according to some survey done recently
2006-08-20 07:32:55 · 3 answers · asked by shitanshusharma 1 in Business & Finance ➔ Other - Business & Finance
Many US and European companies are outsourcing their IT work to Indian companies offshore, reports Paul Taylor.
India has emerged as a leading offshore software development centre in little more than a decade. This achievement has been made possible by domestic de-regulation, entrepreneurial flair, and the soaring global demand for high quality, low cost software and services. For India, which celebrated 50 years of independence this year, the software industry has become a beacon of success. It has proved that, given the right framework, India can compete globally.
"The software industry has emerged as India’s only globally competitive modern industry," says Ajay Malpani, an analyst with Bombay based Caspian Securities. This fact will be evident at this week’s Comdex show in India. Now, flush with this renewed confidence, India’s leading software companies are poised to take the next step towards becoming an important force in the global software and services industry in their own right.
The success of India’s software development industry reflects a number of factors. In particular, faced with a growing shortage of software engineers in the West, hundreds of companies have turned to India’s computer software and services companies for the IT skills they need to maintain and enhance their competitiveness. Some, including many leading American IT companies, have become big employers of Indian software professionals. For example, about 10% of Microsoft’s 20,000 worldwide workforce is Indian. Other IT companies, including market leaders such as Texas Instruments, Motorola, and Oracle have established captive research and development centres in India. Many other US and European companies, including those in the financial services, manufacturing, and utilities sector, have begun to outsource their IT work to Indian companies offshore. This outsourcing contracts range from code maintenance and migration work through to designing and building new customised applications using latest technologies and techniques. Most leading Indian software companies have already forged strong partnerships with their overseas and domestic customers. Many have established sales offices and subsidiaries in US and Europe. Some are preparing to seek listing for their overseas subsidiaries in New York or London. For example, HCL, the leading Indian IT group led by Shiv Nadar, now has operations in 18 countries and plans NASDAQ flotation next year to raise funds for overseas acquisitions as part of a strategic plan to turn the group into a $1bn software and services company serving global clients. “There are very few companies who can offer these services globally,” says Mr. Nadar.
Other Indian entrepreneurs have established computer services companies overseas, for example companies such as US based Mastech and UK based Gulf Computers have grown rapidly by offering managed offshore services to their western clients. Such moves reflect maturation of the Indian software industry. And there is growing confidence among leading entrepreneurs that, even though Indian software exports still account for only a small fraction of the global $300bn to $400bn software market, they can compete not just in terms of price, but on the basis of quality, innovations, and technical expertise.
India’s leading software companies have overcome the credibility hurdle and now have the critical mass needed to move up the value chain in terms of both software services and products. Companies such as HCL, Tata Consultancy Services, Wipro and Infosys Technologies believe they can compete on equal terms with the best product designers, project managers, and software developers in the world. “Trade in the developed world is moving towards services,” says D S Kanodia, chairman of Bombay based Datamatics and one of the fathers of the Indian software industry. “Our experience is in the delivery of services; I think we can beat the world in services.”
Today, Indian software companies sell their services to an expanding international customer list which includes Japanese, South Korean, and South Asian clients, as well as those from North America and Europe, on the basis of quality, speed, and skills as well as price. That this should have been achieved in a developing country still struggling with the wide range of infrastructure and other problems is a remarkable achievement. It is testament to the determination of the architects of India’s software success story. “There is a tremendous amount of confidence around,” says Pradeep Gupta, managing director of International Data Corporation’s Delhi office. “We feel very proud of our country and what the industry has achieved.” Highlighting this, the industry grew by 50.6% in the year to March 31, posting a total turnover of Rs 63.1bn or $1.76bn, according to India's National Association of Software and Services Companies (Nasscom). Five years ago, the industry was worth a mere Rs 11.6bn or $388m. Between 1991/2 and 1996/7, the Indian industry, which comprises more than 730 companies, grew at a compound rate of almost 35 %. It now employs at least 160,000 people in India (a further 100,000 Indian software engineers work overseas). This is much faster than the worldwide industry as a whole. As Dewang Mehta, Nasscom’s executive director has noted: "The software industry is increasingly becoming the driving force in the IT industry. It is particularly suited to India [since it is] people intensive rather than capital intensive; it demands highly skilled young people; it has no undesirable environmental side effects; it is growing rapidly; and unlike capital intensive, low skill industries, investment in this is not easily displaced."
India’s success and its ability to outshine rival offshore software development centres including China, the Philippines, and eastern Europe -- at least for the time being -- reflects a number of factors. In particular, India has a huge pool of relatively low cost, technically qualified, and English-speaking software professionals. India has the second largest English-speaking scientific manpower pool after the US, and a sophisticated higher education system that produces a stream of qualified graduates. This pool of skilled, ambitious but low-cost manpower has helped underpin the rapid growth of the industry -- and particularly exports. However, most analysts agree that low costs are unlikely to provide sustained competitive advantage.
An entry level software programmer in India can expect to earn about Rs 150,000 (£3,000) to start with, rising to around Rs 1mn (£20,000) after 10 years. This is low by international standards but a respectable salary in Indian terms. As competition grows for best graduates with experience, salaries are rising rapidly, and attrition rates - the main problem for the industry - remain high. According to Nasscom, salary increased by about 20 % last year. However Mehta points out that productivity is also rising rapidly. In 1992 productivity was around $21,000 per engineer. By 1996 the figure had risen to $45,000. As a result, India is still very cost competitive. Nevertheless, most industry leaders acknowledge that India will face greater competition from even lower cost countries such as China in the future. “China may be a threat in the longer term,” says V Chandrasekaran, president of Wipro Infotech, “but we still have a big advantage.” To counter that threat, Indian software developers are adopting a range of strategies to move up the value chain, and to position themselves at the center of an emerging regional software hub which could eventually include neighboring nations. Some companies, including HCL, suggest they may build software factories in China itself. In addition, India’s geographic position has given it a time zone advantage with both US and Europe. This enables India to exploit the rapidly expanding international markets for outsourcing software services, including the expanding market for “remote maintenance”. Indian software engineers can fix bugs or upgrade systems overnight while their users in western companies sleep.
India’s emergence as a key centre for software has coincided with the big changes in the way IT is used, including the trend away from mainframe to client-server computing based on desktop personal computers and inter-networking -- an area in which India has strengths. Since, the mid 1980s, there has been a growing shortage of software engineers in the west. This, coupled with the pronounced trend towards “outsourcing” in US and European companies, has been one of the main driving forces behind the growth of the Indian software industry. Equally significant, there has been a marked shift away from on-site development services or “body-shopping” - where work is undertaken at the customers’ site - to offshore services taken care of in India. This shift towards offshore work has been underpinned by two key factors. First, Indian software companies have adopted quality standards enthusiastically -- 58 Indian companies already have ISO 9000 certification. Second, the leading Indian software companies are investing heavily in training, and in leading edge programming skills such as computer aided software engineering, fourth generation languages, object oriented programming, graphical-user interfaces, Java programming, and increasingly, Internet and electronic commerce technologies. Several companies have established close links with India’s top universities, moves which have the added benefit of helping recruitment in a competitive market for India’s top brains.
Similarly, a growing number of the top-tier domestic Indian software developers are beginning to invest in R&D and the creation of their own software packages and services. A handful of Indian companies including Tata Consultancy Services, Infosys, Ramco and Mastek have already developed software packages mostly for the domestic market. And others, including BFL in Bangalore, are beginning to take steps towards developing their own shrink-wrapped products. Meanwhile, the Indian industry is also gearing up for a millennium bomb bonanza. Still, most companies have adopted a cautious approach and limited this work to not more than 20% of turnover. In the longer term, analysts argue that India's competitive advantages will come from ensuring productivity and quality. But the Indian industry still has barriers to overcome if it is to reach its full potential. In particular, infrastructural problems, particularly extended daily power cuts and water shortages in software centres such as Bangalore threaten to curtail growth. These concerns, coupled with a desire to cast a wider recruitment net, are encouraging fast growing companies such as HCL, Infosys and Wipro to expand their operations in other emerging software centres such as Madras, Pune, and Hyderabad.
India can already be justifiably proud of the achievement of its software sector. However, as Mr. Kanodia points out: “We think we are doing very well, but India is still only a very small player in the global software industry." For most Indian software entrepreneurs that simply means there is still a tremendous growth opportunity if, as Bill Gates suggested on a visit to India earlier this year, India is indeed to become “a software superpower”.
An industry on the up and up
Indian companies continue their efforts towards becoming providers of higher value-added services to their overseas clients.
India is making step-by-step progress towards its rightful place in the rapidly expanding global IT industry. This is thanks mainly to the software export produced by its well-educated, highly motivated, and relatively low cost software professionals.“India is unique in that it has a very highly educated population” says L. S. Kanodia, chairman of Datamatics and one of the fathers of the Indian software revolution. “The other great plus from the international point of view is that India is English-speaking in contrast to China and other countries”. Driven by the demands of offshore clients for low cost, high-quality products and services, India’s software export industry has become one of the most dynamic sectors of the Indian economy. It has also become a valuable foreign exchange earner, an important source of new professional jobs and the model for economic success after deregulation. Meanwhile in the US, Europe, and now in Asia, a growing number of companies in the financial services, retail, and manufacturing sectors, are becoming dependent on Indian technical know-how. Indian software engineers maintain and update systems to help companies in the developed world remain competitive and react quickly to commercial opportunities. The remarkable success of the Indian software export sector since the mid-1980s is reflected in the annual figures prepared by Nasscom.
Indian software exports were worth just Rs 30 bn ($1.1 bn) last year. Nasscom expects the export revenue to be worth $1.8 bn in the current year and to reach $4 bn by the end of the decade. Overall, software exports have been growing by more than 55 % annually over the last 5 years and the pace of growth shows no sign of slackening. The businesses responsible for this achievement are a diverse mixture of new start-ups, joint venture companies, foreign implants, and spin-offs from some of India’s oldest and most well-established industrial groups. According to Nasscom, there are more than 550 companies in India involved in software exports (another 180 small companies collectively account for revenues of less than Rs 100 mn). Together these companies employ about 160,000 software engineers – the second and third largest group of software professionals in the world, depending upon Russia’s ranking. However these companies vary dramatically in both size and structure. Last year, 52 companies exported more than Rs 100 mn worth of software. This is compared with just 5 in 1991. Meanwhile, reflecting the growing stratification of the industry, the top 20 exporters, which includes TCS, Wipro Infotech, NIIT, Pentafour, and Infosys, accounted for almost 60 % of the total export.
