<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Good news for techies: your salary will go up to American levels. Bad news for techies: your salary will go up to American levels<!--QuoteEnd--><!--QuoteEEnd-->
<b>Outsourcing Helps World Economy, Say Experts at Conference</b>
By THE ASSOCIATED PRESS
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Published: February 3, 2004
Filed at 8:21 p.m. ET
BOMBAY, India (AP) -- Outsourcing information technology-related jobs
to developing countries such as India will boost competitiveness and
slash costs, international software experts and government ministers
said Tuesday.
``We are not going to put up barriers to protect U.K. firms from
tough competition from India,'' British Energy Minister Stephen Timms
told some 900 delegates from India, Taiwan, Mauritius, the United
States, Canada and Britain participating in a global high-tech
conference.
``It's a great business opportunity for U.S. businesses because it
makes IT available for a wide swathe of U.S. companies,'' said Dan
Griswold, director of the Center for Trade Policy Studies at the
Washington-based Cato Institute.
More jobs in developing countries would build ``larger middle classes
and create a larger market for U.S. products in the future,''
Griswold said.
Participants in the three-day conference, which began Tuesday, will
discuss global economic growth from outsourcing, the impact of the
high-tech industry on the global economy and immigration trends to
developed countries.
``We know those Indian companies will benefit the U.K. economy and
strengthen it,'' Timms said.
He also said two Indian information-technology companies, Tata
Consultancy Services and Mastek, last week won a British government
contract to improve the IT infrastructure of the National Health
Service.
``A large part of the work on that contract will be outsourced to
India,'' Timms said.
The British government recognized that Indian industry could ``help
us in our task of improving and modernizing our public health
services,'' he said.
More than 450 Indian companies operate in Britain, which is India's
second-largest trading partner after the United States.
However, Indian software companies have been battling a backlash from
the United States and some other countries which fear India is
stealing jobs.
India is the leader among several countries which develop software
and handle back office work for foreign companies and government
agencies at a fraction of the cost in developed countries.
The trend, called offshore outsourcing, has resulted in thousands of
skilled jobs moving out of developed countries, including the United
States and Britain, to India, the Philippines and other Asian nations.
The U.S. Senate on Jan. 22 passed a bill that would prohibit
government contractors from shifting work overseas. Experts say the
bill, which awaits presidential approval, would have little impact
because less than 2 percent of India's US$10 billion annual software
export revenue comes from government-related projects.
The conference in Bombay is organized by the National Association of
Software and Service Companies, the Indian software and services
export industry.
<!--QuoteEnd--><!--QuoteEEnd-->
And here's the response sent by a good friend:
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Cringley's attempt to be what he is passionate about is just fine , and a wee bit amusing . Point by point , the defence :
1. India does have 50% of the worlds SEI CIMM operations, some add on PCMM and Sigma Sixes too, and Cringley would do well to contact Carnegie Mellon, Motorola etc who authored these ideas as to what they can actully do to a process. More bad news for him, the busiest phone lines in UK, the British Rail, 50% will ring in India soon . Got cousins , should ask them why here, and why not Ireland, Scotland, Philippines, Outer Mongolia or Iowa.
2. India is indeed a very poor county. A vast majority of us live below $2 per day and it really pains my heart as they are all over so unavoidable, and no faulting them . The match up with US is , GDP per capita $35,060 : $480 , a ratio of over 73: 1, needless to say who the winner has been and will still be for decades to come . And we know here that the credit for this misery goes more to our politicians than the West. US has generously provided about $3m in aid to India this year , a few hundred million to Pakistan and billions to Iraq , Afghanistan, Israel, Egypt . For years .Excluding Pakistan all have much higher living standards than India. The whole of Africa gets lesser than these most deserving aid-dope happy countries do. I think Bill gives more here than the US as a country as do many other charities.  I am not talking per capita official aid here at all , we all can divide a generous $3m or even a $ 300 m by a billion. We are definitely waiting to see the magic of miniscule fractions work for us work here.Seems like homeopathy to me . One would have to present arguments from Marx and Angels or read from the economic handbook of the Soviet State Mangers on "managed international trade the third decimal"  as he suggests be practiced with India types .Would the forum allow such extreme thought provoking arguments, just to give the right of rebuttal to some of us here . Simply put, and no ideology BS ,  India still runs a trade deficit with the world .And trade we think is about buying at the best price and not about balancing books with each supplier . Ask any corporation. The US investment money comes here on economic and not philanthropic considerations . India has received much less of US or world investments than China, though is just about one America less by way of population. Calculations say provides better ROI . The US indeed faces a problem with China.. The investment is creating a huge cheap export base money that threatens every other economy too , and money on money returns are awaited . This generosity  feeds the likes of Wal-Mart, and that I presume is the Big Bad Store is the subject of another blog here. My advise would be to not to do any thing stupid to anger the Chinese as they having taken in billions in investment do take in $250 billion in imports as well. Knowing US has no way with them , are very likely to talk back if lectured on socialism and protectionism. Believe in 2 Tits for a Tat diplomacy . Can and will hurt US investments on their soil. We ( Indians) do manage a slight trade surplus with them, but is a very recent development . As the article seems to be mostly in the "emotionally logical" genere, Mr. Cringley calmly forgets that the tech Indian worker in US come from a poor country where the education is highly subsidized at the cost of essential social services.They then leave to study further,  work, spend, pay taxes and social security most of them in US. And as most don't stay the required years the social security is not refunded, but pays for the dentures of some aging American. As some of the present hullabaloo we are told is said to be election year rhetoric, Will it be appropriate to say, as we Indians in the US are not a vote bank large enough, like the illegal Mexicans for Mr. Bush, we need not be given easier terms for work permits even where there is a desperate need , much less treated as citizenry as haven't crawled under the fences .We shall as we do continue to compete with all others for the declining but still available work visas. I am not getting into the ridiculous idea of demanding a compensation for the subsidies we $480 earners left behind here have paid to educate them and are deprived of their productive output,  as the system here has failed to keep them interested and properly utilized , if they were to stay, as a majority of us still do. Or for that matter ask for a refund from the US of the unused social security, or mention the fees the US universities earn from some of them,  Indians now being the biggest foreign student group some universities do need them to keep going . Gets too messy and is a difficult a computation as well , may even be considered a ridiculous divisionary track by an emotional, and passionate person, which I admit I am about the rights of an individual over political and nationalistic whims.
