It’s time to build on new advantages to sharpen our edge further

THE Indian IT industry has now reached a stage of maturity where it can be a very reliable and safe partner for meeting the requirement of our global partners and also capable of doing or has the capacity to do innovation, said Mr. Kiran Karnik, President of NASSCOM, India’s national platform of the IT and IT Services industry. “We have now reached the stage where we can innovate and not just do what customer wants us to do”, he said in an interview with Amitabha Sen. “There are good laws but we want to strengthen them further in the area of IP so that there is no possible loopholes in terms of copying, pirating and so on. Apart from the law, we are focusing on enforcement. We see strong possibilities of cooperation and complementality with China in the field of IT, he observed.

AS: What, according to you, would be the three most important messages that ‘India Leadership Forum’ would try to convey to the global IT leaders?

KK: The Indian IT industry has now reached a stage of maturity where it can be a very reliable and safe partner for meeting the requirement of our global partners. While we are yet very cost competitive, the Indian it industry has gone beyond that and is providing unique scenario to customers and partners in terms what they need, could be quicker time to market, it can be the better quality, it could be secured cyber environment in terms of protecting data and network so I think value, the cost is a factor but I think we are moving beyond that. We are moving to a stage where Indian IT industry is now capable of doing or has the capacity to do innovation. We have now reached the stage where we can innovate and not just do what customer wants us to do. But take it beyond that and innovate and do some thing which is far better, far superior than what the customer anticipated. Broadly that’s the message we want to convey to the global IT players through India Leadership Forum.

AS: India is called as IT Superpower and there is no denying the fact India did earn a very commanding position in the global software market. But where we stand so far as brand building is concerned which would help sustain our stay like Microsoft or Oracle?

KK: In terms of the Indian IT brand, we are very strong. We don’t draw any complacency but I must say we have done very well in two biggest markets-US and UK, the two most important markets. However we have to do a lot more for other big markets like continental Europe and Japan. In both these markets Indian brands are there but we have to do much more to make it available and promote. A great deal has to be done. So far as special for brand promotion, we have some thoughts on doing that kind of thing. We have some concept but I don’t think we have reached that stage to take on that concept or to moving ahead or taking off on that but yes some thought are there on it and some discussion is going on.

AS: Related to this is a very important issue which again is crucial to Indian IT industry’s survival is the Intellectual Property Rights issue. You being at the helm of industry body, how would like to assess the situation today and what is to be done in this respect to ensure a stronger, secured IPR coverage that would protect the interest of Indian IT companies?

KK: Intellectual Property Rights is a key area as we see from the point of view of both investment from abroad and foreign companies coming in, and for the Indian industry itself because as India begins to move towards creating products and doing more innovation, we need protection which a good intellectual property law affords. We have made a very strong effort to work with the government to strengthen the law. There are good laws but we want to strengthen them further in the area of IP so that there is no possible loopholes in terms of copying, pirating and so on. Apart from the law, we are focusing on enforcement. In many areas there are very good laws but enforcement is not all that strong so we want to strengthen the enforcement. Already some good work done by the Bombay police. We have worked with them to set up a cyber crime cell. We are doing something interesting with them, a cyber crime laboratory which is like a forensic laboratory to track down people on the basis of finger prints, other kinds of evidence etc. This laboratory will do the same thing to track down people on the basis of evidence. These are the initiatives on the enforcement side. We hope from Bombay experience as we gain some ground then it can be transferred to some other cities and areas. So that is an area we are looking at both in terms of law and the enforcement.

AS: One of the much talked about issues-- in fact a very critical issue for the foreign clients of Indian IT firms in particular-- is Information Security. NASSCOM had initiated some measures in collaboration with the US government. What is the present status of the industry? What message you like to convey to the global clients about India as a ‘trusted source’?

KK: We have now moved on and the government has now set up a formal task force, the industry-government task force. We are looking at what amendments are required to strengthen the whole area. Again we are looking at the legal area. From within industry we are also looking at what we need to do by way of our internal thing- processes, people. You make sure internally that nothing happens from insidOf course, most of the companies are doing that. They have secured areas, access are restricted, people are not allowed to take materials- no pencil, papers, floppy disc to copy anything. So those kinds of internal strengthening of processes are going on.

AS: To curb cyber crime do you think the industry should have kind of semi-judicial authority?