Typically individual companies and emerging industries in developing countries like India move through at least three distinct phases as they enter new export markets and begin to climb up the value chain. They begin by exporting cheap labour overseas or “body shopping”. This phase, which the Indian software industries entered in the 1980s, enable companies to build credibility with potential clients, and while the margins in exporting cheap labour may be thin by international standards, low manpower costs means exporters can still achieve healthy profits. “The Indian software industry has been built on low cost labour,” says Pradeep Gupta, managing director of International Data Corporation India, the market analysts. Secondly, they begin to bring work back to their home countries using cheap labour to provide offshore services. This type of contract or project based work eliminates costly travel and helps build local infrastructure. In this phase, many Indian companies have established “software factories” or units dedicated to a single client. These high security units – e.g., those established by companies such as NIIT, Wipro Infotech, BFL, Madras based Square-D – ensure confidentiality for long term partners and operate as extensions to their in-house development teams.
Satellite communications remove distance as an obstacle to doing business. India’s geographic location means global development teams can operate round-the-clock, passing work from one site to the next. The next phase is to build packaged software products for export overseas, or provide high value-added services such as consultancy and systems integration. These are the highest margin businesses in the global software industry and the longer term goal of most companies in India as elsewhere.
However, the packaged software business in particular requires more initial capital – which is in short supply in India – and is much more risky than contract work. Successful orders also require good market understanding and hefty marketing expenses which offset the cost advantage of developing software packages in a developing country. Today most of the Indian software exporters still undertake contract work for their overseas clients -- maintaining application, converting code, or migrating software from one platform to another. This supply of professional services in the form of customised software or professional consultancy is the bread and butter work of the industry. However, whereas the vast bulk of this work used to be done at the customer’s site, a growing proportion of it is now being carried out offshore in India .
According to Nasscom, the proportion of work undertaken for customers on-site has fallen from more than 90% at the start of the decade to 58% today. This shift reflects both the desire of Indian companies to capture more of the value added in their work, and the growing confidence of multi-nationals in the ability of Indian software companies to deliver high quality products and services on time. At the same time, instead of limiting themselves to supplying basic data entry and code-bashing services, companies are undertaking more challenging work for their overseas clients or parents, including full-scale projects from design to testing and delivery.
BIG 31 SOFTWARE EXPORTERS Company 1994-95 1995-96 1996-97 % growth
TCS 2860 4205 6069 44.3
HCL CORPORATION - 2700 5300 96.3
WIPRO INFOTECH 856 1639 2588 57.9
PENTAFOUR SOFTWARE AND EXPORT 553 1020 1594 56.3
INFOSYS TECHNOLOGIES 510 807 1253 55.3
TATA INFOTECH 825 940 1060 12.8
DATAMATICS - 680 986 45
SATYAM COMPUTER SERVICES 330 505 891 76.6
INTERNATIONAL COMPUTER (INDIA) - 640 850 32
PATNI COMPUTER SYSTEMS - 560 849 51.6
SILVERLINE INDUSTRIES - 815 720 -11.6
DSQ SOFTWARE 382 621 677 9
TATA IBM 332 388 649 67.4
MAHINDRA-BT 242 386 604 56.4
MASTEK 178 318 579 82.1
SIEMENS INFORMATION SYSTEMS 219 368 554 50.8
L&T INFORMATION TECHNOLOGY 200 366 499 36.5
INFORMATION MGMT. RESOURCES 320 480 498 3.8
HEXAWARE INFOSYSTEM 182 294 484 64.3
CITICORP INFORMATION TECHNOLOGY INDUSTRIES 176 311 470 51.3
DUN & BRADSTREET SATYAM 88 301 466 55.9
HEWLETT-PACKARD ISO - 190 439 131.2
PERTECH COMPUTERS 71 360 347 -3.7
CMC 142 271 342 26.2
DIGITAL EQUIPMENT 439 357 331 -7.2
MOTOROLA INDIA ELECTRONICS - - 328 -
ROLTA INDIA - 330 326 -1
CITICORP OVERSEAS SOFTWARE 287 270 325 20.5
HUGES SOFTWARE SYSTEMS - 254 312 22.7
BFL SOFTWARE - 199 307 54.3
IIS INFOTECH 229 329 307 -6.8
Most of the larger Indian companies are expanding their international presence. They are setting up offices in the US, Britain, continental Europe, and now in South East Asia and the Far East. The objective of overseas offices is to win new business and build relationship with offshore clients. As one industry leader puts it, the offices are “helping to raise the comfort level with Indian outsourcing”. Some are also beginning to look for partners in neighbouring countries such as Pakistan, Bangladesh, Nepal, and Sri Lanka. This raises the possibility that the Indian software industry could become the centre of a regional hub.
The house is built – now to furnish the interior
India's software industry is gaining strength abroad, but there is still work to be done at home before domestic market will have similar successes.
By most measures, India, for all its success in software design and engineering, remains relatively impoverished in terms of IT infrastructure and deployment. With just 1.5 telephones per 100 people, India has one of the lowest fixed telephony penetration rate in Asia. The installed personal computer base in a nation over 1 bn people stands at only 1.8 mn units. Most segments of India's antiquated public sector have yet to embrace technology despite the dire need for reform.
(The above chart is based on the following data; the vertical axis unit is $ million.)
$ million 1992-93 93-94 94-95 95-96 96-97
hardware (Series 4) 422 583 767 1072 1390
domestic
370 490 590 1037 1050
export
52 93 177 35 340
software (Series 3) 388 560 835 1224 1755
domestic
163 230 350 490 670
export
225 330 485 734 1085
others (Series 2) 207 233 297 435 478
maintenance (Series 1) 90 117 142 155 182
The slow pace of technological advance has already forced some multi-nationals to re-evaluate their direct investment strategies and scale back their expectations. Nevertheless, despite a recent economic slowdown, there are some indications that the climate for the domestic IT industry may be improving.
In India’s main cities – Bombay, Calcutta, Delhi – GSM mobile telephones have become must-have items for India’s large and growing middle class. Motorola manufactures pagers at a plant near Bangalore. It predicts that 10mn pagers will be in use in India by the year 2001. Although local businesses complain that new lines still take far too long to materialise – even when bureaucratic wheels are oiled with the usual bribes – the fixed telephone system is showing some improvement. As import duties have been cut and tough new copyright laws enacted, pirated software has been replaced with strong sales of legitimate packaged software. Microsoft, Symantec, and Adobe sell their packages here.
In India’s embryonic personal computer 'Grey-market' PCs -- locally assembled machines made up with illegally imported components – have been overhauled by branded imports from companies like Compaq Computers, Wipro-Acer and IBM. While brand name imports take a growing market share, local manufacturers – PCL, HCL, Zenith – have been locked in a price cutting battle. Price for mid-range Pentium-based PCs have tumbled to around Rs 30, 000 (GBP 476) and forced a number of companies, including PCL, into extensive restructuring. However, some manufacturers, including HCL Info Solutions remain undaunted. The group has reacted to lower PC price and squeezed margin by expanding its PC operations and gearing up for what it hopes will be a PC sales boom. "We expect to be selling over 100, 000 PCs a year and believe we can win 10 percent of the market," says Arun Dang of HCL. Those are ambitious but not outrageous targets. International Data Corporation’s Delhi office estimates that around 473, 000 PCs were sold in 1996/97 and that the figure will rise to about 636, 000 in the current year (excluding about 20, 000 PC server sales). They say the figure will reach 1.1mn units in 1999/2000 based upon a realistic compound annual growth rate of 32.4 per cent. If IDC’s optimistic projections were realised, PC sales would grow by 40.8 per cent to 1.32m over the next three years. Even IDC’s pessimistic forecast, based on compound annual growth of 25.3 per cent would see sales this year of just under 600, 000 rising to 931, 000 in 1999/2000.
Sales of domestically produced CD-ROM titles and multimedia training programmes are growing. Computer training schools have mushroomed and today more bright young Indians would rather become software entrepreneurs than doctors and lawyers. Under pressure from the IT sector, Internet access is being liberalised – Internet connection grew by 30 % last year to 45, 000 and other telecom services are likely to follow. For India’s emerging technology companies, the web provides an ideal shop window for their services – and a level playing field on which to complete with rivals in the West. In the public sector, a few state govt. and central govt. departments are beginning to adopt technology in an effort to improve efficiency and the delivery of services.
In Industry, sales of high-end business software from companies like Germany’s SAP are growing strongly as India’s commercial and Industrial business houses face up to the need to invest in IT to ensure that they can compete in both the liberal domestic market and overseas. "Potentially this is a huge market,” says Ajay Malpani, an industry analyst with Caspian Research in Bombay. Indeed this improving domestic outlook is reflected in the financial markets. Shares of India’s leading companies, particularly those with strong technology base, product strategy, or service offering have soared over the past years. E.g., shares in Infosys have risen twenty-five fold over the past year. This reflects the determination of the company to become “a world-class software house in the global market” and to compete “on quality and productivity and not just cost.” Although the domestic Indian software market has traditionally lived in the shade of the dynamic export sector, it has nevertheless recorded strong growth in recent years. The domestic market has expanded by almost 49% over the past five years growing from Rs 3.2 billion in 1991/92 to Rs 22.4 billion in 1996/97. Last year's figure includes both the sale of imported software packages as well as domestically developed software packages and services but it excludes the large volume of in-house software development. “For many years the domestic software industry in India has been growing slowly and lagged behind the growth of the export industry,” notes Nasscom. “However this situation is fast changing. In the past couple of years, the domestic software industry has started to show maturity and achieved high growth rate of 40-50 percentage.” “The industry players have realised that software export is very much dependent on the size of the international market that exists for developing software”. According to Nasscom estimates, the domestic software industry will record sales of Rs 36 billion and grow to Rs 125 billion by the end of the decade as the pace of domestic IT adoption accelerates. But there are a number of other reasons behind the recent surge in domestic software sale. These include the elimination of import duties on imported software.
Coupled with growing home PC sales and a marked shift towards packaged software, these factors have produced a surge of interest in the domestic market and a boom in IT training for companies like APTEC and NIIT. The growth and potential of domestic IT market has also caught the attention of MNCs. Microsoft’s Indian sales and operations are expanding rapidly. Other multinationals targeting the growing Indian domestic market include NOVELL, Oracle and Computer Associates. Overall Nasscom reckons there are 430 domestic Indian companies existing in the market. Prominent local companies include TCS, Wipro, CMC, Onward Novell, Sonata, Tata Unisys, Rolta and Mastek.
