The New Wave

Time was when dreams lay on other shores. Downtown New York, Seattle,

California, and of course the Silicon Valley–these were the sole symbols of

hope for an Indian technology professional. Want to work on core digital signal

processing technologies or ASIC design? An engineer born to middle-class

salaried parents wanting to make big money? A technology professional wanting to

make a difference? Time was, when dreamers left home.

Not anymore. It began in 1985 when Dallas-based Texas Instruments opened a

small center in Bangalore–16 people working on design automation tools for IC

design. Through most of the eighties, it remained a trickle. That changed

dramatically in the mid-nineties–both qualitatively and quantitatively. More

and more international IT companies began setting up development centers in

India, and the kind of work they did here began to outgrow the

"Y2K-Fix" stage, toward more cutting-edge technologies (see company

boxes).

IBM Global Services India

Established: 1997 Headed by: Abraham Thomas Developers/Engineers: 3100 Patents filed: 85 Major areas of work: Is IBM’s largest Global Resource Center outside the US. Owns the OS2 project, the MQ Series and its transaction processing software, the TX Series. More recently was involved in the development of WebSphere’s application server and commerce suite. Currently, working on IBM’s Blue Gene Project and the verification aspect of IBM’s Giga Processor for the next generation of IBM systems

Oracle India Development Center

Established: 1994 Headed by: Murali Subramaniam Developers/Engineers: 2000 Patents Filed: 10 Major areas of work: IDC Bangalore works on Oracle’s database, development tools, application servers and e-business applications. This includes components of the Oracle 9i Database Server and the 9iAS Application Server. The Hyderabad unit started in January 1999 is focussed on its ERP products. In addition, Oracle’s India Support center run out of Bangalore and Hyderabad provides tech support to the company’s global customers for a range of Oracle products including databases, tools and applications

Sun Microsystems India Engineering Centre

Established: 1999 Headed by: Vijay Anand Developers/Engineers: 450 Patents filed: 10 Major areas of work: The application server of Version 6 designed and developed in India. A major chunk of Version 7 also being developed here in association with Sun’s Bay Area Engineering center. The company’s meta directory project and Liberty enablement of its Identity server also designed and delivered by the India Engineering center. Now working on Linux versions of many SunOne products

Microsoft India Development Center

Established: 1998 Headed by: Srini Koppulu Developers/Engineers: 125 Major areas of work: Inter-operability of the Windows NT operating system and its back-office products with non-MS platforms. Three versions of the Windows Services for UNIX (SFU) product released. Building Java language support for Visual Sudio.NET. A major project includes development of components for its COM+ (Components Object Model) technologies. Is Microsoft’s second largest R&D center outside of Redmond

Cisco Global Development Center

Established: 2000 Headed by: S Devarajan Developers/Engineers: 670 Patents Filed: Not disclosed Major areas of work: Development and testing of IOS and network mgmt software, ASIC design, ATM and VoIP, optical internetwo-rking, routers and switches. Recently Cisco’s SNMS (small network management software) was completely conceptualized and designed in India. Also does R&D with partners at the Cisco-Wipro development center, Cisco Infosys development center and the Cisco HCL development center

Adobe Systems India Pvt Ltd

Established: 1997 Headed by: Naresh Gupta Developers/Engineers: 140 Patents Filed: 10 Major areas of work: The India center owns two key Adobe products - PageMaker and Photodeluxe (an image editing software that comes pre-bundled with scanners and digital cameras). PageMaker Version 7.0 was delivered from India. Acrobat Reader for Palm Pocket PC and Symbian platforms conceptualized and completely developed in India. Other areas of work include core technologies in the data interchange and document and image compression areas that ship with most Adobe products

Texas Instruments (India) Pvt Ltd

Established: 1985 Headed by: Dr Biswadip (Bobby) Mitra Developers/Engineers: 855 Patents filed: 200 Major areas of work: Complex chip design and software for Wireless Communications, Broadband (DSL, Cable, W-LAN), Internet Audio, Video and Image Processing. The work spans the entire range from System-on-a-chip design, mixed signal and analog design, ASIC and Mixed signal library developm-ent to application software and processor development tools. No "ownership" concept but key activities of various business, including ASIC core cell library development and DSL CPE modem design etc happen in India. The largest number of patents filed by any IT company in India

Philips Software Center

Established: 1996 Headed by: Bob Hoekstra Developers: 750 Major areas of work: Primary expertise in embedded and information system engineering, architecture design, programming and testing. Specializes in logic and circuit design for integrated chips. The center has six product divisions that include Philips’ Mainstream Consumer Electronics, Philips Semiconductors, Philips Medical Systems, Philips Research and Center for Industrial Technology. These product divisions work on technologies ranging from speech procession and video telecommunication to embedded memories, systems-on-silicon design flow, digital rights management and wireless–802.11

