IT Services: The Road Ahead

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