto

choice for software development? Possibly. Today there is a 1:8 lead that we

have. Eight billion dollars against China’s $1 billion. If we grow at 50% per

annum and the Chinese grow at 100% per annum, they would catch up in a decade.

If this threat has to be checked, the objective has to be clear and focused–to

retain the # 1 slot. The process of data collection is starting and Nasscom and

the government are moving to take stock of the situation. As the Chinese say,

what cannot be measured cannot be improved. So the first step should be starting

the process of information collection. But it is imperative to get the objective

straight. If you want to remain # 1, there is no point in defining the speed at

which you will run. That is determined by the other runners. You have a simple

job–stay ahead. And how is this likely to happen? The checkers that have to be

put could run as follows:

Checker One



Keep growing: Not only in the present areas of expertise but in new ones as

well. In other words, enhance the skill-sets. That has to be taken up both by

the organizations and the educational institutions. Which are the potential

growth areas? Are they in business software or ERP or finance or telecom or

entertainment or any of the dozens of other possibilities? Which are those in

which we will have a competitive advantage? There may be no clear answers today

but hopefully the studies being undertaken will throw up some.

Checker Two



Build on existing strengths: There are many that believe that the knowledge

of English has been a key factor in our success. I beg to disagree. English has

been an advantage no doubt. But our knowledge of business practices has

contributed equally to our success. We also had very highly qualified and

trained people. The engineers and MBAs who have built the image of the country

had the width of skills and the analytical ability necessary to take up software

development efforts. And all of this is essential. You cannot develop good

software for customer relationship management if you have never worked in that

environment. India has large volumes of high quality software engineers–professionals

with system integration skills, especially for large-scale integration. How do

we maintain these strengths in increasing numbers with a more developed

multi-disciplinary approach?

Checker Three



Infrastructure development: The growth of exports requires all round

infrastructure. While telecom is the most fundamental requirement, there are

others like airports, air travel, roads etc. Our software city, Bangalore, has

no international airport. There are growing problems of traffic and housing.

Others like Chennai, Hyderabad, Bhubaneswar, Pune, Mohali and Gurgaon have

improved but each has its share of problems. Many state governments are now

making efforts to provide necessary infrastructure. Along with this, they also

need high decibel marketing efforts if another half a dozen centers for

international software development have to come up. This is also critical since

many international companies are now setting up off shore development centers.

In the future too, they will not just give out jobs but would like to have there

own development centers in countries which offer them the best economic value

and the feel good ambience. China is planning to set up ten software industry

bases at Chengdu, Beijing, Shanghai, Dalian, Xi’an, Jinan, Hangzhou,

Guangzhou, Changsha and Nanjing. Significantly, unlike India, each is setting up

its own export targets. Guandong exported software worth $ 170 million and plans

to nearly double it by targeting $ 300 million in one year.

Checker Four



Develop the domestic market: This is where China has a lead. Its number of
telephones per 100 people is 3.5 times that of India (11.12 vs 3.2), Mobile

phone users are 6.58 per 100 vs India’s 0.35. Internet users per thousand

people are 17.37 against 4.93 and ICT expenditure as a percentage of GDP is 4.86

against 3.46 for India. India has a higher number of PCs per 100 people (1.59 vs

0.45), but lags behind in all other areas. The domestic market is critical for

the growth of exports because it provides the basic training ground for people.

It also increases the bank of people required for sustaining the growth of skill

based export efforts. And it provides a buffer against the vagaries of the

international market–as we see at the present time. China’s domestic market

is attracting a large number of international companies and the business-savvy

Chinese are likely to use that as a lever for pushing their own needs of

software exports.

Checker Five



Push the educational efforts: Computer courses are either too technology

bound or too basic to develop the all round capabilities which future software

efforts will require. There may be efforts to bridge this gap, but they are not

defined and visible. India has a resource pool of 300,000 — 500,000 software

professionals. China has one tenth-that number today. The number of

professionals is just part of the need. The quality as well as the multiplicity

of skills required is the need of the future. Most of these checkers are a part

of the effort required to keep IT going. The Chinese threat can only be the

catalyst for accelerated growth, if the objective is to remain # 1. The present

objectives just define the speed at which we want to run and India’s revenues.

These have to change to having India’s market share as a target. That number

is not highlighted today. These targets have to be revised year after year

keeping in mind how others are performing.

The author is Editor-in-Chief, Cyber Media, the publishers of Dataquest. He

can be contacted at shyamm@cmil.com