|Only in India: Coders here are cheaper
For years now, India has
been the preferred destination for global outsourcing. It started
with legions of software engineers in India writing codes remotely,
but soon engulfed just about any work that could be done using
a computer and a telephone line. From telemarketing and technical
support to accounts and payroll processing to medical transcription
and telemedicine, everything gets done by BPOs and KPOs in India.
The fact that wages of skilled software engineers, and now graduates,
are a fraction of those in developed countries, has been a big
draw. But the global it multinational companies (MNCs) may have
underestimated the significance of India to their competitiveness
and, indeed, survival.
Take the case of IBM. Five years ago, it had just 8,000 employees
in the country. Today, that number stands at 53,000. Accenture,
another large global it company, had even fewer software engineers
in India, but today that number has jumped 17 times to 35,000.
A big reason why they have had to offshore is the competition
from Indian it companies, which have bid aggressively for outsourcing
contracts, forcing their global rivals to revisit their own cost
structures. As competition intensifies, the IBMs and Accentures
will have to move more and more jobs to low-cost destinations
such as India (actually, India, because few other emerging countries
can match India's supply of coders).
Already, global investors have their chips on Indian it companies
such as TCS, Infosys and Wipro. That might seem surprising, since
none of them has as yet the research and development (R&D)
skills of their global rivals. Few of them do high-end it work,
and definitely none of them has a truly global brand image. Yet,
the fact is they are far more profitable than IBM or Accenture-not
in absolute terms, but in terms of profit margins. As our cover
story (TCS' Next Big Leap, see page 70) points out, despite revenues
of $91.65 billion, hp had a net income of $6.19 billion-a profit
margin of less than 7 per cent. IBM, which has slipped to the
#2 slot by revenue, had slightly better margins at 10 per cent.
Compare that to the profits the Indian it majors are churning
out. At $4.3 billion, TCS ranks #11 by revenue, but is the fifth
most profitable it company in the world and the fourth most valuable.
Infosys and Wipro aren't too far behind. Infosys ranks 14th by
revenue, but #5 by market value, and Wipro's ranks are 12 and
7, respectively. The only way the IBMs and Accentures-there are
several other foreign players-can survive is by adopting the low-cost
structure of their Indian rivals. And that means, growing in India.
Date With Destiny
|But for infrastructure: The
future's full of promise
The number of rah-rah
reports about India and the Indian economy are growing by the
week. Not one passes without one or the other international consulting
firm or investment bank coming out with yet another study forecasting
the country's imminent ascension to the leading ranks of global
economic superpowers. The latest, brought out by McKinsey Global
Institute, a division of the eponymous global consulting firm,
is titled The Bird of Gold: The Rise of India's Consumer Market,
and predicts that India will become the world's fifth largest
consumer market by 2025, overtaking the likes of Germany and Italy
on the way (see Consumer India 2025, page 100).
This will, without doubt, make industry leaders, politicians
and decision-makers across the world sit up and take renewed notice
of the potential of this market. The report predicts that millions
of Indians will come out of grinding poverty over this period
and upgrade into more sustainable lives. Those who are already
in the latter category will also be in a position to increase
their share of discretionary spends. Result: consumption patterns
in India will change dramatically and begin to mirror those prevailing
in more developed economies.
So far, so good. But this study, and, indeed, all the similar
ones that preceded it (for example, the BRICS I and II reports)
also emphasise that this date with destiny is not necessarily
a given. There are millions of imponderables that can threaten,
and even derail, the journey. These caveats are important, but
have not received the serious attention they deserve. The most
important is the infrastructure deficit in the country. Our roads
are still in appalling condition, our ports are antiquated and
have capacities far below the required levels, our airports are
a joke, the power situation across the country is abysmal and
the bureaucracy (especially at the lower level) is still seen
as a class (in the Hegelian sense) of parasitic rent seekers.
Then, agriculture, which still supports 70 per cent of the population,
is way below global standards in output and efficiency and farm-to-industry
linkages are practically non-existent in almost every state.
There is also a very real danger that politicians still clinging
to antediluvian ideologies, bureaucrats fearing a loss of their
power, and a section of common people suspicious of change will
combine to block the painful but necessary reforms that are sine
qua non for the country to live up to and deliver on the potential
that undoubtedly exists.
Every single sector that has been reformed has benefited the
common man-telecom, aviation and the consumer loan-fuelled economic
boom bear testimony to that. Equally, every sector that the reforms
process has bypassed-example: agriculture and defence equipment-has
Let's not waste any more time over useless debates that stall
progress and hurt the common man. There's a job waiting to be
done. Let's just get on with it.
|Winning's a habit, mate: Nothing
else will do for Aussies
Is the current Australian
team the best ever to play the game? It's difficult to say; Don
Bradman's Australian side of the 1930s and Clive Lloyd's West
Indies team of the 1970s and 1980s can also lay claim to that
title and since one can't really compare teams of two different
eras, the answer to the question will depend on who you're talking
to. But there can't be any debate over another related question:
is this the most dominant team of all times? The answer will have
to be an emphatic yes. No other team in the history of the game
has dominated rivals in the manner Ricky Ponting's, and before
him, Steve Waugh's, men have.
But the point of this edit is not to extol the feats of this
great team. Four years ago, the consensus among cricket pundits
was that Team India came closest to the Aussies in talent, firepower
and grit and would soon challenge them for top spot in world cricket.
Four years later, those hopes have been cr