Although services and turnkey projects still account for a large proportion of the overall domestic IT market, packaged software is claiming a growing share. Sales of packages grew by over 40% last year, led by CAD-CAM, RDBMS, and financial software packages. Among the fastest growing market segments are the manufacturing, financial services, and govt. fields. Sales of ERP packages grew by 46%. CAD-CAM packages grew by 48%, RDBMS by 23%, and financial accounting packages grew by 25%. Overall Nasscom reckons overseas companies launched 156 new software packages last year – producing a bonanza for big resellers such as Wipro. However, domestic packaged software vendors have also performed well. According to Nasscom, 127 new products from indigenous software suppliers were launched last year. The leading domestic packaged software developers include Infosys, whose rapidly expanding product portfolio includes the Banks 2000 banking package. But Narayan Murthy, Infosys CMD, admits: “we have not been able to sell as many copies as we expected because the automation of banks hasn’t been taking place as quickly as expected.” Undaunted, Infosys has now developed Websetu, an electronic commerce tool. Another successful indigenous software package developer is Bombay-based Mastek. Its products include the Mamis enterprise resource planning package, together with life insurance and securities industry offerings, NIIT, part of the HCL group, CITIL, and TCS in Bombay, Bangalore based Synetics, and Madras based RAMCO whose ERP package has won critical acclaim and competes head-to-head with SAP. These companies have begun to prove that domestic Indian software developers can build innovative, leading-edge business software packages capable of competing in the global software markets. Their success is likely to encourage other Indian software entrepreneurs to follow.
Oracle goes into combat and wins another battle
When Larry Ellison, Oracle’s flamboyant chairman, unveiled his vision for the network computer (NC) – a thin client device designed to cut the cost of corporate computing – it was left to Jerry Baker, Oracle’s chief operating officer, to turn the vision into reality. One of the challenges facing Mr. Baker as chief executive of Oracle’s NCI subsidiary was to develop an operating system for an NC based on an Intel microprocessor. “This was one of Oracle’s highest visibility projects”, notes Ranjan Chak, executive director of Oracle software’s Indian Development Centre (IDC) in Bangalore.
Oracle’s IDC unit was set up three years ago and has grown to include 150 software developers. They are working on highly sophisticated projects ranging from automatic porting tools and a support assistant to speed up customer response times to Oracle Installation Studio, a development tool used to create standard installation packages for Oracle projects. The highly confidential NC project was code named Combat. Spurred on by the knowledge that a rival Oracle team was also working on the project, the IDC team worked long hours. “We even had a room booked in a hotel nearby in case someone needed to steal a few winks,” says Bikramjit, project manager on the NC project. “We knew this project was crucial, and we had to deliver”. The Combat team began work on July 8 last year and finished three months later on October 8, just in time to allow Ellison to demonstrate the Intel based NC in Tokyo last month. Their efforts won high praise from Baker. “IDC has been successful in every venture and over-achieved in every way”, he says. "That is the reason I enlisted IDC's support in developing our first corporate NC ... I knew I could count on IDC delivering against all the odds."
Oracle is just one of the big US IT groups that have tapped the Indian market as a source of highly skilled and strongly motivated software engineers. These engineers are available at a fraction of the cost of their US counterparts. Other US multinationals that have established captive software development units – working on international projects and having real world-wide responsibility for particular products include Texas Instruments, one of the first US companies to set up a dedicated facility in Bangalore, Novell, and Motorola. TI, which moved into a stunning new building in Bangalore two years ago, now has 330 people in the facility. The Indian centre has four project teams focused on designing Digital Signal Processors (DSPs), analog devices, application software, and application-specific integrated circuits (ASICs). The Indian facility has been at the forefront of TI's efforts to exploit its leadership in the fast growing DSP market. Novell’s huge software development facility on the outskirts of Bangalore has a similar reputation. The software development centre employs 200 engineers who are working on key components of Novell’s ManageWise and GroupWise products including gateways and storage management systems. “The quality of our people is excellent,” says Vikram Shah, MD. Indeed, despite Bangalore’s overstretched infrastructure and notorious power problems, US, European, and even a few Asian Multinationals are continuing to arrive. Among the recent new entrants are Siemens, which has established a large software development operation and Lucent, the US telecommunications group which is building a new facility next door to TI. But other foreign MNCs are choosing different Indian cities and different methods to tap the Indian market. For example, Cisco, the networking equipment leader, announced in August that it was setting up a software development facility in Madras in partnership with HCL, the Indian IT group. Most recently Microsoft confirmed plans to set up a development centre in Madras in India. Orlando Ayala, Microsoft VP for International Operations, said the “Indian software skills are unparalleled”. Microsoft would be one of the last US IT multinationals to take the plunge and set up offshore operations in India – although US companies are still well ahead of their European and Asian counterparts. Bangalore is itself described as India’s silicon plateau. Indeed, once inside one of the air-conditioned offices leased by western high technology groups in downtown Bangalore or elsewhere in India, it is easy to forget that this is India, and not California. The companies use high-powered Sun Microsystems and Silicon Graphics workstations. Video-conferencing and high-speed satellite telecommunications links have transformed these buildings into virtual offices which could just as easily be in San Mateo, California, Tokyo, or London.
Multinational Corporations in India Rank Company Revenue (Rs. mn) Rank Company Revenue (Rs. mn)
1 HP 6110 25 Intergraph 450
2 IBM 5770 26 Cisco 390
3 Intel 3600 27 TI 360
4 Compaq 3599 28 Tektronix 331
5 Digital 3214 29 Bay 330
6 Acer 2652 30 HNS 321
7 Sun 2160 31 Cabletron 240
8 Microsoft 2000 32 SAP 229
9 Readington 1711 33 SDRC 222
10 Seagate 1600 34 LG 220
11 Siemens 1546 35 Datacraft 213
12 Apple 972 36 PTC 208
13 Citizen 890 37 Autodesk 200
14 Liebert 805 38 Bull 200
15 Novell 800 39 Panasonic 170
16 SGI 715 40 UB 170
17 AST 703 41 D-link 169
18 Dell 700 42 Baan 157
19 Oracle 700 43 Tandem 145
20 Motorola 685 44 Chuntex 141
21 APC 650 45 Cadence 116
22 BT 628 46 CA 113
23 Epson 576 47 Multi-tech 106
24 3Com 520 48 Informix 100
49 Tandberg 90
Continued... 50 Boca 87
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An emerging software superpower
By Dewang Mehta
The next time you buy a pair of Levis or Reeboks take a moment to ponder the process that brought these products to you. While it just takes 8 minutes to stitch a pair of Levis 501s there are hundreds of stages involved in converting the raw denim from the mills to the final product in shops. These stages can be a process manager’s nightmare. Information technology provides the solution. The millions of people who wear the latest pair of jeans or trainers may not realise that software houses in India are to thank for the efficiency with which their favorite brands reach them. Just as the gulf region has its crude oil and South Africa its gold and diamonds, India’s natural resource is its abundance of technically skilled manpower. This natural resource easily transforms India into a software paradise. It is hardly surprising that when people discuss worldwide software development today, they talk of India – more precisely the Indian software industry.
What is behind India’s success in providing efficient software solutions? Some say it is the natural Indian proclivity for mathematics. Others quote the fact it was after all India that invented the numeral zero. Still others point to the country’s cost and quality advantage. The truth encompasses all of these reasons, as well as many more. India offers cost-effectiveness, quality, reliability, speedy deliveries, and above all, use of the state of art technologies in software development. Last year, 131 of Fortune 500 companies outsourced their software requirements to India.
Evidence
A compounded annual growth of about 55% in the last five years speaks volumes about the performance of the Indian software industry. During the 1997-98 fiscal year, India’s software industry is expected to earn revenues of Rs. 100 bn. Of this, exports may be as high as Rs. 64 bn. According to a World Bank survey, India was rated as the top outsourcing destination by vendors in the US. The survey also indicated that India commands 16.7 per cent market share in the global customised software development market. International observers agree that India is reaching the top of the league in software development. When Microsoft’s Bill Gates visited India in March 1997, he observed that India will emerge as a software superpower of the 21st century. Many Indians share his sentiments. The pace of growth of the software Industry has, however, been so phenomenal that growth of infrastructure and domestic demand in India have not been able to keep up. Moreover, the rate of penetration of the personal computer in India has been poor. Although software exports have been increasing steadily, the growth of computerisation within the country – in government, industry, and banking – has been slow. The important questions now are when and how India will emerge on top of the software league. Although the Indian software industry has been growing by 50 per cent annually, industry experts in India are not satisfied. They would like the growth to be 100 per cent. There are indications that such growth can be achieved very soon.
Over the years, Bangalore has gained the reputation of being the Silicon Valley of India. But is one silicon city enough for India? Events in the past few months indicate that in the next 10 years, India is bound to have atleast 25 more Info-cities with the latest infrastructure and connectivity. N. Chandrababu Naidu has taken the lead and established the city of Hyderabad as a major software centre. Locally, Hyderabad is fast being referred to as Cyberabad. Not to be left behind, other chief ministers are trying to promote Info-cities in their states. Karnataka, Goa, Orissa, Maharashtra, Gujarat, Tamil Nadu, West Bengal, Kerela, Rajasthan, and Himachal Pradesh are drafting state IT policies. They are in the race to set up as many info-cities in their respective states.
Areas Revenues
Exports 27.50%
Others 5.90%
Hardware 36%
Training 4.80%
Maintenance 6.40%
Peripherals 7.20%
Software 12.20%
- Top 20
Rank Company Growth (%)
1 Wipro 11.83
2 TCS 40.15
3 JTS 566.42
4 PCL 23.69
5 TISL 62.91
6 NIIT 70.35
7 HP 28
8 Digital 23.71
9 Aptech 24.57
10 CMC 26.72
11 Tata Info 21.11
12 Godrej 41.45
13 Unicorp 49.1
14 Microsoft 78.57
15 CMS 48.11
16 Pentafour 50.61
17 Redington 89.57
18 Microland 30.23
19 ATD 15.17
20 Tancom 43.49
[Check the recent rankings by DataQuest India.]
