India and the flat world
In his bestselling book ‘The world is flat’, author Tom Friedman illustrates his ‘flat world’ concept. For people who have not read the book, let me give a quick background. The three billion people from India and China are much more empowered and connected today. It started when India opened up the economy and China signed the WTO agreement for open trade. Fuelled by these open trade policies, the ‘Outsourcing’ and ‘Off-shoring’ are the latest buzzwords for western world organizations for leveraging the eastern world. According to Friedman, this new worldwide phenomenon has leveled the competing field and the whole world has become flat. I really enjoyed reading the book mainly because the author extensively traveled to various geographical regions, met people, experienced the changes personally and came up with his conclusions.Now, let me look from the reverse angle and ask some questions to myself:
Is the world really flat from India’s perspective?
Can I do the same things from Bangalore, what I would be doing from Santa Clara?
Does the word ‘Bangalored’ really threatening westerners?
Can India sustain this boom?
Are we prepared for the social consequences of capitalism?
As a technology professional, let me take example of Indian software industry and try to get answers. Before getting into answers, let us see the definition for Outsourcing from wikipedia. Please give more emphasis to the words underlined:
Outsourcing entered the business lexicon in the 1980s and often refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of worldwide labor, capital, technology and resources.
From the above definition it’s very clear that Indian companies will get to do only non-core activity. For software companies, most of the work will be in the areas of defect fixing, production support, software maintenance, software patches and working as an extended team. This is a great achievement in our history and loads of jobs got created because of outsourcing. The new ‘generation-Y’ Indians have more disposable income and purchasing power which leads to more business creation and wealth creation. The educated middle class is rising like big time and a new, vibrant, energetic and confident India is emerging. This ‘emergence’ is happening after eight hundred years of Indian history. The western companies are able to reduce the cost by handing over the work, thanks to India’s strong telecom backbone and English speaking population. It’s all a ‘Win-Win’ game. With this can I say the world has become flat from India’s perspective? Definitely NOT!
Even though the above mentioned advantages are very true, terms like product definition, understanding customer needs, customer interfacing, product marketing, technology evaluation and product ownership are still ‘unheard’ words in Indian software industry today. All we are good at is to hire bunch of fresh engineers from the college, train them, bill them, build process framework, commoditize engineers and manage attrition. What is the real ‘value addition’ happening here? According to me it is very minimal. We are currently enjoying the benefits of outsourcing mainly because of the lower wages in India which is catching up very fast. For example, today there is not much salary difference (based on my personal experience) between an engineer in Bangalore and Singapore. Then why should any firm outsource to India?
The Internet has played a significant part in making the world look ‘flat’ but lot of work needs to be done from India’s point of view. Following are three important points to consider:
- The first need is to develop a domestic market for technology products and services, which demands ‘bottom of the pyramid’ innovations. The economic engine should fuel the domestic market creation and ultimately create an array of product making organizations from India. This is what the Asian tigers (Countries like Japan, Korea, Singapore, Taiwan and Hong-Kong) have successfully demonstrated in the past forty years.
- India should become a manufacturing hub, mainly in semiconductors and automobile areas. This not only creates product building capability, also generates need for more software products. Of course, infrastructure is a major challenge in this case.
- Industries should play significant role in forming relationship with academic institutions and do long-term strategic investments. This would create a competitive, industry ready workforce who can be deployed without much training. Missing on this would prove very costly in India, as it will create demand-supply problem.
I can keep adding to the list mentioned above, but they are major points to consider. As of today comparing Bangalore with Silicon Valley is nothing but a joke, where nobody in India talks about value creation. The world might look ‘flat’ from the westerner’s point of view, but India has to go a long way to really to make it a reality.
Comments
The original Article is available at: http://in.rediff.com/money/2004/mar/03guest1.htm
Bangalore: Silicon Valley or Coolie Valley?
March 01, 2004
Politicians, bureaucrats and residents of Bangalore take pride in the fact that they live in what they call the Silicon Valley of the East. The city is considered high tech because of the number of software and software services companies located here.
But is Bangalore really Silicon Valley?
California's Silicon Valley
In 1933 Frederick Terman, a professor of engineering at Stanford University, mentored two undergraduates named Bill Hewlett and Dave Packard, and was instrumental in getting them to start a company.
They went on to form the company Hewlett-Packard. This was the first seed from which Silicon Valley grew.
Today around 2,000 electronics and information technology companies, along with numerous services and supplier firms, are clustered in the area.
Silicon Valley contains the densest concentration of innovative industry that exists anywhere in the world, including companies that are leaders in fields like computers, semiconductors, lasers, fiber optics, robotics, medical instrumentation, and consumer electronics.