3. Mckinsey's analytical methods too have at times proven inadequate at times , but it amazes me why today US needs nurses, teachers, even PhDs specially in the mathematical and technological disciplines and Americans don't apply ? Is it that the work is a wee bit harder or the ROI on advanced education lesser ? It also amazes me that America has no cheap household help, eat out of tins or do take always. Come home to the cleaning and washing after a hard days work , and the weekend is meant for the bushy grass . I sure earn less than a fifth of what I would earn in US . But in less than $100 per month a few household workers keep my life easy. They clean, cook, wash , make bed, iron, run small errands, call the plumber, electrician, water the plants . Surely there are no Americans wanting these jobs in US either, like the nurses and PhDs , and if you had them available at market driven rates , you would have a life as good as mine. Iwould further , I don't employ child labor, pay strictly market rates , and to me is like a monthly outsourcing contract of house jobs so that I can do more of what like . I am as they say in China , am a "Capitalist Pig" looking for a better "QOL" .
4. I am no futurologist, but do remember reading some where that some time back that the knowalls thought a few computers would suffice for the whole world. The "differentiator" argument is interesting but competition and ingenuity are always at work, so one can never be sure to have found one. Have yet to hear of a lasting man made differentiator. When Mr. Cringely or any one else discovers it, or discovers a way to discover it, no need to tootle the horn and administer a lecture to the merciless economic forces of globalization or the poor attempting to get out of their misery thru plain old hard and smart work , just patent, trademark , register it, use it . The proven pudding thingy.
My own suggestion would be lets see if we can use the possibility to our mutual advantage . Let's exchange our young , educated, entrepreneurial for your rusty and the nasty. We may be able to build cheaper prisons here, and a $1000 dollars a month will keep the old Pa & Granny in a villa in the salubrious heavenly Goa or a lush Kerala. Really healthy well cared for and best of all no guilt . Doctors are cheap and world class , medicines are cheaper and USFA aproved , nurses are a plenty, household help limitless, only there are no takers. Yet.
outsource them
<!--emo&:roll--><img src='style_emoticons/<#EMO_DIR#>/ROTFL.gif' border='0' style='vertical-align:middle' alt='ROTFL.gif' /><!--endemo--> <!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Let's exchange our young , educated, entrepreneurial for your rusty and the nasty. We may be able to build cheaper prisons here, and a $1000 dollars a month will keep the old Pa & Granny in a villa in the salubrious heavenly Goa or a lush Kerala. Really healthy well cared for and best of all no guilt . Doctors are cheap and world class , medicines are cheaper and USFA aproved , nurses are a plenty, household help limitless, only there are no takers. Yet.
<!--QuoteEnd--><!--QuoteEEnd--> <!--emo&:roll--><img src='style_emoticons/<#EMO_DIR#>/ROTFL.gif' border='0' style='vertical-align:middle' alt='ROTFL.gif' /><!--endemo-->
Guess who wants a byte of Indiaâs supercomputer?
Devraj Dasgupta
Pune, February 10: IT seems to be a barter of sorts. Soon after New Delhi clinched the Gorshkov deal with Moscow, the Russians want to buy Indiaâs next generation supercomputer, Param Padma, for fundamental and applied research. <!--emo&:ind--><img src='style_emoticons/<#EMO_DIR#>/india.gif' border='0' style='vertical-align:middle' alt='india.gif' /><!--endemo-->
<!--QuoteBegin-rajesh_g+Feb 10 2004, 10:48 PM-->QUOTE(rajesh_g @ Feb 10 2004, 10:48 PM)<!--QuoteEBegin--> Pune, February 10: IT seems to be a barter of sorts. Soon after New Delhi clinched the Gorshkov deal with Moscow, the Russians want to buy Indiaâs next generation supercomputer, <b>Param Padma</b>, for fundamental and applied research. <!--emo&:ind--><img src='style_emoticons/<#EMO_DIR#>/india.gif' border='0' style='vertical-align:middle' alt='india.gif' /><!--endemo--> <!--QuoteEnd--><!--QuoteEEnd-->
I would have named it <b>Padma Laxmi!</b> <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->
LONDON - News and financial-data giant Reuters Group PLC on Monday said it will provide basic news coverage of some U.S. companies from a bureau to be established in Bangalore, India.
<b>It will hire six journalists for the bureau</b>, the company said. They will monitor announcements from 3,000 small and medium-sized U.S. companies.
