A visit to India
Few years ago, when I was in Bangalore, I saw a traffic accident and it took several hours for the emergency ambulance to arrive. The reason could be traffic jam or it could be something else, as in most India cities, traffic is very bad. But now a new thing has happened. My friend, Vivek explained: “The Indian government just funds the creation of a service created by an Indian outsourcing company to provide the country's first dedicated ambulance service. For years the country has had no single number to call an ambulance, with each hospital having their own ambulances and own numbers. Now the government has roll out the Emergency Management 108 service that offers one number and one ambulance fleet with emergency vehicles to serve India's entire population by 2010. You may call it “In-sourcing” rather than “Out-sourcing” because the service was established by Satyam, an outsourcing company. The India government will fund 75 per cent of the service, with the remaining costs met by Satyam with the running costs expected to hit $500 million USD by 2010.
Few years ago, Vivek advised me: “If you get sick, please do not get sick in India as hospitals here are terrible” but this time he told me: “It is OK to get sick here because there are many international hospitals opening here now”. As more Indian getting richer, they demand better hospitals, better doctors and create a huge demand so many international health companies are opening business in India's big cities. As foreign companies outsource software to India, they also bring their health systems here. More and more Indian are willing to pay top money for international standard hospitals and highly skilled doctors. It seems that it is a good business for both sides.
Bangalore is a vibrant city with million software people working days and nights and as they are making more money, many of them begin to enjoy a lifestyle similar to the west. It means coffee shops, bars, karaoke and dancing clubs where young people are frequent. However as more people go to work late, or half awake or drunk when working the next day, software companies complained and local government has issued special rule for all entertainments to close half an hour before midnight so people can go home, sleep and ready to go to work the next day. Vivek explained: “It is an unpopular rule but the police strictly enforcing the rule as it helps maintain law and order and keeps crime in check. Under the new rule, live bands are banned in dancing in clubs and discotheques. Karaoke nightclubs also have to keep music low and stopped before midnight. Most Bangalore's software workers, especially for those who work late, the only place they can go after work is restaurants. That keeps restaurant owners very happy because they do not have to compete with bars and dancing clubs”.
When we walked near popular nightclubs called “Hard rock Café”, “Purple Haze” around 11:00 pm, I saw a lot of police begin their inspections there. Vivek told me: “at 11pm. the lights go off, the music stops, the bar is closed and there is nothing left so people has no place to go but to restaurants or go home. There is so much money in Bangalore, as companies such as Infosys and TCS are enjoying their earning amount to several billion dollars each year and average software salaries are increasing 10% to 20% every year, software workers here are enjoying their life more than anyone in India. They also change jobs quickly for better paid because companies could not hire enough skilled workers so they compete with each others. However, Bangalore is a “Boring city” because there is nothing much to do at night, most people put money in banks and make the banks gets rich. Young people begins to wear expensive designer clothes and makes department stores get rich, of course most software people work hard and have no time to cook so they eat out often and make restaurants get rich. As they drink heavily and can not travel by bus so they have to call taxi and make taxi companies get rich. In the end, everybody benefits from the software outsourcing industry as we continue to expand our business globally”.
I asked him: “Do you think China will be able to compete with India? Could they copy your success here in Beijing or Shanghai?” Vivek shaked his head: “I do not think so, not in the near future because today we already control more then half of the global software outsourcing market. We have plans and strategies to keep others away. As you know, software outsourcing is not like hardware or manufacturing outsourcing, it can not be duplicate because once you handle a domain area, you owned it for a long time because nobody know what you have done, how do you code, how do you maintain the software. Customer can not take it away and give to somebody else because they have to know what we have done first. Today we have about 60% of the market, when we have about 70% or 80% which could happen in another three to five years the software market will be ours. I think China probably has about two to three years to catch up and if they miss this opportunity, they will never be able to compete with us”.
I agued: “But they can do it much cheaper since your price has gone up.” Vivek told me: “The market has changed; it is no longer cost but knowledge and skills. Today most of our customers do not negotiate on costs anymore and they are willing to pay high price for our skills. That is why we opened several campuses to train our workers. We must do this quickly as demands are very strong and state-universities are too slow to react. Few years from now, nobody will talk about outsourcing anymore as most companies will operate globally and they hire people wherever they can find them. I think Bangalore will continue to grow but also Chennai, Pune, and Hyderabad as we are training about half million software engineers each year. Based on some researches, software is seen as the key driver for growth and every software job creates about seven to twelve other jobs in the broader economy. With current workforce about two million software people, we helped create about twenty million additional jobs but to a country of a billion people that is still a long way to go”.
I asked: “So it is good for city like Bangalore and Hyderabad because they are the outsourcing capitals but what about others, after all India is a big country with high level of poverty?” Vivek explained:” Today, at government urging, many software companies are opening business process outsourcing (BPO) operations in rural villages as a way of keeping down costs while improving the life in the country. BPO such as “CallCenter”, “ContactCenter” are easy to operate and easy to train. We are bringing technology to the remote villages but first we need to improve the infrastructure since many villages do not have electricity or internet access. Most people in India do speak English and that is a competitive advantage over China and Vietnam so with a few months training in answering phones then we are in business. There is a big cost advantage to a company locating in rural areas because the labor costs are very low. We believe within few years, 80 to 90 million people could be trained to take care of the back-office needs of the entire world and that will be our next move. People in village do not change jobs as they are making about 4,000 rupees (USD $ 50) per month and they could live quite comfortable as today they only earned less than USD $ 10 per month. We believe as BPO jobs are created, other types of jobs will also be created quickly with more restaurants or transportation and telecommunication companies to serve the workers, boosting the local economy. As I always believe, software technology can change the economy quickly and profitably. Our challenge is not about provide training or create more jobs but the key challenge is to make sure thing remains in India and not somewhere else”
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