Intel Technology India Pvt Ltd

Established: 1999 Headed by: Manni Kantipudi Developers: 700 Patents Filed: 14 Major areas of work: A wide range of work spanning chip design, communication software, compilers, digital signal processing, e-biz technologies and applications, graphics drivers, networking products, manufacturing applications and stack optimization. The center recently developed a network switch product called Intel IXE2424 going through its entire development lifecycle — architecture, validation, production testing, quality checks and software development. Driving Intel’s 100 % e-corporation initiative. Among the fastest-growing IDCs in recent times. Is Intel’s largest non-Manufacturing facility outside the US

Siemens Information Systems Limited

Established: 1992 Headed by: Anil R Laud Developers: 1300 Major areas of work: Has two broad offerings — business solutions and software engineering. Business solutions include process consulting, implementation services and customization of solutions for practices in the ERM, SCM, CRM, PDM, BIM and web/EAI enabled areas. Most of these projects are in the domestic market. The software engineering group works largely in two verticals–healthcare and telecom. India center achievements include the development of a hospital information system, Soarian Clinicals (for Siemens Medical Systems) and Cardiology Data Management Systems

Lucent Technologies India Ltd

Established: 1997 Headed by: Chandan Haldar & Developers/Engineers: 570 Major areas of work: Lucent has two development centers in India. The India Product Realization Center for Mobility Solutions (IPRC) started five years ago, employs 220 engineers and is involved in software research and development in GSM, GPRS, AMPS, Wireless Data and 3G wireless systems. The Integrated Network Solutions India Development Center (INMS) based out of Bangalore was set up in December 2000, has 350 engineers and is involved in wireline solutions. In the NMS area it owns Lucent Technologies’ Navis Core/Extend family product line and is responsible for the development, testing, integration and validation of all current and future releases

Nokia

Major areas of work: Nokia has two global software development teams in India. The Intelligent Edge products group based in Bangalore is involved in the development of ASR routers and recently released the ASRO 2020, an IP aggregation router. The Nokia Internet Communications group has a development center in Hyderabad that is involved in Network security, VPN and Wireless software solutions

Digital GlobalSoft

Established: 1988 Headed by: Som Mittal Developers/Engineers: 1480 Patents filed: 6-8 under internal review Major areas of work: Application management, enterprise package implementation and Infrastructure services. Recently acquired two products from erstwhile Compaq — Digital Infolife (a suite of storage management products) and EDI. Company’s Advance Technology Group involved in enterprise mobility solutions and has significant .NET capability. Intellectual property includes work in speech technology, 3G Protocol Stack, a unified messaging platform called mFortis and several initiatives in VoIP.

Covansys India Pvt Ltd

Established: 1991 Headed by: VV Sundaram Developers/Engineers: 1550 Major areas of work: Started with less than 50 people working on an internal maintenance project, moved to contract programming and is now a full fledged IT services center. Some of the help desk and work flow processing for parent company also done out of India.

Syntel (India) Ltd

Established: 1992 Headed by: Baru S Rao Developers/Engineers: 1464 Major areas of work: Global application outsourcing, product engineering services and e-business solutions including B2B exchanges/marketplaces, CRM, data warehousing, enterprise application integration, web and wireless solutions.

Hughes Software Systems

Established: 1992 Headed by: Arun Kumar Developers/Engineers: 1550 Major areas of work: IPRs (protocol stacks) on voice over packet technologies, satellite and wireless software, GSN nodes, GPRS, UMTS, SS7, Sip and Megaco stacks. BPO initiative planned.

Accenture India Solution Center

Established: April 2001 Headed by: Chaitanya (Chet) Kamat Developers/Engineers: 500 Major areas of work: The Accenture India Solution Center (ISC) is a part of a network of over 40 solution centers set up across the globe and is a major element of Accenture’s strategic delivery capabilities. ISC is initially focusing on enterprise application development and has executed projects for clients in the Financial Services and Energy sectors. Among others, current assignments include developing new trade processing and validation systems, implementing packages for supply-chain management and developing e-Business applications. Technologies deployed include enterprise packages such as SAP R/3, Siebel, PeopleSoft as well as MS and J2EE based platforms

Cadence Design Systems (I) Pvt Ltd

Headed by: Jaswinder Ahuja Established in: 1987 No of developers: 315 Patents filed: 4 in the area of transistor-level abstraction and table based designs with the U.S. patent office and a few others are in the pipeline. Major areas of work: Started operations as off-shore support to its parent organization. The center at Noida is now the largest site of Cadence outside North America. Cadence India is responsible for developing several critical and mainstream technology products across the entire spectrum of electronic and system design automation. Cadence India has evolved to be technological leader at the international level through representation in forums like the VITAL TAG, the IEEE Timing sub-committee, which is responsible for defining the VITAL standard (VHDL initiative Towards ASIC Libraries) and in the Synthesis Inter-operability Working Group(SIWG) setup under the auspices of VHDL international