The reporting roles in Bangalore are new positions and <b>won't replace reporters elsewhere in the world</b>, the company said.
Under a plan announced a year ago, Reuters aims to cut costs by about $800 million by 2005. It is slashing its payroll by 3,000, bringing the work force down to 13,000.
<b>In a phenomenon known as offshoring, U.S. corporations are moving white-collar jobs to India and other Asian countries where labor is cheap.</b> Most of the jobs have been in information technology, but several Wall Street banks announced last year that they were hiring financial analysts in India
From space to education is quite a leap. But Dr U R Rao, the high profile former chairman of the Indian Space Research Organisation, has made the transition without any trouble. His report on technical education in India, submitted to the All India Council for Technical Education, has become the touchstone for government policy decisions on related issues.
Most recently, Human Resource Development Minister Dr Murli Manohar Joshi announced a 30 percent slash in the annual fees at the Indian Institutes of Management, again drawing inspiration from a recommendation of the Rao report.
rediff.com Special Contributing Correspondent M D Riti met Dr Rao at his office in Antariksh Bhavan, headquarters of the Department of Space in Bangalore, to discuss his controversial report.
The recommendations of your report have been generating a lot of interest.
You must mean the fee slash at the IIMs. That was an offshoot of just one of the recommendations I made, and that too one of the lowest priority recommendations! The report really said so much more.
This report was written by a committee constituted by the ministry of human resources and development to examine the functioning of the AICTE. Its aim was to ensure the maintenance of high curriculum standards in technical education.
Since it is the fee slash in technical education institutes, starting with the IIMs, that is now generating so much interest, perhaps you could discuss that first.
Fees are really that last issue we took up! Private self-financing institutions are charging a lot of money. For example, in Chennai, the fee paid by a student was much as Rs 30 lakhs for medical seats!
The directors of various medical institutions, they even offer something called a package deal. That is, you pay upfront one crore, and in seven years you get a guaranteed MD or MS degree. What kind of nonsense is this! I mean, who can afford this kind of money, unless you have black money?
Nowhere in the world is the total thrust of education borne by the student. Not even in the US. The students barely pay one third of the cost. Of course, those institutes have large corpus funds. We do not have that.
Should not the fees charged by technical colleges have some correlation to the earning power of people? If you see even if people pay $30,000, which hardly anyone pays in the US -- they pay more in the region of $11,000 -- even if they pay $30,000, that is the added per capita income of an American. The average per capita income of an Indian is just $450, that is, about Rs 18,000. How do you expect our people to pay $30,000?
Let us acknowledge that when a person gets educated, its not only he or she that benefits. The entire society around benefits, so does the industry. So it is only right that the costs must also be benefited three ways. I had a large number of discussions with industrialists. The final thing is that one third is all that a student should pay. If you take one third of the Indian per capita income, it is just Rs 6,000. If you take the PPP, that is, the per capita purchase parity, then it should be three times that amount.
We have also given a scheme of how the fee can be divided into three and shared amongst all the beneficiaries. The people who get employed, you should put a cess of them to be cut at the source itself. There should be a matching grant from the employer and from the university. All this should be put into a separate escrow account. This procedure should be totally transparent, the details should be worked out to ensure that there are no scams.
Essentially, it is immoral to charge the total amount. We should not deprive the deserving poor. It cannot, of course, be uniform, because in the IITs, the cost of education per student is around Rs 2 lakhs. In most of the other institutes, it is only around Rs 50,000 to Rs 60,000.
Many of the institutes are not spending even a third of that amount. They are employing Graduates who have just passed out, paying them Rs 5,000 and making them teach. I said all this must stop. We must insist they pay the right type of salaries, get PhDs etc, and make industry and society at large share the cost of technical education.
So have you said the IITs and IIMs should also only charge Rs 6,000 as fees?
No, obviously, the IIMs and IITs will be much higher than the NIITs, and the NIITs in turn will charge much more than the rest of the engineering colleges. Today, private colleges are charging, on paper alone, Rs 50,000, without any proper infrastructure.
There are hundreds of other hidden costs, like Rs 4,000 for hostel facilities, Rs 1,000 for using the bus between the hostel and classes. Then, they charge building fund. All these numerous ways of extracting money must be stopped.
Finally, we have said that for India to be able to compete in the global market, industry must be forced to participate in the cost of technical education. If we produce students of the IIT and IIM quality, we have the window of opportunity open.
Speaking of global comparisons, why is that engineers educated in India have far less communication skills than those educated in the US or some other foreign countries? This really handicaps them as the ability to communicate is essential in all disciplines today.
Partly because of their lack of exposure, partly because they have not worked with their hands. Also, we have somehow made them depend on the job market, not on themselves. They are job seekers, not job creators. This has to change. That will happen with better interaction with industries.
We had some schemes to help entrepreneurs, but unfortunately we don't have enough. Countries like China have technology business incubators. Germany has about 6,000 of them, China has 4,000. Beijing University alone has about 500 connected with it.
I am not talking about the technology parks, that I feel are more like five star hotels. You have an expensive place that is well lit, power, and nothing else. Entrepreneurs cannot even pay these rents. Technology business entrepreneurs are organized businesswise.
Can you please sum up your other key recommendations for us?
Certainly. The ambit of this report included all engineering disciplines, architecture and town planning, the applied arts, hotel management, business management and pharmacy. How should AICTE be restructured to face the global challenges? The education system must now equip students to compete in the global market, you see.