Research
In the next 10 years, India will emerge as a global R&D centre for software. Already Computer Vision does 50% of its R&D at Pune. Novell has set up its R&D labs in Bangalore. The operating system for Oracle’s NC was also written at Bangalore. Baan wants to undertake 80% of its R&D at Hyderabad. IBM, Microsoft, Oracle, and Silicon Graphics are heavily investing into R&D schools in India. For any software industry to be strong and vibrant, it has to have its own share of IPR ownership. It is the power of IPR ownership that makes or breaks the software industry. Increased R&D activity is bound to establish India as a technology leader. This will set in motion India’s entry into the top league of software developers. Recently, the so-called information superhighway has caught the imagination of the Indian people. There are only about 45, 000 Internet connections in India at present, but this figure is expected to grow. The government recently announced an Internet Service Provider (ISP) policy, which will help to escalate the pace of Internet connectivity in India. In other words, India may only have an information super-footpath, but it is fast becoming an information superhighway. Within the ISP policy, the government has established a budget of Rs. 12 bn to establish a high-speed national telecom backbone.
In hardware technology, it is said that set-top boxes are likely to replace today's personal computers and televisions. Today, more than a third of US households have personal computers. In India, only one out of every 700 homes has a computer. The Indian government is applying strong measures to change the situation. It hopes to increase the ratio to at least one PC for every 30 people by the year 2007. India today has the second largest English-speaking scientific manpower pool in the world – next only to US. In contrast, half of the world’s illiterate population lives in India, thus it is important to spread literacy and empower the citizens of India. With the thrust in policy initiatives towards technology, I hope to see, in the next five years at least, every school and college in every village, town, and city of India connected to the Internet. It is often said that eventually almost every home in the world will have a PC-***-TV connected to the information superhighway. In India – unlike many other countries – cable TV or the direct-to-home (DTH) is likely to herald the revolution that will bring the so-called information superhighway to home and not necessarily via the personal computer that we know today.
In today’s world of limited connectivity, choices at each point in the ‘value chain’ are, by definition, finite. But in contrast, broadband connectivity of the future means infinite choices. But infinite choice can also bring infinite bewilderment. This navigation problem can be solved in all sorts of ways, and each solution is a potential business: the navigator could be a database, a search engine, intelligent software agent, or just somebody giving advice. The navigator could also be a brand, providing recommendations or endorsements. The new world will be the world of information superhighways and navigators. If India cannot develop the infrastructure for the information superhighway for the world, it can easily play the role of a navigator through its immense software powers. After all, all the navigation will be software-driven. That is the real hope for Indian software industry and India in the future of information technology. From the above scenario, it is evident that in the year 2007, India’s IT industry can easily achieve a revenue of $100bn. That year India will celebrate 60 years of independence – and it could be the year that it emerges as a software superpower.
Indian Computer Industry: Market Leaders
Software
Company Revenue
Rs. m Peripherals
Company Revenue
Rs. m Hardware
Company Revenue
Rs. m
Microsoft 2,000 HP 2,201 IBM 4,480
SISL 921 Seagate 1,600 Compaq 3,600
Novell 800 Redington 1,046 HP 3,248
Oracle 700 Citizen 900 Acer 2,651
BT 627 Liebert 804 Digital 2,432
TI 360 APC 650 Sun 2,160
HNS 311 Epson 576 Apple 972
Lotus 240 Tektronix 330 SGI 714
SAP 229 LG 219 AST 703
SDRC 221 Canon 50 Dell 700
Source: Dataquest Magazine
Software industry concentration Location No. of units approved No. of units operating No. of units exported
Bangalore 170 132 81
Chennai 60 41 29
Bhubaneswar 11 8 2
Calcutta 24 20 10
Gandhinagar 42 12 1
Hyderabad 89 63 44
Jaipur 5 4 2
Noida (Delhi) 161 109 71
Pune 71 50 34
T’Puram 34 22 14
Total Units 667 461 298
Source: Software Technology Planning
Key IT Companies
IT Multinationals Revenue Rs. mn Growth % PC Suppliers Numbers Value Rs. mn
PTC 208 212.78 Compaq 33,452 3,599
3Com 520 108 Acer 33,036 2,652
Siemens 1,546 100.69 IBM 24,371 2,116
Redington 1,710 89.57 AST 12,600 703
BT 628 84.48 HP 11,935 1,099
Liebert 805 81.18 Digital 10,369 1,077
Compaq 3,599 79.97 Dell 7,770 700
CA 113 79.37 Apple 6,506 972
Microsoft 2,000 78.57 SNI 2,800 152
SDRC 221 74.41 Toshiba 1,145 110
Source: Dataquest Magazine
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Long way to go on a bumpy road
By Amy Louise Kazmin
Inspite of India’s computer talent, the country has a mere 50,000 Internet subscribers. There is, however, plenty of pent-up demand
India may be a supplier of computer programming brainpower for the global information technology industry, but as a stretch of the superhighway it’s little more than a bumpy, single lane road. While foreign companies like AT&T, Global One, Compuserve, and IBM have watched in frustration, access to the Internet has remained a tightly controlled government monopoly. India’s international telephone company, VSNL, is selling 500-hour, annual Internet subscriptions for a whooping $420 – nearly twice the monthly salary of an entry-level computer engineer. The government’s hefty up-front charge, a lack of promotional efforts, and a reputation for unreliable service has left India behind in the Internet race. For all its computer talent, the country currently has a mere 50,000 Internet subscribers, though there is plenty of pent-up demand.
Yet India’s information technology industry is now poised for a fillip. In September 1997, India’s Cabinet agreed to let private Internet service providers set up shop for the first time. In doing so, officials conceded that it will take the marketing muscle and customer service of private companies to popularise the Internet, and bring its benefits to a wider Indian audience. When it comes to the numbers, officials are aiming high: they say they would like to see India boast 1.5m to 2m subscribers by the year 2000. Computer professionals now talk hopefully of the potential for a fast moving Internet boom comparable to the cable television revolution that swept India several years ago. “It’s going to be part of everybody’s life,” says Anjeli Sinha, Director of Status Infonet Limited, a New Delhi based networking company that designs and maintains corporate websites. “We can see a tremendous business potential.”
It is, however, too soon to celebrate. Although potential Internet service providers are cautiously optimistic, technical details are still being thrashed out. Officials have not yet decided whether all existing telecommunication infrastructure – including India’s new and upcoming privately owned cellular telephone networks will be allowed to carry data traffic. If not, private service providers will have to depend on the government -- their competitor -- to make lines available, a not entirely comfortable proposition. VSNL will also retain its monopoly over international access to the Net. Potential Internet service providers are lobbying to be allowed to select their own foreign half channel – that is to link directly to the international backbone of their choice after going through the VSNL gateway – but the proposal has met with resistance from VSNL. The matter has now been referred to India’s cabinet secretary for further consideration.
The outcome of the half channel battle is likely to determine just how much telecom and information technology heavyweights are willing to invest in India’s Internet business. At, present VSNL routes most of its international traffic in bulk through MCI. But companies like Global One or AT&T will not be too eager to market Internet service in India if it means generating more traffic for their rival. If they set up Internet services, they say they must be allowed to link up directly to their own systems after going through VSNL’s international gateway. “If that doesn’t come through you have a real challenge asking multinationals to set up a branded service,” says Virat Bhatia, of AT&T. Foreign equity caps are another constraint. With a 49 per cent foreign equity limit on Internet service providers, global telecom companies say their investment will be limited to what local partners can bear. “This is a clever way that the government is using to stifle competition against itself,” says the India country manager for one leading telecom company.
The domestic telecom backbone is another concern. India has decided that private investors will initially be barred from building or operating their own high-speed national data transmission infrastructure. Instead, the government intends to spend $333mn over five years to build a 2.5 gigabit fiber-optic network that everyone in the industry can use. While the goal is laudable, the analysts fear that New Delhi – notorious for lengthy delays in implementing projects – will not build fast enough to keep pace with exploding Internet demand. “Speed is of the essence,” says Dewang Mehta, Director of the National Association of Software and Service Companies. “If the backbone comes after five years, that’s too late in the day.” It is not that speed just counts. Competing networks would also reduce consumer costs, attract cutting edge technology, and help develop the infrastructure. But the government, which has a monopoly in domestic long distance as well as international phone service, fears that privately owned data links would be widely used for voice traffic, eroding their revenues. Despite the gaps, industry analysts say there is much to be pleased about. “It’s a major milestone,” says Suresh Aswani, general manager for network services of IBM Global Services India. “There are lots of possibilities here.” Among them: the government has decided that international service providers will be allowed to directly interconnect among themselves; and VSATs will be allowed to carry data transmissions. Once application procedures are formulated, analysts expect Internet service to sprout in cities that currently have no access to VSNL’s network. And faced with imminent competition, VSNL’s own service is also steadily improving. Six months ago, Internet users in the Indian capital griped that it was nearly impossible to get online during busy working hours. But the addition of more lines, consolidated on just few telephone numbers, has made access far easier, even during prime working hours.
Several Indian IT groups have a web presence. Wipro Infotech, NIIT, and of course VSNL--India’s international telecom service provider. One of the best sites for an overview of the Indian software industry is NASSCOM. IDC’s India site, is also worth a visit for a view of the domestic industry. For general information try Dataquest, India’s IT magazine.
Additional links: SiliconIndia.com
Studies by Dr. Richard Heeks, The Univ. of Manchester
Embassy of India: India’s Information Technology Industry
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Solving the 'Year 2000' Computer Problem - By Paul Taylor
Timely opportunity for India Inc.
Software companies are busy helping solve the year 2000 computer date problem (Y2K) as well as programming for European economic and monetary union (EMU)
The 'millennium bomb' or the year 2000 computer date problem could prove to be the “icing on the cake of success” for India’s offshore software companies. The Y2K issue -- as it is often called -- threatens to disrupt the information technology systems and other electronic equipment throughout the world because many older computer programs, database and micro-controllers use just two digits to denote the year. They will therefore be unable to deal with the date change on January 1, 2000 unless huge sums are spent to correct the problem. Researchers at the Gartner Group have estimated it could cost as much as $600bn to tackle the millennium problem, but time or rather the lack of it, could pose an even greater challenge. In addition, the people needed to quantify, plan, execute, and test software changes in private and public sector enterprises throughout the developed world are in short supply. “The millennium bug means tremendous opportunities for Indian software companies,” says Dewang Mehta, Executive Director of National Association of Software and Services Companies. “Many Indian companies have already taken up this challenge and see it as a significant opportunity – it’s “extra cash ” says Mr. Mehta. He estimates that at least $2bn of Y2K work could come to India – still a relatively small amount, given the scale of the worldwide problem – and a further $1bn of EMU-related software work could follow.
