Can India Produce a Google?
New America Media, Q&A, Rafiq Dossani and Sandip Roy, Posted: Feb 26, 2008
Editor’s Note: With the largest youth population in the world, and a booming middle class, India is being heralded as a potential Superpower, especially when it comes to information technology. But, is India just going to be the "back office" to the world; booking its airline tickets, or will there be an Indian Google? Rafiq Dossani has had a ringside seat in watching India's economic transformation. He was once an editor with Business India Weekly, one of India's best-known business publications. He's now the executive director of South Asia Programs at Stanford University's Shorenstein Asia-Pacific Research Center. His latest book is "India Arriving-How this Economic Powerhouse is Redefining Global Business." Here are excerpts from an interview with him on UpFront.
What according to you has been at the core of the success India has had, especially in Information Technology (IT)? The Philippines and Israel and Ireland have had the advantage of English language as well, and you say China has better infrastructure.
When I started looking at this some years ago, about a decade ago, from my ringside seat at Stanford University, in the heart of Silicon Valley, it seemed hard to escape the conclusion that it was something to do with Silicon Valley and the Indians there. One had seen the effect that the Taiwanese in Silicon Valley had had on Taiwan. But as I started looking more closely at this, it became clear that, what we call in India, the "non-resident Indian" or the Diaspora, at that stage had a fairly marginal role. That was to change in later years, particularly the last three or four years. But in terms of seeding the industry, starting it off, that was driven by domestic enterprise - large firms that, under fairly adverse conditions but with good access to management talent, and professionals, were able to do this business.
How much of this business has been about research and development and how much has been the back office kind of work - fixing the world's Y2K problem, doing custom software? You write that India produces about 25 Ph.D.s in Computer Science, while the U.S. produces about 800 a year.
Yes, in fact the total number of Ph.D.s in all fields produced by all the Indian Institutes of Technology (IITs), is less than half than of one institution of America -- that's Univ. of California, Berkeley.
So can India produce its own Google?
If you ask me, "Will those who started the industry and have taken it to its present size - firms like TCS (Tata Consultancy Services), Infosys, Wipro, can they be the ones to do the kind of Google creative work?" The answer is no. In fact, Google was not created by a large firm, it was a startup.
Now, if you ask whether someone else might do that in India, and who that will be, well I have an answer that will probably surprise you. I think it will come not from Silicon Valley inspired startups, although several of those have been formed and are doing fairly innovative work, but catering mostly to the global markets. It will come when India's local market reaches a certain level of maturity, and it'll come from a small town. It won't come from Bangalore or Bombay, Delhi, or one of those cities.
Why do you think it will come from a small town?
What’s happened in India over the last decade has been this immense burst of entrepreneurial energy being unleashed. It's being unleashed at the local level. If you ask me about Bombay, I would say yes, there are local entrepreneurs, but really, Bombay, Delhi and so on are being driven by larger firms, which because of the advantages of scale and access to political connections, have grabbed most of the lucrative businesses. But small firms are starting to do well now in towns like Varanasi, Indore, and Lucknow. The largest city where you could say such work is going on would be Pune. What you're seeing there is that they are looking at local problems and saying, "Yes, we have a solution for this." So, they are right now developing products and services for the local market but the Indian local market is still fairly unsophisticated.
It's getting there. In certain areas such as airline, telephone, and cell phone services India is becoming quite sophisticated. Those would be the areas where you will start seeing a fairly sophisticated product and service.
I can give you one example. Indore is a small town by Indian standards, a very poor town, 2 million people, relies on soybean trading. You wouldn’t think Indore would be a bastion for software product development, but when I visited it, the first thing that struck me was when I spoke at a university, was how highly qualified the faculty was. And then speaking to students: how well trained they were. Even though their language was mostly Hindi and not English, they all used Google with complete fluency.
So, I asked, "Are there any software companies here?" and they said, "Are there any? There are fifty software companies that export services to the United States." So I visited a few.