Our committee had a large number of stake holders including representatives of a large number of private and government institutions, secretaries of government departments, directors of the IITs and IIMs, the UGC and so on. The first thing the committee did was address the mushroom growth of technical education institutions, especially in the last four years.
For example, two decades ago, there were less than 300 engineering institutions in the country, now there are something like 1,200 of them. The last few years have seen a similar spurt in MBA institutes to about 900, with an intake of about 60,000 students. There are only six IITs, but 1,200 other institutes, and only a few IIMs but so many other MBA colleges.
AICTE has a regulation that the teacher-student ratio must be 1:15, and there must be a complement of 1:2:4 or professors to associate professors and lecturers. However, because of this tremendous growth in institutions, propelled partly by a highly speculative demand by students and parents, who hope that they will land good jobs. There is a great amount of push by political entities and others in creating more self-financing institutions.
All this has led to a tremendous lowering of the standards of technical education in the country. Of the 1,200 engineering institutions, for example, almost 970 are self-financing. The Supreme Court judgment has said that they should not commercialise education, but could charge whatever amount they consider necessary. The definition of commercialization is very vague. Where do you stop?
For example, it might be quite right to say that an institution developing its own infrastructure is development indeed. But when an institution says it wants to grow another institution, is that commercialization or development? Eventually, students are made to pay an enormous amount of money under different headings. This is especially true of colleges offerings MBAs, medical and engineering degrees.
The first thing we looked at was the number of faculty required. The faculty requirement is so large and the infrastructure need is so huge that if we go strictly by the norms, we need today something like 30,000 professors to meet the needs of the engineering institutions. The country only produces about 375 PhDs a year. In disciplines like management, pharmacy, hotel management and pharmacy, it is negligible.
All these institutions, especially the government ones, have faculty that is underqualified, for this reason. They often hire Graduates who have just passed out as faculty, whereas the minimum requirement is really an MTech or a master's degree. Likewise, there is a scarcity of at least 25,000 master's degree holders.
Obviously, the quality of Graduates comes down. So, while we produce a large number of technical people, their quality is extremely poor. This is a very disturbing factor.
So, one our first recommendations was on how to control the number of institutions. This is hard because of the geographic inequity. If you look at the four southern states and Maharashtra, they have a concentration of 60 to 70 per cent of the country's institutions.
Kerala has about 77 engineering colleges as against Bihar, which barely has about 7! When you go to the North East and Orissa too, there is a severe paucity of such colleges. While it is true that students from there come here to study, it does not help the economic growth of those regions. People need to grow there and go back there for work, but if there is a lack of industries and infrastructure to absorb them, that is not going to happen.
Secondly, if you take the whole economic growth rate of the country, which is about 6% -- even if you take it as 8% -- the growth rate of engineers is 15 to 20%. The economic growth rate simply cannot support this high turnout of engineers. There is 15% to 20% unemployment in some disciplines, and much more underemployment. This is dangerous.
So, we said we must control intake more rigorously. Those institutions who do not have enough faculty or infrastructure must be ruthlessly stopped.
Then, there is the issue of accreditation. Every institution can seek accreditation to the AICTE two years after its first batch has passed out. Now, although accreditation has been mandatory, less than 5% of the institutions have been accredited! Unfortunately, there is no upper limit on how long an institution can wait to seek accreditation. There are institutions that are more than 25 years old that do not enjoy accreditation!
So, we have suggested that every institution must seek accreditation as soon as possible. Those that fall marginally short of the requirements of accreditation maybe given a grace period to overcome their problems. Those that fail to do so, and those that simply do not come anywhere near the quality required, we must reduce their intake as a first step, and then take more drastic action after that.
Even accredited institutions must seek re-accreditation every five years. The same holds good for the deemed universities. There are now many universities who somehow get deemed status, and then they stay deemed forever. I told the AICTE that I wanted to call them doomed universities in my report, only, I thought they would simply think I was making a spelling mistake.
When 3.5 lakh engineers are turned out every year, do we realize that in four years' time, we would have increased our population of engineers by 15 lakhs? What will we do with them?
We have made concrete suggestions to help the faculty paucity situation, such as utilizing qualified retired people, and having adjunct professorships.
A major problem is that there is virtually no interaction between technical education institutions and industry. In fact, we have said in our report that institutions and industry have become like two different castes. Unless we break this caste structure, we will never have the right kind of education system.
Unfortunately, except for a few industries like steel or automobile, we continue to depend upon imported know-how. Any imported know-how is at least a generation old, and we can never compete in the global market using it. The only alternative, then, is indigenisation. That's why it is in the interest of industry also to have a close association with institutes.
Do you think industry-institute interaction is better at least in premier institutes like the IITs and IIMs?
No, the interaction of even the IIMs and IITs is nowhere near what it should be. This interaction must be forced upon both sides. Industries must be mandated to spend a part of their money, whether gross profit or net profit, in supporting research. Otherwise, there is no way they will come together.
Unfortunately, institutions too have not made an adequate effort in this direction. Instead of calling people for the occasional lecture, why don't they appoint industry stalwarts as adjunct professors, ask them to give curriculum based lectures.
We have looked at other schemes like early induction schemes for staff, giving scholarships to poor students who execute a bond saying that after their studies, they will serve as teachers.
