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India poised to shake up global tech status quo

Posted: 21 Feb 2008 ?? ?Print Version ?Bookmark and Share

Keywords:IT hub? India IT industry? software? technology research?

India is riding a new wave of globalization and prosperity as IT outsourcing, design and development markets push the country to take on a new role as a technology leader.

No longer an island of outsourcing, India is at the center of a growing number of regional business and IT technology partnerships with neighbors as diverse as Egypt, China, Pakistan and Dubai. All are poised to shake up the IT status quo in the West while bringing a new phase of tech-driven development to North Africa, the Middle East and the Gulf states.

With aspirations of repeating India's success in business process outsourcing, design and development, political, the region's business and academic leaders are seeking to align with, or replicate, India's models for IT business and technology development.

This new geo-technology axis is destined to have a profound impact on the global IT and technology sectors, and it marks a turning point in the industry's balance of power. This shift mirrors the decades-old exodus of electronics and computer manufacturing from the United States to Asia and China. It also comes as the U.S. IT sector is increasingly seen as a "mature" market that is on the verge of a recession.

India's emergence as a global IT leader will have profound significance for the electronics market as next-generation semiconductor and electronics system designincluding embedded systems designwill follow technology demand emerging from burgeoning domestic and regional economies.

India's evolution
This trend is foremost in the minds of the India Semiconductor Association, (ISA) which convenes its 2008 Vision Summit this week. ISA expects the Indian industry to evolve from design into a major electronics manufacturing hub before the end of the decade.

According to analysts at Prayag Consulting, the geography of innovation is changing, and, according to John Kao, an innovation consultant, all of the key advantages once enjoyed by the United States are disappearing. "While in the 20th century, leading-edge thinking emanated from the West, today the rise of Asia is evening that out." In its place, Prayag's consultants see a new technology innovation triumvirate emerging.

"We are seeing a whole new age of globalization today. With the explosion of technologies, knowledge pools and people are connected as never before and the rules of the game have changed irreversibly. The death of distance, a result of the wired world we now live in, has opened up possibilities for individuals, enterprises and nations. Three countries that are taking full advantage of this paradigm shift are Israel, China and India," the market researcher asserted in a research bulletin.

Following in the footsteps of India pioneers like Texas Instruments Inc. and Motorola Inc., multinational companies like Cisco Systems Inc. and IBM Corp. are launching operations in the country. IBM alone employs 76,000 workers in India, its second-largest employee base.

From its new headquarters in India, Cisco is developing the network architecture for an $8-billion high-tech "smart city" project in Saudi Arabia, part of a contract it signed in January. According to Cisco, there are as many as 12 "smart city" deals in the pipeline.

Virginia Rometty, senior VP of IBM's global business services, IBM has placed India at the apex of its global IT strategy. As businesses move to greater levels of global integration, IBM's India strategy increasingly relies on the ability to deliver the best ideas and capabilities from anywhere in the world, Rometty said in a keynote speech.

"We achieve this by building globally integrated centers of excellence and networking them together," Rometty added.

Global position
As this new global axis evolves, it is redefining India's position in the global IT design and development market. This trend could help propel India from a services-only model to an innovation, or intellectual property-driven business model.

"We do a great deal of asset development for our industry solutions in Bangalore, jointly with IBM colleagues from software and research," Rometty noted.

India's IT services industry accounts for over 5 percent of the national GDP. Aided by surge in IT exports, India's foreign exchange reserves have reached record levels. The growing reserves have helped accelerate financial sector reforms. For example, movement of financial capital in and out of the country has become easier. India's outgoing foreign direct investment grew by a whopping 280 percent to $11 billion in 2007.

India's IT industry employs more than 1.6 million workers, and indirectly employs an additional 6 million in related industries. It is estimated that IT employees' per-capita tax payments are six times the national average. Based on the direct and indirect multiplier effects of growth in the IT sector, it is estimated that as much as 25 percent of India's incremental, nominal GDP expansion through fiscal 2010 will come from this sector.

India is also feeling its own pressure resulting from the appreciation of the rupee and a growing crunch of available talent to serve new customersfactors that are all conducive to a new wave of regional technology partnerships. Among them is the Asian-Oceanian Computing Industry Organization, formed in 1984. Among its 20 members are Japan, South Korea, Taiwan and Vietnam.

India and its emerging network of regional partners are no longer focused solely on serving overseas customers. For the first time, India's domestic and regional markets are a new source of growth and development.

Hard-pressed to meet new local and offshore demand, Wipro Ltd is setting up its own offshore centers, including a new Atlanta operation. Infosys Technologies Ltd and Tata Consultancy Services Ltd and Satyam Computer Services Ltd already have development centers in Hungary, Romania, China and Canada.

Guan Rong Rong, secretary general of Beijing Software Imports and Exports Committee, acknowledged that while "China leads in hardware and infrastructure, India is the global leader in software." She noted that China's own software industry is seeking "equity partnerships" with India and hopes to form what she called "a hub of virtual collaborative networks," to serve the regional and global market.

The local government of Wuxi City, China, has made a massive investment in a new software park. "We are seeing the beginnings of cooperation and hope for great success with India," said city officials Weize Yang.

As IT outsourcing becomes more institutionalized in the United States, "it's only natural that companies will begin looking for a 'second source' and a back-up to spread the risk to two or three countries," said Yang.

Added an industry observer, "China has an army of programmers but they do not have project management experience."

The software cooperation is driven, in part, by China's language limitations. English-speaking India has a huge advantage over rival China. "India sees that it has about 10 years more in the language advantage over China," John Studzinski, senior managing director for The Blackstone Group, said in Mumbai last week. After that, observes predict, China will begin to close the language gap.

'Third wave'
Noting that the global IT industry could reach $100 billion over the next decade, observers note that Asian countries that have successfully moved up the electronics value chain will become suppliers of locally branded, global brands. This would mark a "third wave" of technology development.

To get there, India's IT sector will have to concentrate on delivering "complete solutions" to its business partners, not just business process services. They also will have to move beyond so-called "cost arbitrage" to "delivering strategic impact to their customers" while providing IP, said Sudhakar Ram, chairman and managing director of Mastek Ltd.

The focus is shifting to developing and differentiating products with IP in the form of methodologies, frameworks, tools and platforms. To do this, Ram said companies here will have to "build a cadre of domain experts in their target industries or develop strong partnerships with firms that can bring in that expertise."

Finally, domestic IT firms will have to "make a move away from an India-centric approach to a truly global approach," he added.

Last week, Nasscom, India's leading IT trade group, announced the findings of its Strategic Review 2008. It found that software and services exports are expected to reach $40 billion in 2008.

- Richard Wallace
EE Times

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