Wednesday, March 28, 2007

People are not products

Ever so often, we hear of how China and other low cost centers will trounce India in services. I have argued over a few posts that this is not as easy as it is purported to be. One, we have a huge demographic advantage - of qualified engineers, so scaling up is an issue in other places more than it is in India. Coming to China, naysayers please note the scale of the companies in India. As per the latest Businessworld issue, Accenture in the next four months will have 35000 people, 5000 more than what they would have in the US. EDS has about 20, 000 people in India. Infosys, TCS, Wipro, Satyam have more than 70% people based out of India. For IBM, India is a huge center (nearly 50,000).

And even today, our services sector is focused on the top tier cities. If they go even to tier II cities like Coimbatore, Ahmedabad, Madurai, there is a lot of pool that can be tapped. Thats some distance we can cover in terms of the cost advantage - though there is more than just a cost advantage for our tech industry.

Unlike a manufacturing facility, getting the tacit knowledge out of people is not easy. It can be done, but there is a basic assumption there that our industry will sit twiddling its thumbs. Unlike Chinas manufacturing revolution and Indias faltering infrastructure, this revolution in India is driven purely by people and companies and private enterprise, which is why more than anything else, I believe there is long way to go before China is anywhere in the picture.

So, what am I trying to say? That there is a lot of steam in Indian industry before China can come anywhere close by. The sheer scale of operations in India (and the scale it can take in future) is better than the combined might of all non-China centers. That, the industry is dependent on private enterprise and not government laxity - so, this will entail stiff competition. Try creating a 50, 000 people enterprise overnight and it is not as easy as it seems. Also, note that already our companies are in China - the Satyams, Infosyses and TCS, so, it may so happen that we leverage Chinas cost advantage to our advantage too. This is one interesting game.

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