However, all this will take a long time to implement. An earlier report on the subject said that instead of 375 we should turn out 750 PhDs in a year. When I have 30,000 as the gap, when will we ever clear the shortfall?
Then again, there are a large number of PhDs in the US who are willing to come back if you guarantee them jobs. A few months ago when I was giving a talk in Houston, I told the NRI community there that there were plenty of good teaching jobs going abegging here. They promptly said, look, you say we must go through an interview, and for that we will have to fly all the way to India, with no certainty of a job at the end of the road. Even if you do offer us jobs after the interviews, then, you offer contracts for one year at a time. None of us is willing to take risks as large as that. Lets face it, Indians are not capable of taking that kind of risk.
In ISRO and IISc, we give jobs without interviews. They have just started this system at the IITs. Others do not even try these new systems. So, our committee has proposed a distance education scheme instead.
We suggest that the AICTE pay decent honorariums to some of the best engineering brains in the country, ask them to prepare 15 or 20 lectures on subjects that are clearly a part of the engineering syllabus, record these lectures on a disc and then broadcast them to the whole country.
AICTE will spend barely Rs 20 crores a year in preparing the lectures, hiring transponders, preparing the disc and then broadcasting it. Each institution can pay a royalty of Rs 2 lakhs for this. Every two years, change the lectures and the professors who have given them. Every institution has a couple of hours a day at least where teachers sit with students in classrooms and hear these lectures. Every institution has VSATs to make this possible. For this, they charge students about Rs 1,000 a year, and make up their money.
The committee has also looked at all possible ways to improve engineering college faculty. Everyone says teaching is a poorly paid profession, yet, some of the best brains in the world are teachers, simply because they feel that it is such a prideful thing to be. They come for the freedom the profession provides them, the opportunities for research and the interaction they can enjoy with the younger generation.
It is hard to provide these facilities everywhere. So we should have centralised research facilities provided by the AICTE in centralized places. Now they are spending about Rs 15 crores a year on preventing obsolescence and modernization of equipment. But that is not enough. These centers could also be used by industries, and thereby we could generate enough money to run these places.
Indian IT industry posted a 21 per cent increase in revenue in the year 2003 at $16.4 billion constituting three per cent of the country's GDP, according to IT consultant Skoch.
Software exports posted a 30 per cent growth during the year to touch $10.4 billion, it said.
The BPO services during the year posted a huge 71 per cent increase.
The expected upsurge in software exports has happened despite stiff trade barriers existing in the traditional US market, Skoch CEO Samir Kochar said while releasing the annual IT industry review.
<b>Investors unimpressed by Indian tech recovery </b>
Reuters
Mumbai/Bangalore, February 18
<b>India's software sector is reversing a two-year slowdown on robust demand for outsourcing and steadier prices, but investors are not buying the recovery story yet and are looking instead at growth stocks elsewhere</b>.
Despite pressure on margins, software exporters have raised profit forecasts as clients loosen purse strings in a revived global economy. But fund managers want to see signs of sustained growth before stepping up exposure to the once-fancied sector.
"We need some major announcements such as big contract wins or acquisitions to fire up the imagination in the tech sector," said Ashim Syal, chief investment officer at ING Vysya Mutual Fund, which has about $39 million invested in Indian equities.
Bombay's infotech index rose only 23 per cent in 2003 compared to a 73 per cent rally in the 30-share blue chip index, which made India Asia's second-best performing stock market after Thailand's, powered by a booming economy.
"The stock market seems like a classic beauty contest and I am forced to pick only the best (sectors)," said Syal, who has cut exposure to software to 10 per cent of his portfolio, from between 25 and 30 per cent six months ago.
Indian software firms are on a hiring spree, emerging as one-stop shops that combine software with back-office services such as payroll processing for giants such as US telecoms equipment maker Cisco Systems Inc
But their profit margins have been hit as clients clamour for discounts in a fiercely competitive market and wages rise due to aggressive hiring by recent foreign entrants like Accenture Ltd.
MARGINS SEEN FALLING
Analysts expect average net profit margins at the top three listed software firms -- Infosys Technologies Ltd, Wipro and Satyam Computer Ltd -- to fall to about 22 per cent this fiscal year from about 28 per cent two years ago.
"New entrants are building offshore capacities. Bargaining power is shifting to the employees, while pricing power remains subdued," ABN Amro said in a report, while cutting its rating on the software sector to "underweight" from "neutral".
Margins for Indian exporters have also been clipped by a rising rupee, which appreciated by 5.2 per cent against the dollar last year and a further 0.8 per cent so far this year.
Fund managers expect software shares to catch up after their under-performance, but they say its time to cherry-pick in a sector poised to report $12 billion in annual exports by March 2004.
"Valuations are fair now and any decline will give us an opportunity to increase exposure to the sector," said Paras Adenwala, chief of equity funds at Birla Sun Life Asset Management, which manages Rs 90 billion ($2 billion).
According to analysts, Wipro trades at about 30 times 2004-05 estimated earnings while Infosys is at 23 times. The main Mumbai index is trading at around 16-18 times.
As India's domestic economy races ahead, money managers are mainly bullish on automobile, commodity and media stocks, while few are picking software firms.
Meanwhile, the industry is increasingly confident about the future. Infosys has raised its profit growth forecast to nearly 31 per cent for the year ended March from 25 per cent previously, while Wipro forecast sustained growth after making a record quarterly profit, aided by a rebound in its telecoms unit.