Motorola India

Year of start up: 1987 Headed by: Pramod Saxena Major areas of work: For almost 11 year now India has been a major hub for Motorola’s R&D efforts–the company set up the internal software development division or global software group (GSG) as Motorola India Electronics Limited (MIEL) in 1991 and has centers in Bangalore and Hyderabad. Besides, Motorola also established its chip development operations in the country in 1998 and has chip design labs at Noida and Gurgaon as part of Motorola’s semiconductor products sector (SPS) division. The development center in Bangalore focuses on software development for all Motorola handsets as well as cutting edge research on wireless technologies. The software used in the Motorola Accompli PDA-cum-GSM Phone that was launched globally in mid 2001 was developed entirely in India

Cognizant Technology Solutions

Established in: 1994 Headed by: N Lakshmi Narayanan No of patents filed: None Major areas of work: Cognizant Technology Solutions, a SEI — CMM level 5 company based in the US, provides custom software development, integration and maintenance services that link e-business with core information systems for companies worldwide. For Cognizant, India is the nerve center of its operations with major development centers located in Chennai, Kolkota, Pune and Bangalore. However, Chennai is its India headquarters and major operations and development activity happens here. Cognizant’s Chennai development center executes large scale off shore projects in areas like eBusiness development and integration, middleware technologies, CRM, ERP, mobile commerce and focused vertical solutions in healthcare, banking and insurance segments

Today, Dataquest estimates the number of MNC IDCs in the country at over 50,

making up a total of 35,000 developers, and a conservative Rs 6,000 crore in

revenues (estimated on a cost-plus basis). The Top 20 MNC IDCs alone (see DQ Top

20 Volume 1–July 15, 2002) account for 25,000 developers and engineers, and

about Rs 4,500 crore in revenues.

More importantly, they cover the entire spectrum–service companies, ISVs,

research centers, and even IT arms of international enterprises like Delphi and

Canon, which have fanned out their IT needs to their India centers. All the Big

Five are here (though after the IBM-PwC merger comes through, that will become

the Big 4)–as are 16 of the top 20 independent software vendors of the world.

As a phenomenon, the mushrooming of MNC development centers in the country

has largely gone unnoticed. For various reasons–information was fragmented,

most IDCs came in different stages, and even those that were obviously visible

started small. Texas Instruments started with 16 people. Sun Micro’s India

Engineering Center started with 30 developers. Adobe had three people to begin

with. These were experimental projects–low headcount, low investments and low

risk.

But not anymore. In a first focus of its kind, Dataquest looks at this

fast-growing segment of the industry in a comprehensive manner, at the kind of

work these centers do, and at what this means for the Indian IT industry.

Cutting edge



The upsides are plenty. The most important is that MNC IDCs have brought to

Indian shores work on some really cutting-edge technologies that will drive

intellectual property growth from the subcontinent in the years to come. Texas

Instruments alone has filed nearly 200 patents from India so far, the largest by

any IT company in the country. Next in line is IBM Global Services India, with

85.

More important than the number of patents filed, perhaps, is the fact that

some of these centers have become key drivers of technologies and products for

their parent companies. Texas Instruments India, for one, will be driving TI’s

critical system-on-a-chip design projects in DSL and wireless LAN, both of which

require a high degree of integration of analog energy management with RF and

digital technologies. Says Dr Biswadip (Bobby) Mitra, managing director of TI

India, "We started analog design early–in 1988. This is key because it

has given us 14 years of experience in this very experience-critical

domain."

IGSI’s exports division is IBM’s largest global resource center outside

the United States. Says IGSI head Uday Shukla, "We are at least three times

as big as the second-largest IBM GRC, which is in Mexico." The India center

today "owns"–read that as "drives all development, new

releases, support and testing"–IBM’s OS2, MQ Series and its transaction

processing software, the TX Series.

Similarly, Sun Microsystems’ India Engineering Center, which started three

years ago with less than 30 people, mostly working on Solaris maintenance

projects, is now 450-strong. Today, 25% of the company’s workforce on SunONE–its

Web services platform–is based out of India. Large chunks of SunOne–Version

6 of its app server, meta directory products, mail and calendar service–were

developed in India. Part of the SunMC–the management console for Solaris–was

designed here. Says Vijay Anand, the IEC’s new site director who has come down

from Santa Clara on a two-year assignment, "The turning point for the IEC

came in 2000 when the company decided that India had product development and

ownership capabilities. We’ve filed for 10 patents already, most of which are

in an advanced stage of approval. And you should see a lot more happening after

the recently-formed centralized software group sets its agenda. We are already

delivering Linux versions of many of SunOne’s products, and there’s a good

chance that Sun’s Linux product line will come to India."