Last year the national association formed a special interest group on the Year 2000 issues. The directory of Year 2000 solution providers from India lists 135 companies, which either have tools or are providing solutions to the problem. Indeed, over the past few years most of India’s leading offshore software development companies have set up dedicated Year 2000 units or complete “software factories”. Some, like HCL Consulting, have signed partnership deals with US and European tool vendors, computer services organisations and consultancies. HCL Group's joint venture with James Martin, the US-based service providers, combines what Gartner has described as "the leading redevelopment and Year 2000 solutions methodology” with HCL’s “software factories" which are aimed at reducing project time and cutting project costs. “The cost savings for these (Y2K) projects, if conducted offshore, will range from 30-60 per cent less than the competitive offerings that that do not include offshore services,” said Gartner analysts.
Such claims are backed up by the experience of companies like Bombay-based Datamatics which operates one of the country’s largest Y2K software conversion factories and has evolved its own integrated conversion program dubbed Datamatics Solution 2000. "An offshore software facility has the potential to reduce your IT costs by 40 to 50 per cent while meeting software project schedules," says the company. Both advantages are crucial to the Year 2000 problem with its characteristic large volumes and finite worldwide deadlines.
Many Indian software companies, including Datamatics, are using Y2K tool-sets developed by US market leader like Viasoft and Peritus and Micro Focus, the UK-based group. Others including Delhi-based IIS Infotech, have developed their own proprietary methodology and tools to provide a comprehensive solution to the problem. IIS uses its own Year 2000 tools called IIS 2000 but also has a partnership with Viasoft, one of the leading US-based tool vendors. “Our order book has improved dramatically this year," says Saurav Srivastava, IIS managing director. "Y2K had a role to play in this." Finanace companies, utilities, and transport companies have been among the first to address the Y2K issues, he adds. As with other Indian software companies, IIS based in Noida near New Delhi, sees the Year 2000 problem as an opportunity to grow the business and forge new customer contacts.
In Bangalore, other leading software developers including Infosys, BFL, Wipro Systems, and TISL -- the Tata IBM joint venture, are also exploiting the Y2K opportunity. For example BFL, which uses Micro Focus tools, is undertaking a large project for Fedral Express, the international courier, while TISL is tackling projects for IBM customers in Australia, the US, Europe, and the Middle East. Mr. B.V. Venkatesh, BFL’s president and chief executive, says the group’s dedicated Year 2000 team has already converted more than 20m lines of code for overseas clients in the finance, transport, and other sectors.
Nevertheless, most companies report that business has been slower than expected. “I don’t think Year 2000 work has met with our expectations,” says Mr. V. Chandrasekaran, chief executive of Wipro Systems which has undertaken about $6m of Y2K contract work. "Customers still seem to think there will be some kind of magic wand -- I know big companies that haven’t even started work”. However along with other senior software industry leaders, Mr. Chandrasekharan believes there could be late rush to secure Year 2000 resources. “It could happen next year,” he says. But even if there is a late rush of work, India's software companies are likely to adopt a careful approach, ensuring they don't become too reliant on work which could quickly dry up after the millennium. “Most Indian companies are being intelligent and are limiting their Y2K work to about 10 percent of turnover,” notes Mr. Mehta.
But most companies, particularly those with large overseas parents, are being more adventurous. For example, most of TISL’s work is for IBM’s customers overseas, but even so Pawan Kumar, the group’s managing director, says it is limiting the level of of its Y2K work to involve not more than 20 percent of its workforce.” If we want to do more work than that, we will subcontract it out to business partners,” says Mr. Kumar. He says TISL has had talks with five or six potential partners who could be called upon to do overflow Y2K work. Other companies including TCS have already begun to subcontract Y2K conversion work, in TCS’s case to Delhi based Svam Software.
India’s offshore software development industry is maturing and increasingly looking at companies in neighbouring countries as potential partners. “India Inc or India Plc is beginning to emerge,” says Mr Mehta.
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Tata Consultancy Services - By Krishna Guha in Mumbai (Bombay)
Strategic alliances with global partners
TCS, India’s biggest software company, with revenues of Rs. 7.2 bn has learned to be nimble in developing new products.
Size sets Tata Consultancy Services apart from the rest of the Indian software industry – and gives it a distinct set of priorities, including the health of India’s domestic market. “Export can continue to grow rapidly – India still accounts for less than one per cent of the total global software industry,” says Faqir Kohli, deputy chairman of TCS, which achived revenues of Rs. 7.2 bn last year. “But in the long run you export those goods for which you also have good domestic market within the country”. Mr Kohli says that Indian software companies are held back by the "low level of computerisation" at home. Last year India added 500,000 personal computers out of a global increase of 73 m but the number of PCs per capita is tiny by international standards. Whole swathes of India's economy and most of its Government sector are not computerised at all. Mr. Kohli says, Indian software companies must "help grow" their home market -- working with hardware manufacturers, universities, and government. The potential for TCS -- India's biggest software company with the strongest brand name -- is obvious. But TCS also needs a healthy local market. "About 40 per cent of our people are working on domestic business," Mr. Kohli says. "I need these jobs to train my people." The challenges of being a big global software company direct corporate strategy within TCS. "We have the critical mass to look at things in a much broader prospective than we used to," says S. Ramdorai, Managing Director. Unlike most of India's small software companies, TCS has a powerful international brand, and is recognised for its experience and technology. But size as the old adage says, isn't everything.
"Size can be advantage or a disadvantage, because of the internal delays that may creep in," says Mr. Ramdorai . He says TCS has learnt to be "very nimble" inspite of its scale -- developing new products and pitching for new business. "A big part of this game is how fast you can run," he adds. Training -- or "technological absorption" -- is also a big priority." The speed at which technology changes is accelerating," said Mr. Ramdorai. "It used to to be 24 -month cycle, now about 12 months, and only time will tell how fast technology is going to change in future."
Unlike a small start up company, TCS cannot just throw together the latest skills and technologies hot from the university classroom. It has to continuously retrain a staff of thousands. "You have to be proactive and have the ability to absorb technology at the rapid pace at which it hits you," says Mr. Ramdorai. "This is probably the biggest external challenge." Furthermore, Mr. Ramdorai says that a big company has to ensure that experience gained in one project is actually diffused within the organisation, and employed in future assignments. "Re-use and re-use has to be a way of life," he said."We cannot afford to reinvent the wheel." TCS is aware that the advantages of incumbency -- and a glittering track record -- can quickly be eroded in today's fast-evolving technology industries. Advances in communications with the Internet, Intranet, and wide area network (WAN) applications are the most obvious examples. "Solutions can come from any company, big or small, anywhere in the world," says Mr. Ramdorai. It is an open arena and we have to be prepared for that."
In addition the clients are much more likely to shop around -- given the big increase in the number of alternative providers. "If you have done a successful engagement it doesn't mean that you will automatically win the next contract," says Mr. Ramadorai." You have to work hard to win each one." In this arena -- where the client is king -- business skills have come to the fore. And industry specialists say that sales and marketing is the nearest thing to a weak link in the TCS chain, when compared with global best practice. Mr. Ramadorai says marketing skills "have to be improved." "If you are just a technological organisation you can only go so far," he explains,"if you are a great marketing organisation with great technological depth that is the best combination."
The central plank of TCS's strategy is to decentralise the company into business units that operate "like small businesses" -- chasing after opportunities and churning out new ideas. Some of TCS's business units are clustered around technologies -- for instance, an Internet, Intranet, and WAN division and others around client industries such as banking. "We give responsibility to the head of the business unit to completely run it as an independent business" with about 500 or 600 employees, he says. The main board only sets "policy guidelines."
Operations, marketing, sales, supply "everything is decentralised," he says. This policy has "accelerated" in the last 18 months. Many of the new unit managers are sent to top business schools -- such as Harvard -- to develop entrepreneurial skills. TCS is now looking at cementing this new structure with performance-related pay. "Rewards have to be completely relooked at," says Mr. Ramadorai . In future, these will be based on the performance of an individual business unit. In some units, the scheme has already been put in place.
Meanwhile TCS has developed strategic alliances with several global companies. These include Earnest and Young, the accountancy and consultancy group, and Microsoft. "Strategic alliances, alignments, and opportunity-specific relationships are becoming a way of life," says Mr. Ramadorai. He adds that clients now demand a single team with world class skills in several different disciplines. The TCS-Ernest and Young alliance targets banking and finance, utilities, energy, telecom, healthcare, government, transport, and manufacturing. By contrast, the alliance with Microsoft enabled TCS to design India's new paper-less National Share Depository based on NT and Sequal Server technologies.
The company has set up a huge facility to process Year-2000 systems' migration -- capable of handling upto 750m lines of code -- business which could be worth about $400m, though TCS is only expecting $200m to $300m. But while TCS set up the factory and provided about 25 per cent of staff, the rest are outsourced from lower skill software companies. This will cushion the loss of revenue when the project is over, which Mr. Ramadorai belives will be some time after 2000. "Many companies will only migrate mission critical systems by 2000," he says.
TCS hopes the non-staff workers will become maintenance outfits, deepening the pool of servicing talents available. As for TCS itself, industry observers often point to the logic of a merger with other software companies in the Tata group -- perhaps followed by flotation to create India's first quoted software giant. But this is not likely in the foreseeable future.
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MASTEK - Krishna Guha
Plans for higher-value business worldwide
Mastek aims to eventually provide strategic solutions for large clients.
Ashank Desai, former head of India's software industry association, Nasscom, believes that India will lose its cost advantage over its international competitors in as little as six years. This belief underlies corporate strategy at Mastek, a fast-growing software company, where Mr. Desai is chairman and managing director. "Cost advantage will remain for six or seven years, but unless we begin to change now, we will not be able to compete in six or seven years' time," says Mr. Desai. He argues that India's software companies need to build "sustainable advantages," which will remain when salaries have levelled out. This means continuously moving into "higher value addition." It also means a shift in focus and targets from total revenue growth to revenue earned per person. Mastek, for instance, is trying to graduate from technical solutions to applications, through business solutions and on to providing "strategic solutions" to big corporate clients.
This involves a new way of thinking of computing -- more akin to a management consultant than a computer programmer. "Information technology today is not used for cost reduction. It is used to create strategic advantage," says Mr. Desai. He says software companies like Mastek have to become much more "business-focussed" and develop know-how in different industries. At present, Mr Desai admits, Indian companies are often called on "because we are very good at technology, but not because we can add value to a business or provide a solution of a business kind." This long run goal threatens to bring minnows like Mastek into competition with big IT consultancy companies like Andersen Consulting. But Mr. Desai believes that companies such as Andersen will "themselves move up and up the value chain," leaving "a slot vacant which can be filled by companies from India."