"With many customers looking to seal strategic relationships with Indian software firms, contract sizes for the industry are getting bigger and tenures are becoming longer," Satyam Computer's chief financial officer V Srinivas told Reuters.
We grew up with the hippies in the 1960's. Thanks to the high-tech revolution, many of us became yuppies in the 1980's. And now, fasten your seat belt, because you may soon lose your job to a "zippie" in the 2000's.
"The Zippies Are Here," declared the Indian weekly magazine Outlook. Zippies are this huge cohort of Indian youth who are the first to come of age since India shifted away from socialism and dived headfirst into global trade, the information revolution and turning itself into the world's service center. Outlook calls India's zippies "Liberalization's Children," and defines one as "a young city or suburban resident, between 15 and 25 years of age, with a zip in the stride. Belongs to generation Z. Can be male or female, studying or working. Oozes attitude, ambition and aspiration. Cool, confident and creative. Seeks challenges, loves risks and shuns fears." Indian zippies carry no guilt about making money or spending it. They are, says one Indian analyst quoted by Outlook, destination driven, not destiny driven; outward, not inward, looking; upwardly mobile, not stuck-in-my-station-in-life.
With 54 percent of India under the age of 25 â that's 555 million people â six out of 10 Indian households have at least one zippie, Outlook says. And a growing slice of them (most Indians are still poor village-dwellers) will be able to do your white-collar job as well as you for a fraction of the pay. Indian zippies are one reason outsourcing is becoming the hot issue in this year's U.S. presidential campaign.
<b>I just arrived here in Bangalore, India's Silicon Valley, to meet the zippies on the receiving end of U.S. jobs. Judging from the construction going on every block here, the multiple applicants for every new tech job, the crowded pub scene and the families of four you see zipping around on a single motor scooter, Bangalore is one hot town.</b> <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->
Taking all this in, two things strike me about this outsourcing issue: One, economists are surely right: the biggest factor eliminating old jobs and churning new ones is technological change â the phone mail system that eliminated your secretary. As for the zippies who soak up certain U.S. or European jobs, they will become consumers, the global pie will grow, and ultimately we will all be better off. As long as America maintains its ability to do cutting-edge innovation, the long run should be fine. Saving money by outsourcing basic jobs to zippies, so we can invest in more high-end innovation, makes sense.
But here's what I also feel: this particular short run could be a real bear â and politically explosive. The potential speed and scale of this outsourcing phenomenon make its potential impact enormous and unpredictable. As we enter a world where the price of digitizing information â converting it into little packets of ones and zeros and then transmitting it over high-speed data networks â falls to near zero, it means the vaunted "death of distance" is really here. And that means that many jobs you can now do from your house â whether data processing, reading an X-ray, or basic accounting or lawyering â can now also be done from a zippie's house in India or China.
And as education levels in these overseas homes rise to U.S. levels, the barriers to shipping white-collar jobs abroad fall and the incentives rise. At a minimum, some very educated Americans used to high salaries â people who vote and know how to write op-ed pieces â will either lose their jobs, or have to accept lower pay or become part-timers without health insurance.
"The fundamental question we have to ask as a society is, what do we do about it?" notes Robert Reich, the former labor secretary and now Brandeis University professor. "For starters, we're going to have to get serious about some of the things we just gab about â job training, life-long learning, wage insurance. And perhaps we need to welcome more unionization in the personal services area â retail, hotel, restaurant and hospital jobs which cannot be moved overseas â in order to stabilize their wages and health care benefits." Maybe, as a transition measure, adds Mr. Reich, companies shouldn't be allowed to deduct the full cost of outsourcing, creating a small tax that could be used to help people adjust.
Either way, managing this phenomenon will require a public policy response â something more serious than the Bush mantra of let the market sort it out, or the demagoguery of the Democratic candidates, who seem to want to make outsourcing equal to treason and punishable by hanging. Time to get real.
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Wipro wants to go to Pakistan, but without hawking its high-end IT products. A company source told FE that the Indian MNC will focus on hydraulics, medical systems and consumer goods instead. The strategy on hardware could not be ascertained.
The plan somewhat resembles chairman Azim Premjiâs moves in China. Mr Premji famously limited his spread there even as rivals powered ahead citing business realities. His conservatism on China is changing now and Mr Premji has told top aides that Wipro must ramp up its operations in the Middle Kingdom. On why Mr Premji is being selective about what heâll share with Pakistan, the source echoed how his boss felt. âWe canât be pissing in our soup bowl, can we!â
This wonât stop Mr Premji from deploying marketing muscle in Pakistan in the remaining areas of his interest. Islamabad has JP Morgan to thank for that. The Wipro chairman has taken detailed briefings with Morgan analysts who are knowledgeable on Pakistan and he emerged convinced that growth rates there are extremely attractive and sustainable too.
Mr Premji is clear that Prime Minister Atal Bihari Vajpayee is doing the right thing by engaging Pakistan in a sincere dialogue. A Wipro strategist said Mr Premji sees âbusiness interestsâ ultimately driving the relationship between the two South Asian neighbours. âThe more we trade, the better.â
Also, Mr Premji believes that companies with the first-mover advantage would serve the twin causes of regional peace and shareholder interest. An Ismaili Muslim himself, heâs of the view that all this will have a positive influence on Indiaâs Muslims as well and if peace gets a chance India can save nearly 1 per cent of its GDP and Pakistan around 2.5 per cent. âThis can be ploughed back for infrastructure and improving social indicators like health and education.â
The Stanford engineer holds more than 80 per cent of Wiproâs stock, making him one of the richest men in the world. His technology operations, which include customers like Microsoft, Sony and Nokia, are headquartered in Santa Clara, California. Staff strength is over 23,000.
