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 Nuclear
device to kill 20 million!" screamed the USA Today headlines.
At first I put it away as sensationalist nonsense. I hoped anybody
with half a brain could see that this applied not just to India
and Pakistan, but to the US, China, Russia, Israel, UK as well.
USA Today neglected to mention that what we could do in the subcontinent,
the US could do a 100 times over.
As it turned out, not enough people seemed
to be in the 'half-a-brain' category. Everywhere I went in the US,
I was asked: "So how are things back home? Is your family safe?"
I did my bit for peace by insisting all was well.
I was dismissive of all this, till I came across
a Big Five consultant to US CTOs on outsourcing. "I was praised
last year when I suggested we outsource back-office functions to
India. And companies started doing that," he said. "But
now CEOs ask me if I think it's wise to put all our eggs in the
India basket-especially if the country can get nuked any moment."
He said he couldn't disagree, and was now forced to recommend a
hedged approach to it outsourcing. Of the pie that was earlier 100
per cent India's, now only perhaps two-thirds would come to us.
The rest would be shared between perhaps higher-cost, but lower-risk
places like Canada and Ireland. And some of it would go to China.
The mention of China set one of my friends
frothing at the mouth. This gentleman ran an IT services firm in
New York. He first railed about Infy's decision to work at $10 an
hour-down from the $80 or so it charged a year or two ago. "We're
now forced to fight for scraps of work," he was bemoaning.
He quoted an incident where he was offered
work at $8 or so. When he asked if he could at least get up to double-digit
levels, the American CTO showed him a proposal from Beijing. A no-name
Chinese firm, staffed with purported PhDs, offering to do Java work
at-hold your breath-50 cents an hour!
I did some back-of-the-envelope calculations,
and saw that worked out to Rs 5,000 monthly per man. That wouldn't
cover salaries of peons in Bangalore. For my pal, the writing was
on the wall. He was clear-he saw, at most, about three or four more
years in this business for us. He saw the probability of most Indian
it shops dying out by 2006 or 2007.
His explanation? Given that the Mayor of Beijing
had promised that every resident would speak English by the 2008
Olympics, our language advantage would have withered away by then.
"They're learning English in stadiums there," he groaned,
"by the tens of thousands."
Even the decline till 2006 is not likely to
be gradual or easy. Many firms have already seen a sudden fall-off.
It doesn't help if an ill-advised US ambassador puts out a travel
advisory against Americans visiting India right now.
My own read? The going will be tough for it
services firms. Especially the small ones. Many of those will fall
by the wayside, giving a temporary advantage to the big ones, who
will be shortlisted for more work by clients who want their outsourcers
to be around tomorrow.
But all isn't rosy for them either. The rates
that have gone down will not go up again. China will simply get
some work, any work, by pricing at ridiculous levels (who can resist
50 cents an hour?)-and will mass-produce and mass-deliver more scalably
than us.
We can delay-maybe even prevent this bleak
future. First thing is to get our political pr apparatus in order
abroad, and get spin working for us. Perhaps it wasn't that bad
an idea to consider Narayanamurthy for the President. If the future
of our it business depends on politics, who would you rather have
as our first citizen -a ex-CEO, or an ex-nuclear scientist?
Mahesh Murthy, an angel investor, heads
Passionfund. He earlier ran Channel V and, before that, helped launch
Yahoo! and Amazon at a Valley-based interactive marketing firm.
Reach him at Mahesh@passionfund.com.
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