The first string in this strategy was to restructure Mastek around four industry divisions -- manufacturing, distribution, financial services, and government -- in June of this year. "Last year we had the head of our Delhi office running the northern region of India," says Mr. Desai. "This year he is the head of government services all over India." The biggest government software market in India is of course, Delhi itself, home of the central government. But Mr. Desai says the new structure "will allow the division head to replicate IT solutions in Maharashtra, Kerala, or any of the other States." Mastek has meanwhile set up a research and development centre in Pune -- away from the regional head offices -- "to make sure it is not driven by today's urgencies." The company has also restructured the way it serves clients abroad -- which account for 85 per cent of last year's $21m in revenues. The company has set up subsidiaries in the UK, US, Singapore, and Malaysia. These deal directly with clients. The parent company provides the off-shore development facilities. "The centre of gravity of the business is in the countries where we have clients," says Mr. Desai. "These are not junior guys sitting there and selling." Mastek has opted to appoint local managers to head its foreign subsidiaries wherever possible. This helps the company gain credibility and local market know-how. "The UK market is different. The US market is different," says Mr. Desai. "Each country has a different culture, a different way of doing business and building relationships." He says local managers "bring with them these nuances" and "customer relationships and references," which are hard to build from scratch. This has worked in the UK. Mastek UK, headed by Mike Cast, accounts for 30 per cent of the group's revenues. Customers include mail-order company Innovations and Mastek has also paired up with small IT consultancy companies such as BACG and Quidnunc. But the strategy has not yet borne fruit in the US -- where Mastek has struggled to find the right executives and business partners.
The company hopes it has turned the corner with the appointment of a new US managing director, Ken Beherendt. The next phase of Mastek's plan is to roll out higher value business solutions worldwide. Mr. Desai is realistic. He knows that off-shore software development and other support services will continue to dominate turnover for some time to come. But he has set a target of 40 per cent of revenues from business solutions - and 10 percent from "new projects." At the start, Mastek is concentrating on IT consultancy-style projects in India's own increasingly sophisticated market -- and in South-east Asia. It is not trying to take on Andersen's head-to-head in the US. For the US and UK, "We will continue to do outsourcing and offshore work," Mr Desai says. "For the next five years, we can continue to grow based on existing advantages -- speed, quality and cost." But he adds: "In India and Malaysia, we already have to compete not on the basis of cost." Half of Mastek's revenues from its Malaysian subsidiary comes from business solution packages and systems integration, including prestige clients such as Bank of America. "If we provide higher value solutions here," says Mr. Desai, "We will learn the skills to provide them to the developed world."
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Profile: CHANDRABABU NAIDU - By Paul Taylor
Chief Minister with a vision for IT
As head of the State of Andhra Pradesh, Chandrababu Naidu is, at 47, India's youngest chief minister. He believes IT is essential if India is to update its bureaucratic local government system and make it more responsive to the needs of the electors. The son of a farmer in Naravaripally, Mr. Naidu became active in politics while studying economics at Tirupati University. By the mid-1980s he had risen to become general secretary of the Telugu Desam Party. His high profile campaign to turn Andhra Pradesh into a model high technology state has already won him admirers -- including Bill Gates, the Microsoft chairman who visited India earlier this year.
When Bill Gates was unable to visit Hyderabad during his Indian visit, Mr. Naidu flew to New Delhi to specially meet him. At a US Embassy cocktail party, Mr. Naidu cornered the Microsoft chairman, opened his portable computer, and spent half an hour demonstrating the executive information system which he had developed to help him keep track of state affairs. Using the system, he can see data on virtually any facet of his state. He can, for example, see whether tax receipts are in line with budgets, check primary school education standards before a village-visit or monitor water levels in Andhra reservoirs. Mr. Naidu acknowledges that what he is trying to achieve amounts to a revolution in current thinking. After all, EIS systems, web sites, notebook, personal computers, and electronic government are not the routine stuff of Indian politics. Also Andhra Pradesh is a poor and relatively backward state.
Among the challenges are the lack of infrastructure and the lack of international-class educational institutions in Hyderabad. "At the same time ordinary people are not aware of information technology, computers, and all these things. So we have to educate them, carry them, motivate them, and tell them this is for their benefit." His four-pronged strategy for achieving such a transformation is straightforward. First, his priority is to develop the state's information technology infrastructure to encourage more software companies to set up operations in Hyderabad. Secondly, he plans to introduce IT to government systematically by computerising all government agencies. Thirdly he wants the use of IT in the private sector, and finally he is targeting human resources development.
Already he has won backing for the establishment of a new Indian Institute of Information Technology (IIIT) in Hyderabad. This will house schools supported by multinational IT companies, including IBM, Oracle, and Microsoft. Mr. Naidu says other US companies including Motorola and Silicon Graphics are also showing interest. After meeting Mr. Gates he is also hopeful that Microsoft will decide to site its software development centre in Hyderabad. "The biggest strength for us is our English speaking manpower," Mr Naidu says. In addition, he claims that 52 per cent of the estimated 1m software professionals of Indian origin who are working in the US are from Andhra Pradesh. He views Singapore's 2000 and Malaysia's multimedia super corridor as potential development models. Mr. Naidu has assembled an impressive team of domestic and international advisers. And he has persuaded the federal government to pay 10 per cent of hardware expenditure costs and 80-90 per cent of software costs, and to release spare telecommunications capacity for state use.
The chief minister is planning to build a fiber optic network to support data communications and video conferencing. He also plans to use this network to conduct government audits, track files, and provide government services accessible via electronic kiosks sited in public places.
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Overseas Listing: Paul Taylor
All eyes are on Nasdaq
Several leading software companies are seeking listings for their US subsidiaries as the export market continues its surge.
India’s leading software development companies are preparing to seek listings on the US-based Nasdaq exchange next year. Between 10 and 15 Indian companies may seek Nasdaq listing for their US or other offshore subsidiaries next year, according to Dewang Mehta, executive director of India's National Association of Software and Services Companies. Among those which are likely to seek early listing are HCL, the country’s largest IT group, Wipro Infotec, and Infosys Technology-- of India’s blue chip IT companies. Other companies with UK-based subsidiaries or sister companies could seek listings on the London AIM. Several other US-based companies founded by Indian entrepreneurs with extensive outsourcing operations in India, including IMR and Mastech, are already quoted on Nasdaq.
The move to seek overseas listings reflects the growing confidence of India’s booming export-led software development industry. “We need to leverage our technology and project management skills,” says N.R. Murthy, chairman of Infosys. The company is expected to take a formal decision on seeking a Nasdaq listing shortly. There are a number of factors driving therush to Wall Street. These include: the growing need to be able to offer dollar-denominated stock options to help retain skilled staff; overseas acquisition plans, and the companies’ desire to raise their international profile. “There is a strong move towards globalisation within the industry,” says Mr. Mehta. More than 100 Indian companies have established US subsidiaries in the past three years, according to Mr. Mehta. Many have a view towards a possible future listing. Some, such as HCL, are preparing to set up subsidiaries in offshore centres such as Bermuda and use these as springboards for seeking Nasdaq listings. “We plan to take this company for a listing on Nasdaq sometime next year,” says Shiv Nadar, the dynamic chairman of HCL. He sees the Nasdaq market as a possible source of funds to help him turn HCL into a global software group, both through organic growth and selective acquisitions, probably in the US.
Several joint ventures and quoted companies – including Delhi-based IIS Infotech and Bombay-based Rave Computers, whose sister company, The Karnataka Group, is based in Britain – are still considering their options. Meanwhile, Bangalore-based BFL Software says it is looking at introducing international employee share options as a way to reduce staff attrition rates, which are as high as 25 percent in much of the Indian industry. Too many young software engineers leave to take up jobs paying up to 10 times their Indian salaries in the US, Singapore, and the Middle East. “Attrition is our biggest problem,” says Anand Jhaveri, managing director of Rave, a fast-growing software start-up, working on state-of-the-art applications mostly for customers in the UK. He, like other Indian software entrepreneurs, believes that being able to offer loyal employees dollar or sterling denominated share options would help retain staff. For the time being, Rave and other small software start-ups try to retain their best software engineers by paying generous bonuses.
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Bangalore - By Rohit Jaggi
A good place to be an engineer
Bangalore has become India’s centre of technology. A benign climate, and healthy wages in a thriving sector have created a bustling city.
As befits the city where India’s first electric bulb was lit, Bangalore is a switched-on place for the technology-friendly. Much has changed since 1905, but the city’s agreeable climate and compact size make the long hours put in by most software engineers more bearable. “Bangalore gives you time,” says Pradeep Kar, chairman of Microland, which he set up in the city in 1989. “People live five to 20 minutes from work so you can play golf or tennis in the morning and still be at your terminal by eight o’clock.” The night before the morning after, though, is quite likely to be busy. According to management consultant Sunil Chainani, the city has “lots of happening places such as pubs and restaurants. Many software professionals work very long hours, but after they finish they are very visible around town.” Bangalore, which the computer industry shares with aircraft, electronics, and machine tool companies, is proud of its many qualities. Its elevation of 1000 metres above sea level takes the sting out of the south Indian climate, and it is one of the country’s most progressive and liberal cities. Bars and restaurants are plentiful. Discos cater for the more energetic young professionals, and the atmosphere is friendly. Days can be long even apart from work. Dinner parties tend not to start until quite late – and lateness for a late-ish start is fashionable – and more often than not food will be served right at the end of the evening, often around midnight. It is normal to leave immediately after the meal, so anyone who can deal with a full stomach last thing at night and little sleep is still in with a chance of beating their colleagues at squash in the morning.
The pub scene is lively, with as many as 100 pubs or bars, so there are many alternatives to the round of dinners at people’s homes. Beer is cheap and on tap, and they are full of well-heeled young Bangalorians. Some are more popular with IT staff than others, such as The Pub World with its loud music, or Black Cadillac with its many expats and armies of women in black leather. Stumble down the stairs into The Underground – not quite artfully decorated enough to look like a London Tube station – and the pub will be thronged with serious-looking people, mostly men, discussing the finer points of cricket and computers. There’s even a society for techie tipplers – the Beer Drinker’s Association of Information Technology, or ‘Bait’ for short. The only drawback is the licensing laws, which prevent bars serving alcohol after 11pm. A typical evening might end in a 24-hour coffee shop in one of the many five-star hotels built to cater for the large number of business visitors. The local software professionals have the disposable income to deal with an active lifestyle. An average salary for a fresh B.Tech, according to Kar, is around Rs.12,000 and pay rises steeply. Mr. Chainani says there are many young people who have built up a wealth of Rs.5 mn. “Not only does the money go a lot further here, but you have all the comforts of life. And you are somebody here.