Despite recent acquisitions in high-end businesses like the energy practice of American Management Systems and financial services firm Nerve Wire Inc, Mr Premji continues to own non-IT businesses including cooking oil.
He believes that this strategy keeps the Wipro brand in the public eye and doesnât require much of his time anyway. The acronym Wipro came from the family businessâs original name, Western India Vegetable Products Ltd.
Meanwhile, there is a debate going on within government and industry whether India should empower Pakistan with IT prowess.
Reports like these are getting routine. Time for some smart psy-op ads with the "Indian inside," akin to the "Intel inside" commercials.
Reuters
LG to make Bangalore software unit global mobile hub
BOMBAY (Reuters) - LG Electronics plans to make its Indian software centre the global hub for producing software for its mobile phones that will be sold worldwide, officials of the Korean consumer goods giant said on Friday.
LG will also increase the staff at the centre in India's technology capital of Bangalore to 1,000 people within three years from 300 now, they told a news conference.
"Whether a company makes it to the top tier of the mobile phone sector will really depend on its software capability," said Mun-Hwa Park, chief executive and president of LG Electronics' telecommunication equipment and handset company.
"That's why we want our India software unit to focus 100 percent on mobile phones."
Until now, employees of LG Software India were writing software for a variety of LG Electronics' products.
<b>Indian telecom operators could see almost three-fold jump in revenues â from $9 billlion in 2002 to $25 billion by 2007, according to a study released by Ernst &Young</b>.
<b>As per the study the Indian telecom network will become the second largest in the world after China in the next five years</b>.
The report, titled âRedefining Indian Telecom,â also said that the teledensity in India would cross 20 per cent in the next five years instead of eight years as projected by the government.
âWe estimate the subscriber base to cross the 20 crore mark by 2007 and 25 crore in the next couple of years. This will easily make India the second largest market in the world,â Sanjay Mehta, Ernst & Young director, said.
Outlining the key drivers of future growth, the report said that small operators with low economies of scale would not be viable due to the very high cost per minute.
âEventually only three or four large operators with pan-India operations will remain dominant,â it said.
The report predicted that state owned telecom majors, MTNL and BSNL, would eventually merge in the face of stiff competition from integrated private players.
Once mobile operators were allowed to route inter circle calls within their own network, the long distance operators would lose relevance, and therefore such players would integrate with large wireless or wire line players.
âAccording to us, companies with low cost and pan India business models with diversified product offerings will be the future winners,â the E&Y study said.
The report cautioned operators that while the future value for companies would reside in ownership of customers, operators should also pay rigorous attention to retaining revenue.
âThe ability to keep operating costs under control will be the key for the much needed flexibility in pricing. Various operators have moved towards infrastructure sharing and outsourcing network O&M activities,â it said.
Global IT major Hewlett Packard on Tuesday launched its mobile e-service bazaar, which is an incubator for wireless technology applications, in three cities in the country - Bangalore, Mumbai and Delhi.
Located around the world, with regional hubs at Silicon Valley, Helsinki, Singapore and Tokyo, HP mobile e-services bazaar turns new ideas and technologies into real world solutions for operators and enterprises, who can then collaborate to fuel the rapid development of innovative new e-services.
"Our mobile e-services bazaar acts as a catalyst for the creation of mobile e-services by providing an environment for hundreds of our members to incubate new ideas, strategies and technologies," HP Mobile e-services bazaar, Founder global leader business enablement Peter Vesterbacka told reporters.
Stating that HP was committed for further development of bluetooth wireless technology, he said, the company was working wth AU system, Ericsson and Ylez in this segment.
BANGALORE, India -- A cheap handheld computer, designed by Indian scientists for use by the poor, went on sale Friday for $220 after a delay of nearly three years.
Simputer's software was developed by volunteers, to keep development costs low, said Swami Manohar, chief executive of Picopeta Simputers, at the model's launch. Picopeta Simputers and Encore Software are the two companies licensed to make the devices.
The launch of the Simputer was delayed due to a lack of investment and a poor response to the concept from large-scale distributors, Manohar said.
However, the government-owned Bharat Electronics agreed to manufacture the Simputer, which was developed in 2001 by scientists at the Bangalore-based Institute of Science in response to low levels of computer use in India.
The Simputer is available in Bangalore and will be available across India by April 1, he said.
Picopeta hopes to sell 50,000 units in the fiscal year ending March 2005, Manohar said.
The Simputer doesn't have a keyboard, although it can be attached to one. Instead it has a stylus that allows the user to "write" on the screen.
The basic model has a monochrome display, a 206 megahertz processor and 64 megabytes of memory. It has an internal microphone, speakers and a battery that lasts for six hours.
The device can even be connected to the Internet, Manohar said.
To keep costs down, it uses the Linux operating system, which does not require a license.
Only nine in every 1,000 Indians own a computer. Until now, they have been unaffordable to most -- especially the rural poor -- because of low wages and high taxes on computers.
