Crystal-gazers: (L to R) Vivek Gupta, Andrea Bierce and Arjun Sethi of AT Kearney

How do companies argue the business case for offshoring? What has offshoring done for company shareholders? How much of the offshoring pie does India command? Is the India price advantage slowly diminishing? What is the next big wave in offshoring? That may sound like a volley of unwieldly questions to most, but Andrea Bierce, VP and Managing Director, at Kearney, Arjun Sethi, Principal, at Kearney and Vivek Gupta, MD, at Kearney (India), who met up with BT during a recent offshoring summit in Mumbai, effortlessly belted out answers, which, on closer examination, throw up a distinct pattern to the offshoring business and its future.

"First lets get the statistics out of the way," starts Sethi. "India has 3-4 per cent of the outsourcing market globally and about 22 per cent of the overall offshoring business. India is expected to corner about 7-8 per cent of the overall outsourcing market by 2010." The outsourcing industry is currently worth about $360-540 billion (Rs 16,20,000 crore-Rs 24,30,000 crore) of which 25 per cent is offshored, says Sethi, quick to add that the last bit of data has been gleaned from various sources and is not an at Kearney number. As for the business case for outsourcing, Sethi again breaks down the numbers. "To begin with, it's a 30-50 per cent cost saving, but over and above that there is a 10-12 per cent productivity gain. Most often there are technology interventions as well."

Bierce buttresses the business case further with a live example. "Take the case of this healthcare company in Baltimore that had almost shut down and would have had to fire all its 2,500 employees when it discovered offshoring. It offshored 500 jobs and the benefits were enough to save the rest of the 2,000 jobs". What are the future trends in the offshoring space, what sectors will be part of the next wave? "The value of the outsourced pharma business to India could touch $1.5 billion (Rs 6,750 crore) in the next eight to 10 years. These would be in areas spanning drug discovery, bioinformatics, data sequencing, clinical trials, etc.," says Bierce.

"Auto is at an embryonic stage, but India has an advantage in engineering and design-based manufacturing. We are different from China in that we have a larger pool of engineering talent suited for design; also the components industry needs to be able to come to the table with unique design capabilities, but some companies are starting to address the problem through selective acquisitions of tier-two companies overseas," says Gupta, adding "India is about three to five years away from creating parts of a car platform entirely out of here."

-Priya Srinivasan

Get Rich, Quick
There's no lack of opportunities.

The total market capitalisation of the top 10 companies (by market value) on the Bombay Stock Exchange on November 12 was Rs 59,76,023.36 crore. Of this, Rs 8,70,121.7 crore, a staggering 15 per cent, is wealth that has been created in the past three years, courtesy public issues by hitherto unlisted companies such as Bharti Tele-Ventures, National Thermal Power Corporation and Tata Consultancy Services. Apart from indicating that the Indian stockmarket is getting deeper and more mature-something that bodes well for the country's economy as a whole-this also means investors have had enough opportunity, over the past few years, of getting richer. Indeed, look just beyond the top 10, and other such opportunities emerge: Biocon, GAIL and Patni (first two are in the top 50) are companies that listed recently on the stock exchange. Include new issues by already-listed companies-ones by ONGC and ICICI Bank are top of mind-and the conclusion is the simple fact that investors in the primary market have never had it so good.

-Roshni Jayakar

CURIOSITY
Look Ma, No Soap
What is it: Haier's detergent-free washing machine

What is it: Haier's detergent-free washing machine.

How does it work: Through electrolysis, raising the ph of water to the level it will be if detergent were added

Advantages: No soap suds, hence environment-friendly; lower power consumption since washing time is reduced

Price: Rs 35,000

Response: The company says the product, launched internationally in May, is going great guns.

-Priyanka Sangan

Q&A
"Companies Here Are Not Saddled With Legacy"

Thomas Kurian is Senior Vice President of Development for Oracle Corporation's middleware platform products. In India recently for the Oracle OpenWorld Technology conference in Mumbai, he spoke to Business Today's Priya Srinivasan on emerging trends in grid computing, service-oriented architecture and RFID (Radio Frequency IDentification) and specifically how the region is leading these technology trends.

In your presentation earlier in the conference you referred to Korean steel-maker Posco as one of the leading examples of adoption of grid computing-that's interesting, an Asian company leading a technology trend....

There are many companies in Asia that are at the cutting edge of technology adoption. What is unique about what Posco did was that it integrated its entire manufacturing process into a grid architecture using Linux. It is way ahead of the curve in technology usage, a sort of poster child for grid computing. Another example of cutting-edge technology adoption in the Asian region would be Shanda Technolgies in Shanghai, the world's largest online gaming company, which has built its entire system on grid computing.

How would you rate India as a technology user?

Economies like India and China are very keen on moving to e-business and e-governance and most companies here are not saddled with legacy systems. Some of the e-governance proposals we are seeing out of India are way ahead of proposals in developed markets. In areas like grid computing and RFID, we expect to see companies of all sizes adopt the technologies due to their various benefits.