“It’s the people at small companies, with only a salary and no stock or share options, who may be looking to the US.” The exodus of trained personnel abroad, especially to the US where salaries can be ten times as high, is taken very seriously by the IT companies. “I believe companies like Tata lose out a lot of employees,” Mr.Chainani says. Many companies have moved to tackle staff attrition rates, which are reckoned to be as high as 25 percent. Infosys rewards employees with stock options, and loses far fewer staff than the industry norm. “The company has been successful arguably because it has concentrated on keeping people,” Mr Chainani says. Employee ownership of 15-20 percent of a company is normal in the technology sector, says Kar. His staff own 17 percent of Microland. Infosys is also among market leaders preparing to seek US Nasdaq listings, partly in order to be able to offer dollar stock options to highly skilled staff as an extra incentive to stay. The question of how to keep staff throws into relief the issue of the number of women software engineers. “There are very few women – less than 5 percent,” says Mr. Kar. “And virtually no women at a senior level.” A large part of the reason is the traditional route via a background in engineering, physics, or maths, which have tended to be unpopular subjects with women. But many companies are now trying to increase their numbers of female professionals, partly because they tend to be more stable and less likely to look abroad for a reason to leave the company. The companies may succeed in curbing the high rate of job mobility among Bangalore’s software engineers, but it looks like their upward mobility still has many miles in it.
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Supplier Profile: Microland - By Rohit Jaggi
Building on a solid network: Bangalore-based Microland is a rapidly expanding competitor in India’s high technology sector
Aggressive, forward-looking and market-responsive are descriptions that epitomise companies at the leading edge of information technology in India. They apply particularly aptly to Microland, a young Bangalore.
based company. Its mission is to “provide the highest value networking and communication services and solutions in the global market place”. According to Vinnie Mehta of the Manufacturers’ Association for Information Technology, “It’s a very young and aggressive company, with a young chairman.” The management team’s average age is 37, and that of employees just 27. As the country’s biggest independent networking specialist, Microland’s tally of 2000-plus clients has propelled it into the IT-sector’s top-20 by turnover for the first time this year. The eight-year-old company’s growth has not been driven by low pricing. “Normally we are at least 5 per cent more expensive than anyone else,” says Pradeep Kar, 39, its chairman and managing director.
“We chose to position ourselves as a premium provider. We lose many deals, we win the rest.” The company is also careful not to over-extend itself. “We don’t take on projects worth over Rs.100 mn,” Mr. Kar says. Turnover last year was Rs.5.7 bn, 39 per cent up on the previous year. That was down steeply on the previous year’s growth of 69 percent. But according to Mr. Kar, Microland is in no danger of failing to achieve its ambition of doubling or more the whole-industry turnover growth. Last year that figure was 13 percent. despite the slowing of growth last year, Mr. Kar insists that there has been no fall in the number of systems integration or turnkey projects. Microland was a pioneer in Indian networking, designing new systems and integrating existing ones. It supplies hardware, but only as part of networking package. What the company can now offer its clients, which range from financial services companies to large corporates and telecommunications giants and include Bank of America, Morgan Stanley, Hindustan Lever, and VSNL, is alliances with a wide range of global IT leaders. “We’re the only guys in the big league,” says the softly spoken Mr. Kar. In 1992 Microland was the first to introduce Compaq into India, and it also scored a first with Netscape. It now has some 30 alliances with partners including Sun, Intel, and Compaq on the hardware side, and Microsoft, Novell, and Unix in software.
It also aims for long-term relationships with its customers, and 60 percent of revenues come from existing clients. Most of the company’s customers are in the private sector. This leaves largely untapped the opportunities in the public sector, which is making swift strides from piles of paper to personal computers. According to Bangalore-based management consultant Sunil Chainani: “The PC explosion is going to take off. The cost is very favourable – there’s been a 30-40 percent drop in price in one year, and only 10 percent of that was because of a rationalisation in duties. “Almost everyone in every sector is beginning to use a PC – railway stations and schools as well as homes.” But Mr. Kar is happy with the company’s focus on the private sector and suspicious of the public sector because, he says, decisions take too long. Also, he says, “they buy just on price”, and he has encountered a lack of honesty. MicroUniv, the company’s training arm, focuses on “networking-centric applications”, Mr. Kar explains. It provides teaching at clients’ premises or at 14 of its own sites in six cities. “We’re a career-enhancement community,” says Mr. Kar. “But the main point of the training operation is to make money”. In India’s fast-changing environment, Mr. Kar’s aim of regenerating the company every two to three years makes sense. "Because we’re small and flexible, we’re able to implement change faster – we’re doing it before other companies,” he says. MicroWeb was set up two years ago as an Internet division, and it also focuses on the now-fashionable business of building corporate intranets.
The Internet has huge potential, Mr. Kar stresses, and a 30 per cent growth in Indian Internet connections last year backs this up. Liberalising reforms which will stimulate the market by opening up the field to independent Internet service providers, initially using the existing monopoly VSNL as a gateway but eventually with their own gateways, has been approved by cabinet. But parliamentary ratification has been held up partly by concerns that cheap and easily available access to the Internet would lead to a significant proportion of telephone voice traffic emigrating from conventional routes. Microland is hoping for a significant chunk of business offering the new internet service providers a range of services from design to build, operate, and transfer. As a measure of the potential, Mr. Kar reckons that there will be “In excess of 100 ISPs” within about two years. There is risk, too, in this direction. “Nobody knows how or when ISPs will take off,” says Mr. Chainani. “Many people are scared that they will turn out like private airlines.” The private internal air carriers generally failed to fulfil their early promise, partly because they ran into new regulatory restrictions. “No one is yet enthused,” he adds. “Everyone wants it -- no one knows when or how affordable it will be.”
Until Last year Mr. Kar was also CEO. He says the size of the company – 560-plus employees in nine cities – meant he “couldn’t do justice to the present or the future”. One idea he is mulling over is franchising, but for the moment Mr. Kar’s response is a qualified “not yet”. He says he must first resolve his own doubts about the size of the investment and the ability to maintain high quality standards. Microland is not among the leading software exporters such as Infosys and DFL Software. Across the industry, 60 per cent of the software exports are to the US. However, Microland already works with Sygma Soft in Singapore and Mitsubishi in Japan, among others. It is planning a determined assault on this prized market. “In the next five years 25 per cent of our business will come from exports,” says Mr. Kar. “To a large extent to the US.”
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Technical Training - By Mark Nicholson in New Delhi
Sharp focus on the future
Two companies, Aptech and NIIT, are India’s biggest IT trainers, equipping together up to 300,000 people a year.
Graduate students or working managers who have undergone IT training provided by NIIT and Aptech are often referred to, slightly cutely, as Niitians and Aptechites. Hundreds of thousands of them are snapping up information technology jobs every year in India. These alien-sounding creatures are also increasingly cropping up elsewhere in the world from South-east Asia and China to Europe and the US. In reality, there’s actually noting very Star Wars about them, save perhaps their sharp eyes on the future. As India’s two biggest private computer and software education companies, NIIT and Aptech account for about four-fifths of India’s blossoming IT training industry. Together they claim to equip up to 300,000 Indians a year (or Niitians and Aptechites, as these highly brand conscious companies like to tag their students) with tutoring and qualifications in anything from basic use of Windows 95 to leading edge multimedia skills. Both companies are already among India’s top 10 IT companies, according to the annual league table compiled by Dataquest, the industry magazine, and are climbing. Last year NIIT’s turnover rose 70 per cent to Rs.4.5 bn ($124m), roughly half directly from training, the remainder from sales of IT education and other software. Aptech, meanwhile saw sales rise 24 per cent to Rs.230m, virtually all from its panoply of IT training course.
Moreover, India’s market leaders in IT education are increasingly succeeding in selling their branded courses and training tools overseas. Both have operations in more than 20 countries. And between them they are fast creating for India a global niche as a provider of high-quality, low-cost private IT education. The driving force, however, is a booming Indian market for software and IT training, which is being pulled along by annual growth exceeding 50 per cent in the nation’s software industry overall. According to Dewang Mehta, executive director of the National Association of Software and Service Companies, the industry association, the success of these companies is also a measure of the degree to which software and IT have caught the imagination of educated Indian youth as a career path. “Once upon a time every Indian mother wanted her child to be a doctor or a lawyer,” he says. ‘Today they are all asking if their sons and daughters can be software engineers.”
The appeal is clear enough. A student earning a basic programming diploma from Aptech, says Pradeep Sharma, the company’s vice president, can expect to find a job paying at least Rs. 5,000 ($138) a month -- twice the entry level salary for India’s civil service. upper-end salaries for more highly qualified IT and software engineers are among India’s highest -- only the financial services industry pays better, according to Mr. Mehta. He points out that better qualified software professionals can expect starting salaries of Rs. 12,500 a month, rising on average to Rs. 83,000 with 10 years’ experience. These are large sums in India, where GDP per capita is just above $230. Small wonder there is scarcely a commercial district in any decent-sized Indian town which is not strung with cheap cloth banners advertising IT education. Many such adverts are for a thriving grey market of small-time operators offering little more than garage-like premises, a couple of computers and a tutor or two. Hence the energy both Aptech and NIIT apply to branding their own training courses and tools.
Each company offers the widest possible range of training, from basic understanding of Windows to more specialised diploma courses in IT communications technology or multimedia. Each offers predominantly parallel training, done while students are either at work or studying for other degrees. Courses range from short part-time studies to full four-year degree-equivalent qualifications. Neither, though, can directly offer an Indian degree, which remains formally the preserve of India’s public education system. Aptech, though, has begun offering a degree course under the auspice of the Open University of British Colombia, which will offer students a Canadian-recognised graduate qualification. Each company also offers Indian and multinational companies both courses for working executives and tailored IT course programmes. "Any company worth its salt in India is a customer of ours,” says Rajendra Pawar, NIIT’s founding managing director.