One of those that struck me was a product software company that makes cell phone software. What they had developed was downloadable software which allowed you to play in the background your religious music, but also taught you the various movements for different kinds of prayers: gender specific, sect specific, just amazing, the range. I said, "Wow, you must be having a tremendous market in India." They said, "No -- really our market is overseas. We sell our cell phone software primarily in Southeast Asia, and the Middle East, because that's where the capability to pay is higher. Of course, we sell in India as well."
I asked him, "Why did you choose this?"
He said, with a twinkle in his eye, I think, "People often download free software in India, but with religious software, they're a little more careful."
One of the things that people hear about most here are the call centers. In your opinion, how much of an economic impact have they really had?
It's really very, very important, from one point of view and that is of providing starting employment. It's not a good long-term industry for India to have. It's unlikely that India, for the long-term, for various reasons will be able to compete in this field. But what happened is Indian entrepreneurship, or Indian enterprise, around the 1990-2000 timeframe, discovered an opportunity. There was this pool of young people who spoke good English coming out of schools and colleges. It's a tremendous tribute to enterprise. I visited this call center in 2001 with spanking new excellent equipment, everything was really spiffy. They had set this up in 80 days from groundbreaking to completion, a thousand seat call-center, about 100,000 square feet. That sort of speed would be unthinkable in almost any country, yet they do this in Delhi, so, that's enterprise for you. India is starting use the call center as an entry point for young people to enter the workplace. There's still a large enough pool that this is a large and growing business.
Though, obviously the paradoxical effect is, as conditions improve in India, the wages in the call centers are going to rise and so they will become less competitive.
They will certainly, and the big problem is that the pool of those who speak English, very good English, or good enough for the call center is not that large. Now, you don't need very good English to write software code. One of the things that struck me visiting the small town software companies is that the programmers don't speak good English at all. But to operate a call center and to answer questions in a proper way, you certainly need a higher standard of English than to write code. That pool is not very large. I estimate it's about 50 million people.
What did you find about the effect of the growth in the economy, especially in IT, in widening the rich/poor gap even more? You have a story in this book where you quote an official from the chip company AMD, who says they are paying about 15 percent more every year to retain the software engineers, but the company chauffeur’s salary has pretty much stuck at eighty dollars a month or something like that.
Yes, this is the problem of education in India. Out of every hundred eligible people of secondary school-going age, which in India is defined as grade 6 to 12, only about a third of them are actually going to school. By the time they graduate, or reach college going age only 9 out of every hundred actually go to college. So, what do they do? They work in the corner shop, they work as chauffeurs. For them there is really no hope, they are neither fit to enter the manufacturing sector, nor any kind of sophisticated service. There is this widening gap, which is threatening India's stability.
What about the non-resident Indian? The non-resident in the diaspora was initially regarded as part of the brain drain from India. How has their role in it changed?
Over the last four or five years, their importance has increased dramatically. They're now the carrier of intellectual capital. This is the way that the Indian IT sector is beginning to rise above its mundane level work of just doing programming or coding activities. Also, for firms like Yahoo!, Google and so on, which have large operations in India, the non-resident Indian is the carrier of the company’s culture or of Silicon Valley’s culture.
Should the United States be worried about the reverse brain drain of people going back to places like India?
The brain drain from India is coming to an end, I believe. In the mid-1980's about 60 percent of the IITs' undergrad populations came here for graduate studies, typically for a Ph.D. That incentive is now gone. You can now earn a good living, in fact it's so good now that people from Silicon Valley are going back and are willing to work for 30 percent less than what they would earn over here. Now whereas ten years back you had to pay someone a premium, even in a good city like Bangalore, you now can get a discount of almost that amount. So, the point is that, I think that wave, for the moment, of people coming here, is going to die down. Certainly the best and brightest, looking to do the most innovative work or to study in the most important universities: the Berkeley's, Stanford's and so on, will still come.
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