Some products that went from dream to reality in Silicon Valley are the first video game, the ink-jet printer, the video recorder, the mouse, the personal computer, and much else that we take for granted in the information age.
Here's a sample of some Silicon Valley firms, familiar to most of us because of their products: Adobe Systems (Acrobat Reader), Apple Computer (computer), Hewlett-Packard (printer), Intel (the CPU in your PC), Netscape (Internet browser), Seagate Technology (the hard disk in your PC), Yahoo (Internet portal), VeriFone (credit card terminals in shops), Symantec (Norton anti-virus software), etc.
Such firms are called technology companies, because their chief resource is the technologies that they develop and own, not the real estate that they are sitting on or the equipment that they possess. Stocks in a technology company are called 'tech stocks.' Scientists and engineers working in these companies are called 'techies.'
Indicative of the inventive spirit is the fact that residents of Santa Clara County, which includes San Jose and other Silicon Valley computer hotbeds, were granted 27,617 patents during the 1990s.
Silicon Valley thrives on risk. Business in the Valley is about placing bets on people, ideas and inventions.
If the Silicon Valley were an independent country, its economy would be about the tenth largest in the world.
Bangalore or 'Coolie Valley'
If you ask the president of any of Bangalore's software development companies what his company does, he'll say "We provide end-to-end solutions for Xxxx." Xxxx could be any or all of these -- e-commerce, banking, telecom. . .
What he means to say is this: 'We'll do the software coding in any of these areas for you. Just tell us what you need. We have a huge mass of engineers who know various programming languages.'
These companies do not develop any technologies or products. They provide development services. They have engineers who specialize in programming languages rather than in technologies.
Their chief resource is the huge mass of low-cost labour that they have taken the trouble to recruit.
Ask them about patents, and you get the reply "Huh, what's that?"
These companies start with zero risk. They do not bet on their ideas or inventions. A company is started after getting some contracts in hand.
A typical engineer in these companies has no specialization in any technology. He does not use his engineering knowledge. You could say his body is employed, but his brain is severely under-employed.
Here is a sample of some prominent Bangalore software companies with what they specialize in: Tata Consultancy Services (end-to-end solutions), Wipro (end-to-end solutions), Infosys (end-to-end solutions)
DSQ Software (end-to-end solutions), Kshema Technologies (end-to-end solutions), Ivega Technologies (end-to-end solutions), MindTree Consulting (end-to-end solutions).
The comparison
Silicon Valley companies are based on 'know what.' They know the market, they know the technology and they know what products to make to earn money.
Coolie valley companies are based on 'know how.' They do the software coding for other companies that have the 'know what.' If you tell them what to do, they know how and will do it for you.
Silicon Valley companies invest huge sums of money on R&D. They generate new ideas and are constantly developing new ways of doing things.
Coolie Valley companies have nothing called R&D. They do not generate any new ideas.
A typical Silicon Valley engineer is a specialist in a particular technology, like inkjet printing or virus detection. He spends all his life working in this technology area.
A typical Coolie Valley engineer is a specialist in a few languages. He is not concerned about the technology that he is working on and is willing to develop any software with the languages that he knows.
A typical Silicon Valley engineer's education and work experience all relate to a technology. When he changes jobs, he changes to another company working on the same technology.
A typical Coolie Valley engineer's work experience does not teach him any technology. He may be a mechanical engineer currently working for three months on banking software, and then the next three months on shoe retailing software.
Silicon Valley is all about the excitement of creating things out of nothing. Companies like HP actually started in the garages of their founders.
Coolie Valley does not know the meaning of creativity. Some companies are started by people who quit other companies and take some of the parent firm's software development contracts with them.
Silicon Valley's entrepreneurs bet on people, ideas and inventions.
Coolie Valley's entrepreneurs bet on certainties. They start a firm after getting software development contracts.
Silicon Valley's firms are about technology management.
Coolie valley's firms are about man management.
It is extremely presumptuous to compare Bangalore with Silicon Valley, so all you Bangaloreans, please do me a favour and
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Don't call your city Silicon Valley ('pub city' or 'garden city', I have no problem with -- lots of pubs and lots of trees, but very little silicon).
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Don't call one of your new software companies a 'high technology start-up.'
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Don't call your engineers 'techies.' They've forgotten their engineering long ago.
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Don't say you've invested in 'tech stocks' ('body stocks' maybe ?).
If you are from Delhi or Mumbai and encounter a Bangalorean 'techie' spouting off about his work or about his Silicon Valley, you no longer need to develop an inferiority complex.
G V Dasarathi is director of a software products development company