Only in India: Coders here are cheaper and better

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

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 stagnated.

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.

Nurturing Winners

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