KK: I do not think the industry should have any semi judicial power. That’s not a good ground to get to. We would want the industry to concentrate on quality aspect and not the kind of semi-judicial power you are talking about. We would rather emphasize more on quality, standards etc. Indian industry has worked hard and today it is recognized that Indian industry has quality which is the world’s best. Many of multinational companies have their Indian operations at a higher level of quality certification than even their home country. Same thing I would say about Information Security. Create the kind of thing internally without semi-judicial authority, just create cerate certain areas and standard. For example, you keep your precious thing not at home but in safe deposit vault so that it is not lost. We want India mentally, conceptually to be regarded as safe deposit vault for the IT industry. Secured data in fact is safer in India than it is back home. We would like to do that by strengthening the legal process and second is internally setting by standard and not by any kind of force. By setting some standards to follow. I would spur it really through market forces, rather than gentleman’s agreement, as you say, There some standards existing already so far as information security is concerned. We propagate among the companies to meet those standards if you have to be in business as things are largely decided by market forces and your business mechanism.

AS: Very often, "low-cost" is cited as Indian IT industry’s USP (unique selling proposition)? To what extent it is sustainable? Do you think that’s the only edge that helps Indian firms cut in the global IT market?

KK: No. this was a very old scenario, may be five or six years ago, just before Y2K when certainly India’s USP was low cost. Today it is no longer that, it has gone much beyond that. It has moved on other dimensions. Today it is more value than low cost. It is the value depending on what business you are in, may be customer service which is far more important than just cost. Cost is very important but there is something more to it. Other sides like talent that are available, the customer service, experienced customer service, the quality you give , these are important dimensions. The people come for cost but they stay and grow for quality, productivity, talent and other factors. Initially impetus to come to India was the cost advantage, cost arbitrage but today it is not that only. There are some other factors but having said that we are aware that if cost goes completely out of the line you will have problem. You have to maintain the cost judiciously. People cost have been going up but others costs like telecom, etc are coming down due to efficient management. Today one of the concerns has been that the indirect cost driver of our operation is infrastructure. Diesel driven power adds to your cost by 1-2 percent. Then you have to transport people. In many cities like Bangalore or even in Delhi you have to take people from their home and take them back unlike Bombay where people travel on their own. In such a situation your transport cost adds up another 1 or 2 percent to your overall cost of operation. You will have to have mangers to take of these 100 or 200 cars and take people up and down. Our policies are to bring down those costs so that we increase our efficiency.

AS: About two years back you talked about adopting a strategy of "complementality and collaboration" with countries that have appropriate facilities and skills. What is the scenario today?

KK: We see strong possibilities of cooperation and complementality with China and ultimately there will be some competition also. But we see strong prospect of complementality, particularly in the areas of embedded software. We see a great possibility. In Chinese IT industry, they are very strong in hardware side. In consumer electronics they are the biggest manufacturer of almost every consumer thing in the world . They manufacture almost every kind of consumer electronic goods, TV sets, refrigerators micro oven etc. All these today have the chips built into them for variety of function like multiple chips. If we can work with them, so the Indian software where we have expertise, special talents and ability to do sophisticated things, can be added to the Chinese hardware in these things we will both gain because their products would be able to offer products which would offer variety of functions- you can have more intelligent TV sets, or a micro oven or a washing machine that can offer more consumer-friendly services with lot more functions. For the Chinese, it adds greater value to their products. Both sides we gain. That’s the kind of thing where you can complement and work jointly. But ultimately there will be some competition also. There will be certain areas we can go for complementality and in certain areas we will compete.

There are other kind of complementality. . For example, Philippines. They have some special advantages in regard to call centers, particularly for the US because the English language they are strong, the left-behind American culture and so on. So the kind of thing possible for the Indian companies which have expertise and running call centers , they know what to do, they know quality, they know how to maintain internal processes and project management, So Indian companies are setting up in Philippines. So this is a different kind of complementality. Philippines is happy, investment is coming, some employment is generated there. And for Indian companies it is complementary because they are able to supplement what they do from here which is something more which is specifically geared to specific kind of American market. That’s the kind of thing we see happening. So two thins are happening: one is Indian companies going to other countries, setting up facilities there and secondly Indian companies partnering with the local companies in countries like China to do something more. I think both these are good possibilities we should look at.

AS: Lots have been talked about India as a leading destination for “Outsourcing”. At the same time there is no denying the fact also that many a country are also emerging as India’s potent competitors in this field. What message you would like to convey to the existing and prospective global customers who might be considering other countries as alternative BPO destinations? What India can offer that probably her competitors cannot?