Adobe is one of those rare product companies doing complete product shipment

from India, including its PageMaker 7 in July last year (an upgrade) and Acrobat

Reader for Palm OS, this last conceived, designed and developed at its India

center. The center started with three people in 1997–today, it staffs over 10%

of Adobe’s worldwide engineering resources. Intel’s development center in

India is among the fastest-growing in recent times and drives the company’s

100% e-corporation initiative, among other things. Microsoft’s center in

Hyderabad–its second-largest R&D setup outside of Redmond–drives the

company’s initiatives in inter-operability and Java support for Visual

Studio.NET. The list could go on.

Ripple effects



While this in itself is something to write home about, the phenomenon also

has other crucial fallouts.

One, it contributes to accelerated technology dissemination in the Indian IT

industry, in both structured and unstructured ways. An Oracle employee working

on its 9i database server leaves his job for another. And he takes with him all

his knowledge and its history with him. Cisco formally ties up with Wipro, HCL

and Infosys–and the joint research centers contribute to a growing pool of

knowledge in all three Indian companies. Nokia sponsors PhD students in IIT

Delhi and sets up a fellowship in high-speed networking, driving research in

that area. Intel and Nokia tie up with the Indian Institute of Science,

accelerating work in many domain areas. It’s a shattered glass effect.

Two, this has given Indian developers and engineers the kind of work and

living conditions that they would normally have had to go to the US for. They

get to work on the technology they want, at the salaries they want.

Three, its brought back a lot of Indians who’d gone abroad earlier. Most

MNC IDCs are headed by Indians who’ve worked in the parent multinational in

the US for several years and who see this as an opportunity to come back home

without jeopardizing their careers.

Four, it has led to the inflow of a fair amount of foreign direct investment

and the introduction of some world-class processes in companies–which,

otherwise, may have taken a little longer to happen.

Five, it builds brand equity. For too long, India has been synonymous with

cheap labor, and Indian IT services companies with bargain bazaars. This has

often obscured the technology capability of Indian programmers and companies

despite some really competitive work from the likes of Wipro and HCL

Technologies. While many believe that India will never live down its core

"low-cost" branding, MNC IDCs may well help change that perception in

the future.

The downsides



There are a few. The ability to put up their own offshore centers in India

has allowed both global IT companies and non-IT enterprises to bypass the Indian

IT industry if they choose to do so. Normally, the pain factor has rarely been

worth the effort. But the slowdown of the last year-and-a-half has made it worth

the effort, and Indian companies have often complained of being blackmailed–"Lower

your billing rates or we’ll put up a development center of our own." This

makes the competitive landscape that much more difficult for Indian companies.

More importantly, it cuts into their outsourcing pie.

Some Indian companies can deal with the challenge. Says Vivek Paul, CEO of

Wipro Technologies, "Global IT services companies have not been a threat to

us so far. They may move some of their IT work to India, but they don’t yet

have the concept of a global delivery model bang on, like we do. Global delivery

is a disruptive process. I’m not sure that many of these companies are up to

it." But there will be many Tier 2 companies that find it increasingly

difficult to compete.

Secondly, the presence of these IDCs in India is subsidized. They come under

the ambit of software technology parks, with subsidized import duties and

minimal export obligations. Often, export obligations are met through a minimal

internal billing rate mechanism (Indian arm does a minimal billing to the parent

company)–and the money that comes in mostly goes for payment of salaries and

infrastructure costs. As such, though 35,000-odd developers contribute to the

income tax coffers, exports from IDCs are not "true exports", and

their economic value add is minimal.

Which brings us to the final issue–that of "value" itself. As of

now, there’s no way to judge the true value of work done in the India

development centers. While there may be some estimates possible on how much

PageMaker 7.0 made for Adobe, for instance, most IDCs work on components of a

technology or product whose final value will be many times higher than the

cost-plus remittances made in India. The question then arises–is India getting

the true value of work being done here? More fundamentally, is this a valid

question to ask?

Some of this might change with the new tax regime under which 10% of all

profits of software companies are being taxed w.e.f. from April 1 this year.

Chances are that all IDCs will be subject to OECD norms on transfer-pricing

mechanisms that will require them to restructure their remittances. These are

emerging opportunities and threats of an emerging phenomenon. With a little time

and a little wisdom, it is possible to make the best of both. Either way, as

offshoring becomes increasingly important, this is a trend that's here to stay.

Sarita Rani in Bangalore