Saturday, April 21, 2007

Indian IT - not doing much? Think again

There has been a lot of discussion on how the IT industry should do more for India. There are some out of touch views and some sane views. It is nothing short of a miracle that we are talking about an industry today, which was almost not an industry. The IT industry would not have happened had it not been for the foresight of some of those who laid the foundation of what is today a billion dollar industry.

My comparison here stems from the supply of Indian "skilled" labour supply to the Middle East in parallel to the bodyshopper mode, which was the way the IT industry began.

The Gulf boom was a labour market. Companies would operate through recruiters in India - some good, many shady - and work in supplying people to the foreign companies. Here, the companies had no interest in their people succeeding and to a certain extent, the people also couldn't care less beyond the money. Result, engineers were sent as plumbers, drivers - the agent would get his cut on a per person basis if the person served his contract. Almost all assignments were on contract - nothing like being a permanent employee with strong legalities if someone broke the contract. Some came back, some stayed, but nobody could protest or do anything, since it was a choice that most of them made. At the lower end, this has resulted in exploitation - but thats a different story.

The so called IT industry in India started exactly the same way as the demand for labour in the Middle East. It was not even an industry when it began. Companies, fly by night agents, would hire people and send them out on lucrative assignments to the US, UK or even the Middle East. They would send out people, "trained" (usually for not more than a few days and the rest of it would be picked up by the person themselves. Many people were trained in no more than house or a second hand desktop. The luckier ones found themselves going through organized training shops like NIIT etc. If it continued in this way, it would have been another story of missed opportunities, like the Gulf boom.

Fortunately, some companies, notably TCS, Infosys saw a way to make this work. By creating a company organizing people, skills, training they were able to create a lucrative business model out of IT outsourcing. Even then, when they began, most of these companies worked on a staff augmentation mode. Over time, they realized, very smartly, that their margins on a per person basis is much lower than their margin on a per project or assignment. Using the time difference to our advantage, using people here, using onsite coordinators they created a skillset, a repository of skills of their employees which they used to bid for projects. Try talking to an Indian IT biggie for "staff augmentation" today and you will be shooed away by the security guard at the gate itself. They bid for projects and usually are not interested in tidbits unless they see an opportunity beyond that.

The Gulf boom, could have led to Indian companies becoming infrastructure giants, could have led to the creation of atleast one good infrastructure consulting company or an architecture firm or an engineering firm or an accounting firm or if not anything else, a good human resource placement bureau. Did it result in anything? It did not.

The IT industry, likewise, could have become your friendly neighbourhood recruiting agent, sending people out of the country to become coders. Yet it grew from nothing. From unfriendly laws, difficult regulations to become Indians defining norm, otherwise we would still be known only for elephants and (paper) tigers.

Those who talk of or question social contribution of the IT industry might do well to remember this - and this, without the multiplier effect of the industry in India and the economy. Where we are today is a matter of pride, reached overcoming a fair share of obstacles. And we all know the multiplier effect of the gulf boom in India - except for large houses for those who went there, we have precious little to show.

(Cross posted at The Indian Economy Blog)


ada-paavi!!!! said...

of course the IT industry has had some impact, no doubt.

the important question is the contribution via the multiplier effect equal to or more than the amount of subsidies it gets? it the multiplier is less as of now (when the industry is developed, and doesnt need to be spoonfed) it is time for a cut back in the subsidies.

infosys now looks more like a realestate company than an IT company.

Neelakantan said...

Whether Infosys is a real estate company is not is entirely upto the governments that offer them land. Companies are ever willing to pay for land. So, thats a government issue.

My point is, did we ever see the social effect of the 'gulf boom' - by all accounts it is negative.

The overall effect of the IT, BPO boom is positive. It is the direct employment, indirect employment and the multipliers that will result in upgradation of infrastructure, getting people out of poverty...perhaps I will write about this in detail!