KK: In terms of competition, we are very aware, we need to be on our toes without a dot because there we in some sense have shown them the path which was easier for others to follow than it was for us. But frankly speaking, in regard to our competitors we are three or four years ahead over all in terms of industry. In specific segments there may be competition. For example, as I mentioned earlier, in call centers Philippines is a competition for individual companies but not as a whole because they do not have scalabilities, they don’t have the numbers. At least for next three or four years we are ahead of others we make sure that we are prepared, we build on new advantages to create a new, move on to new things. So you need to sustain that.

AS: Do you think that publicity hype being built over the US market is overarching other potential BPO markets?

KK: With regard to the US, large part of our exports are very much heading towards US. In fact this year it will be about 68-69 percent. But US is the biggest IT market in the world. The US alone accounts for over 50 percent of the global IT market in any case. So it is not very disproportionate. We are very active in pushing to expand in other markets, particularly continental Europe and Japan. These are two large markets where our penetration is yet comparatively small. In countries like France, Germany, Italy we will have to do a more lot in next four/five years.

The good news is that the US market continues to be pretty much the same for last two/three years. While we have had 30 percent growth overall, it means that Japanese and European markets also continued that kind of growth because they sustained the share. They did not gain share but they did not lost share as well. The fact is that we continued to grow in the Japanese and European markets . The fact is that we are growing across everywhere. But the challenge to us is how to further accelerate our growth in Japan and Europe. We are working on that. Number of things we are trying to do. Indications are that that Europeans are bit slow in outsourcing, optimizing global sourcing kind of thing. But they have to compete globally and to ensure that they will have to reduce cost , provide service and so on. They are beginning to realize. We are optimistic that few years from now we will see the share of non-US sector is increased substantially.

AS: What is the prospect of West Bengal as IT destination? What is your view on Bengal Govt.’s initiative to develop Siliguri as IT gateway to South East Asia?

KK: I am very optimistic. We are very pleased with the way the West Bengal government has moved in the last couple of years. There is tremendous energy behind it. Both at the political and also I want to acknowledge, at the bureaucratic level. They are today very charged and dynamic body. The govt. has taken good step. The policy has been positive and immediately you see the response. Industries are setting up more and more there. The prospect is very good not only just because of govt. policies which are very necessary but there is another requirement and that is talent and in that Calcutta and West Bengal is tremendous. It was neglected so far because of other reasons relating to policies. Once that policy corrective has come, the people realized that the talent pool is there. Which is very good. I see very good prospects of West Bengal. What the West Bengal govt. needs to do is to continue to give the thrust and dynamism they have done in last two years. Secondly, to continue to move ahead, even more vigorously, on improving infrastructure because that continues to be a constraint in many places. Besides, govt. has to work with industry to further build on the talent advantage that West Bengal, Calcutta in particular, has. This is like raw diamond which is very precious but you have process and polish to add value to that. There may be very bright, talented persons but may be lacking something in some particular area. If that thing is taken care of, he may turn out to be a big asset for a company.

About Siliguri I am great enthusiastic. I am not going to say that Siliguri is going to get business next year. But looking ahead for next two or three years now. For two or three reasons the prospects of Siliguri is very bright. That is a great place to tap into all the talent exist in the north east region today. To expect an IT company to go to Aizol or Kohima is not realistic, frankly speaking. There is a talent pool in that region. They speak good English, they are hard working, industrious.

With the opening of Nathula Pass as the China trade develops, that would be the staging point for Siliguri because that is going to be the central hub where things would be coming and then distributed all across the country. Siliguri itself will develop as a city and town. Otherwise, very nice weather and ambience is very good. It will attract outsiders if you make it a nice place to live in. Even as a tourist destination it is the staging point to travel into Sikkim, Bhutan, Darjeeling, for that matter the entire north east.

If the West Bengal government can somehow combine all these and make the kind of hub for the north east then automatically IT industry will also come and it will be self reinforcing because in IT industry you get more people, because more people come, a city develops. You will be able to attract more IT people. The kind of phenomenon we have seen in Bangalore, it could begin the take-off in Siliguri in three four years from now.

My suggestion to West Bengal govt. has been to look ahead. You know what’s going to happen. Don’t start in some small way. You think in terms of that long term perspective. You have to invest. You plan it a way that it shapes up as an international hub. Don’t think small, think big and start now. That would be my suggestion to the West Bengal government.

February 7, 2005

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