Happy Diwali
For consumer durables companies, it was.

The monsoon was patchy, but it wasn't a full-blown drought. The economic engine of the country, which moved into overdrive sometime last year, is now in cruise-control mode, despite minor hiccups such as zooming inflation. Still, with popular sentiment, as measured by the BSE Sensex at its highest pre-Diwali level in the past six years, and consumer confidence, as measured by the BT-IRICS at a healthy 158, marketers do seem to have reason to cheer. Expectedly, companies selling all manner of consumer goods, from cars to two-wheelers to consumer electronics have seen a buoyant Diwali season (a growth of over 25 per cent) and look set to see the year out on a high note.

-Shailesh Dobhal

Bound By Duty
The proposal to reduce import tariffs to ASEAN levels is nothing new.

On November 9, when prime Minister Manmohan Singh, while addressing Indian and European CEPs at The Hague, announced that India would bring down average import tariffs to the levels they stand at in countries that are part of the Association of South East Asian Nations (ASEAN, a trade bloc of 10 countries that includes Malaysia, the Philippines and Cambodia), he wasn't making a revolutionary policy announcement. Instead, he was merely announcing something that each of the two previous governments had, in turn, announced.

When implemented-this is expected to happen by 2005-06-peak import duties will fall from the current 20 per cent to a band of 10-12 per cent, and it will mean Indian companies across sectors such as consumer durables, heavy machinery and auto components will have to cope with competition from companies in export-oriented markets such as Thailand, Malaysia and Singapore. For the government itself, it will mean a significant hit to its tax takings estimated by some analysts at Rs 3,000 crore.

Some tax experts reckon that reducing tariffs to ASEAN levels is not such a big deal. All the government has to do is bring down the average unweighted tariff to 15 per cent, something it can achieve by reducing the four highest rates of tariff in the country (150 per cent, 100 per cent, 85 per cent and 75 per cent) suitably to reduce the average by 12 percentage points from the current 27 per cent. It can leave tariffs on all other items unchanged, something that lends credence to the point of view that the ASEAN-level exercise does not involve serious reforms in the duty structure.

Indeed, there are hundreds of items in a single chapter of the standard customs tariff book, each with different basic rates, special rates and exemptions. An intelligent bureaucrat can use this effectively to render the whole ASEAN-rate thingamajig irrelevant.

In 1996, when this proposal was first aired, it meant a reduction in average import tariffs from the existing 100 per cent. Since then, India Inc. seems to have learnt how to thrive in the face of global competition. It is a rare company that today depends merely on tariff protection as a source of competitive advantage. Despite the strides India Inc. has made in competitiveness, it is unlikely that it will be left to fend for itself: the government, as indeed all governments across the world do, retains the flexibility to protect domestic companies should the need arise. This protection could take the form of what is called a 'sensitive item list', that will list sectors that need not be brought under the new tariff regime. Then, the government can always levy anti-dumping duties in case a deluge of cheaper imports threatens to overwhelm Indian players in a particular sector.

The reduction in import tariffs should also help India and India Inc. prepare for 2006, when the country hopes to signal its commitment to the World Trade Organisation by moving to a maximum-tariff of 10 per cent. And it should ease the country's admission into the broader asean+3 (10 ASEAN countries, China, South Korea and Japan) bloc, the eastern hemisphere's rival to the European Union and the North American Free Trade Agreement. This is imperative for a country seeking to increase its share of world trade from the currently anaemic 0.8 per cent to a not-so-bad 2 per cent by 2009, a target laid out in the New Foreign Trade Policy, 2004. The European Union, in particular, is becoming a difficult market to crack for Indian firms, and admission to the asean+3 bloc should help that cause.

-Ashish Gupta

All You Need To Know About WiMax
An FAQ on the hot new wireless broadband technology.

How is WiMax different from Wi-Fi?

It's the next generation of wireless broadband. It operates on the 802.16 standard and scores over Wi-Fi in two areas-speed and coverage. Wi-Fi has a range of 30 metres; WiMax can cover 50 km. Wi-Fi has a download speed of 2 megabytes (MB) per second; WiMax offers an impressive 75 MB per second. But expect Wi-Fi and WiMax to coexist.

How does WiMax help telcos?

It will allow service providers to beat the 'last-mile' trap, according to Jai Menon of Bharti Tele-Ventures. Telcos like Bharti, which is testing WiMax in Bangalore, will only have to add some (expensive) incremental hardware to existing base stations to provide WiMax.

Can it get better?

Yes, says Menon. Work is already underway to evaluate a newer standard, 802.20, which will allow for seamless broadband roaming from a laptop computer with literally no strings attached.

When can we expect to see WiMax deployed and how much will it cost?

Menon expects the rollout to take some time and initially target small and medium enterprises. At the moment, late 2005 seems to be a realistic target. As for cost, it's hard to put a number to the service. But expect the charges to be pretty steep initially. However, like everything else in electronics, it should get cheaper with time.

-Kushan Mitra