Tax cuts have recently brought prices down, pushing up demand in cities. But most Indian villagers can't afford to buy a basic desktop, which costs about 20,000 rupees (US$450).
Picopeta also launched two other versions of the Simputer with additional features at $276 and $443. They are likely to appeal to more affluent users, Manohar said.
NEW DELHI - Shortly after he assumed office as India's new Minister for Human Resources Development, Mr Arjun Singh of the Congress-led United Progressive Alliance summoned leading educators from around the country for an emergency meeting.
He had a problem on his hands: His predecessor, Mr Murli Manohar Joshi of the National Democratic Alliance - <b>a man noted for his rabid Hindu-centric views </b> [Can they write anything without bringing some hindu angle?]- had slashed by 80 per cent the annual US$1,500 (S$2,564) tuition and room-and-board fee that each student pays at the prestigious Indian Institutes of Technology (IITs) and the Indian Institutes of Management (IIMs).
Moreover, Mr Joshi wanted to change the curricula of these institutions to reflect India's Hindu heritage, as well as dilute their strenuous entrance requirements so more students from 'backward' communities could gain entry.
His actions had stirred a huge controversy, not least because the IITs and IIMs have nourished not only Indian industry, manufacturing and business but also technological communities overseas - such as Silicon Valley in the United States. In fact, Indians in Silicon Valley are estimated to have a net worth of more than US$50 billion.
Mr Singh needed to calm the waters. His solution was to leave it up to the administrators of the seven IITs and six IIMs whether to reduce fees.
Institutes like IIM Kozhikode had already implemented Mr Joshi's 80 per cent fee cut order. On Monday, the government asked the IIMs to come out with a common fee structure.
The question of fee reduction, while aimed at winning applause from the masses, is actually an irrelevance. The IITs accept only 2,000 of the 200,000 applicants they receive each year; the IIMs accept a similar number. Banks and financial institutions line up to offer successful applicants cheap loans because they know that every IIT and IIM Graduate is guaranteed a job that often fetches a starting salary of US$20,000 a year - extraordinarily high by Indian standards.
Higher technical education has been an article of faith in India, ever since a 22-member official committee headed by Mr N.R. Sarkar submitted a report on the subject in 1946.
The Sarkar Committee recommended the creation of four higher technical institutions of international standard, one each in the north, south, east and west, modelled possibly on the Massachusetts Institute of Technology.
In May 1950, the first in the series was established in Kharagpur at the site of the Hijli Detention Camp, where the British had incarcerated political prisoners, and named the 'Indian Institute of Technology'.
Jawaharlal Nehru, India's first prime minister, was determined that science and technology should play a prominent role in modernising India. He envisioned that the IIT system would, over time, 'provide scientists and technologists of the highest calibre who would engage in research, design and development to help build the nation'.
(Each Indian Five-Year Plan has typically allocated more money to higher technical education than to primary or secondary education, which may explain why the country's literacy rate is still below 50 per cent.)
In addition to the IITs and IIMs, the Nehruvian vision of a technologically competent society has resulted in a network today of more than 1,000 engineering colleges, another 1,000 colleges offering master's degrees in computer applications, 291 universities and 12,000 undergraduate colleges. Together, they turn out two million Graduates each year, 125,000 of them in engineering.
But apart from the elite IIT and IIM Graduates, there are not enough jobs for all Graduates. This has resulted in an exodus of highly skilled Indians to foreign countries.
In the United States alone, there are more than 30,000 IIT Graduates, and their per capita income has been put at US$2 million. The combined net worth of IIT Graduates in the US alone is estimated at US$35 billion. Several studies suggest that Indian professionals abroad have a cumulative net worth of US$200 billion. Each year, they remit around US$20 billion back home.
According to the New York-based International Council on Education, 50 per cent of Graduates of the IITs and IIMs, the top 20 per cent of medical school Graduates, and the top 15 per cent of Graduates of humanities colleges leave India each year. Some 75 per cent of computer professionals also emigrate to the West each year.
This means that India itself is facing a shortage of high-level professionals. The National Association of Software and Service Companies says that each year India needs 140,000 expert workers in technology, but only 100,000 are available because 45,000 go abroad.
According to a United Nations Development Programme study, the net loss to India each year through such emigration is US$2 billion.
Emigration is a price that free societies must pay, especially with globalisation. Mr Arjun Singh indeed has a problem on his hands, notwithstanding his resolution of the more immediate fee situation: How do you persuade skilled Graduates to stay behind and help out in enlarging the Indian economy?
What does one offer them? Better pay? More perks? More health-care and leisure benefits?
India's quest to become an economic superpower may well be defined by how - and how quickly - it comes up with answers to such questions.
I posted this as an example of the kind of coverage one would like to see in the local press about India - not judgemental and brief to the point. In this instance, the columnist paid the highest compliment - she wants her hometown to emulate what was done in Pune, India. This is the kind of image one would like India to have. Technology oriented and the reference to the right kind of progress
All this talk about stemming the brain drain is so much hooey. First of all most would not leave if there were a job available in India. secondd you cant prevent people from travelling where they want to. anything less would be curtailing their freedom of movement - we certainly dont want to emulate the chinese in this. Third, India's reputationas a whole has gone up immesaurably because of the technical diaspora.
The so called brain drain may not be without some drawbacks but bottomline it has benefited India immensely. Eventually the Indian diaspora will lay the rame role in investing in India that the Chinese diaspora is already playing forthe last 2 decades.
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