Where the companies differ is in their approach to branding their products. Aptech recently separated out its educational arm from its software division, which became Hexaware, a distinct sister software export and development company. Aptech also chooses to market each of its specialist courses under separate banners. Its flagship, accounting for 80 per cent of revenues, is Aptech Computer Education. This offers students a range of mass education courses at various levels in software engineering and systems management. Aptech then separately markets three other branded course programmes: Hard-core, a series of courses in networking and telecom; Asset, which covers training in Oracle Power-builder, C++ and other areas designed to meet the needs of India’s export industry; and Arena, a course in multimedia, graphics, and animation. NIIT, however, has evolved a more holistic approach to its brand. It places particular emphasis on what it sees as a creative symbiosis between its training and software departments. As such, says Mr. Pawar, the company is resisting the temptation to allow its faster-growing software arm to outstrip its educational department. The company’s software exports -- chiefly of educational software -- have risen to $50m in the past seven years. They now account for about half the company turnover. And there it will stay, proportionately, says Mr. Pawar. “The software market is very much bigger than the IT training industry,” he says. “So there’s a bigger market out there. But we have decided we’d rather keep building the company in an integrated way.”
Moreover, unlike Aptech, NIIT also sees itself as playing an innovative role in giving India’s nascent computer mania a wider push. It has established a series of Computer-dromes around India, which are well-equipped computer centres where students can take NIIT courses. It is also pioneering family clubs, where volunteers give over their home personal computers to neighborhood kids, supplying specially tailored NIIT CD-roms and other education aids. Earlier this year NIIT also sponsored a national TV computer education series carried by Doordashan, the state broadcaster, called Boot-IT. While part corporate altruism to raise computer consciousness among the established 280m Indians with televisions, it is also a strong NIIT branding exercise. “It makes it possible for millions of consumers to become aware of our product without having to spend anything. It’s the old marketing thing where you let people smell your perfume by putting it free inside a glossy magazine,” says Mr. Pawar. And next, the world. NIIT has wholly-owned subsidiaries in the US, Europe, Japan, Singapore, and other South-east Asian capitals. Aptech, too, is extending it global reach in Asia, Europe, and the US, where it recently opened an Aptech training centre in Princeton, New Jersey. “We can find a niche in these countries, no doubt,” says Aptech ’s Mr. Sharma. “We offer cheaper, but quality services in these markets. And as far as private computer education is concerned, India has a lot to offer. It’s one of the only places where computer education is so well organised and where the brands are so strong."
Here's a win-win development that's ripe for demogogic denunciation: Pharmaceutical companies are moving drug testing to India, where well-educated doctors are plentiful and costs are low. Moving tests to India promises to speed drug development while building yet another relatively high-value industry for the still-poor country. Atul Sathe reports for the Financial Express from Mumbai:
Pharma outsourcing to India has the potential to pick up due to several distinct factors. In US, the time to get the drug to market has increased from 7.5 years in 1970s to 12.5 years in 1990s. This is less by as much as 30-40% if done in India. Moreover, administrative costs incurred by pharma companies in India are 30-50% lower than those in the West.
AT Kearney Inc vice-president & managing director, Andrea Bierce attributes the attractiveness of India as an outsourcing destination to various aspects. "India has a huge pool of talented doctors. 20,000 new doctors graduate every year in India. There is also a distinct wage arbitrage in India. The regulatory requirements in this country are not as strict as those in US." said Ms Bierce. Lower R&D costs is another major advantage.
However, the regulatory issue is considered to be a little controversial. Pharma companies may find India attractive for activities like clinical trials because of the presence of many diseases. But the industry and the government need to work in tandem to balance the interests of the people and the outsourcing opportunities available.
GSK has one of the largest presence in India among all foreign companies. They have a five year arrangement with Ranbaxy for drug discovery and have a clinical research centre. The company has five manufacturing plants and is also into bio-informatics and DNA sequencing.
It is learnt that Astra Zeneca, which has a very focussed strategy on drug discovery on tuberculosis (TB), is likely to begin clinical trials on TB in India by 2006. Conversely, Indian biotech major, Biocon, which has a diabetics focus, is expected to get into a joint venture/partnership in the US in future.
Ms Bierce added that pharma outsourcing operations in India can be categorised into four types. There are independent service providers and pure-play IT companies. The latter include TCS and Infosys that have gone into bio-tech. There are Indian pharma companies and there are global pharma companies that have captive outsourcing operations here. From an estimated $20 million worth of pharma outsourcing at present, India has the potential to reach about $1.5 billion in 8-10 years.
Prime Minister Manmohan Singh on Tuesday painted a vivid picture of India and the United States joined together by the bonds of democracy and told members of the US Congress the two nations were “natural partners.”
In an address to the joint session of Congress, a privilege reserved for a few key US allies, Dr Singh reiterated India’s commitment to democratic values and practices. This, he said, “means there are many concerns and perceptions that we share with the United States.”
Dr Singh received a warm welcome at the US Capitol from lawmakers, including Senators Hillary Rodham Clinton, Edward M. Kennedy and Joseph Lieberman, and members of the Congressional Caucus on India and Indian Americans - Congressmen Joe Wilson, Frank Pallone, Jim McDermott and Joseph Crowley. Bobby Jindal, the only Indian American Congressman on Capitol Hill, was also present in the audience.
In a speech peppered 29 times by enthusiastic applause, Dr Singh noted that a shared commitment to democratic values and processes “has been a bond that has helped us transcend differences.”
As democracies, Dr Singh said, India and the US must work together to create a world in which democracies could flourish. “I believe we are at a juncture where we can embark on a partnership that can draw both on principle as well as pragmatism,” he said, adding that both countries must build on this opportunity.
Dr Singh, who dined with President George W. Bush and first lady Laura Bush at the White House on Monday night, said the objective on his visit was to lay the basis for transformed ties between the two countries. “I believe that we have made a very good beginning. With the support and understanding of the Congress, the full benefits of our partnership will be realised in the months and years to come.”
The Prime Minister raised India’s concern, one shared with the US, about the threat of terrorism. “Open societies like ours are today threatened more than ever before by the rise of terrorism,” he said. Saying India and the US had both suffered grievously from terrorism and must make common cause against it, Dr Singh added those who resort to terror “often clothe it in the garb of real or imaginary grievances.”
“We must categorically affirm that no grievance can justify resort to terror,” he said to thunderous applause, adding that both India and the US must work together in all forums to counter all forms of terrorism. “We cannot be selective in this area. We must fight terrorism wherever it exists, because terrorism anywhere threatens democracy everywhere.”
The Prime Minister wooed Corporate America in his speech and noted that 400 of the Fortune 500 companies were already in India. He said India needed massive foreign direct investment, especially in infrastructure, and hoped American companies would participate in the opportunities being created.
Dr Singh heaped praise on the Indian American diaspora and told US lawmakers their presence in high technology industries in the US makes India and the US natural partners. Many from the 1.8 million strong Indian American community packed the chamber’s galleries for Dr Singh’s historic address.
A day after India and the US finalised a joint agreement which includes cooperation in the sphere of civil nuclear energy, Dr Singh assured members of the Senate and House of Representatives that India’s track record in nuclear non-proliferation was “impeccable.”
“We have adhered scrupulously to every rule and canon in this area. We have done so even though we have witnessed unchecked nuclear proliferation in our own neighbourhood which has directly affected our security interests,” he said, adding, India, as a responsible nuclear power, “is fully conscious of the immense responsibilities that come with the possession of advanced technologies, both civilian and strategic.”
“We have never been, and will never be, a source of proliferation of sensitive technologies,” he said to sustained applause — enthusiasm that will perhaps belie naysayers’ claims that nuclear cooperation with India could have a serious fallout.
While the Bush administration has informed the Indian delegation that it does not favour a vote on UN Security Council expansion at this juncture, Dr Singh kept the issue alive on Capitol Hill, saying the Security Council must be restructured as part of the reform process.
“In this context, you would agree that the voice of the world’s largest democracy surely cannot be left unheard on the Security Council when the United Nations is being restructured,” he said to applause led by Republican Sen Norm Coleman, a tireless advocate of UN reform.
The architect of India’s economic policy told the Americans these changes had liberated Indian enterprise from government control and made the economy much more open to global flows of trade, capital and technology.
Dr Singh emphasised the need to make special efforts to bring US and Indian private sectors closer. Mr Bush and Dr Singh have set up a CEOs forum and attended the group’s first meeting on Monday.
After the speech, Florida Republican Congresswoman Ileana Ros-Lehtinen told The Tribune she welcomed Dr Singh’s address because “India is a pivotal ally of the US and because there are many areas where both our countries can work together for the betterment of all.”
The congresswoman, the co-chair of the India Caucus, said she looked forward to “working with him on the myriad of issues that are so important to our strong relations. India and the US both stand for freedom, liberty, justice and equality and that in itself is the foundation for a grand relationship.”
Congressman Bobby Jindal said he was “confident that his address, as well as his meeting with President Bush on Monday, represents a major step forward in the strengthening of Indian-American relations. I look forward to a continuing of that relationship.”
South Carolina Republican Congressman Joe Wilson said: “Prime Minister Manmohan Singh eloquently expressed today that the people of the United States and the people of India have much in common.”
“As the bonds of cooperation between America, the oldest democracy, and India, the largest democracy, grow stronger everyday, our relationship has never been better,” said Mr Wilson.
Indian IT and BPO companies have been indulging in acquisition talks that might bring huge revenues to the country. Not surprisingly, they are all set to acquire overseas companies with lucrative bids. To begin with, Indian dealers have chosen some companies that spend over $500 million. Experts believe that the valuations for companies abroad are attractive. They average less than 1.5 times the revenue multiples. There is no doubt that the acquisition helps acquire clients and domain expertise in selective areas.
Indian IT giant, Wipro Technologies has acquired four companies and is evaluating a few more. Recently, Bangalore-based Subex Systems made the biggest acquisition by buying UK-based Azure Solutions. Other companies that are eying overseas acquisition are BPO leaders Genpact and Transworks. The current trend suggests that Indian IT and BPO companies have realized the potential of overseas acquisition.
2006-08-20 07:43:16 · answer #1 · answered by neema s 5 · 0⤊ 0⤋
at that factor people who combat them have been primary as freedom warring parties and all of us have been united. Now we aren't any further freedom warring parties and divided into various events and extremely almost helping them.
2016-12-17 14:10:05 · answer #2 · answered by omparsad 4 · 0⤊ 0⤋
if u talking about the public limited firms.. then u shud go to www.bseindia.com for more info ..
as list of private companies is very vast..but stillu can find it about at www.mca.gov.in
2006-08-20 08:27:26 · answer #3 · answered by sanjubuddy 4 · 0⤊ 0⤋