Face to Face: Mr. Macky Hashim, Chairman - SAARC Chamber of Commerce & Industry

'Liberalized policy makes India a major IT power'

Outsourcing has come to stay
India may face greater competition in outsourcing segment
Convincing customers a big challenge for Indian IT firms

THE biggest obstacle the information technology spread is a government getting in the way and India’s IT industry is a prime example of that. The unshackling of country’s barriered economy in 1991 by Mr. Manmohan Singh, then Finance minister and now Prime Minister and his government has made India today a major IT power, said Mr. Harris Miller, President of the IT Association of America (ITAA) in an interview with Amitabha Sen.

About outsourcing, Mr. Miller maintained, the moot question is “where do you do it? You can do it in the country where you are operating or you do it ten thousand miles away. That’s the challenge for Indian companies--to convince customers in the US, Japan and Europe. The reality is that over time, more and more of these functions will get outsourced. Whether they will go offshore or not is really the interesting part, and that’s the challenge Indian companies are going to face. More and more US companies are there, more and more Chinese companies are there, more and more Russian companies are there to compete for outsourcing opportunities.”

Commenting on Kolkata as IT destination the ITAA President said that the Left Front government in West Bengal is offering the prospective investors in IT “a very stable business environment. I think it is a very credible location in trying to compete with other major cities and regions in India, successfully. When anybody asks me, I always mention Kolkata as a very credible destination.”

Q. A perceptible shift is visible today – from developed countries to developing ones who are keen to adapt, absorb and utilize the Information Technology as a development tool for their countries economy, education, healthcare etc. How as world’s largest IT association’s President you view this change? What could be the possible factors prompting developing nations to get closer to IT?

A. I have been predicting this for long time. Clearly any new technology is first adopted by wealthy individuals in developed economies. As its benefits are perceived by a wider audience, it spreads to the middle class in developed economies and eventually to less developed economies. This pattern has been repeated with electricity, radio, television, cell phones and now information technology. So it’s not surprising to me at all that Information Technology is currently growing much more rapidly in Asia, Latin America and Africa. Consumers in these regions are now coming to see the benefits and are going to take advantage of them in the same way the developed economies have.

Q. You are interacting with IT leaders -from time to time, at different national and international fora like WITSA where developing nations also have started joining in. What are the prospects and problems you find these developing nations are facing today in the field of IT? How they could get into the mainstream of globalization?

A. The number one element of any successful IT industry is the people. This is a technology which runs on brains and not brawn. So countries that want to be competitive have to develop the kind of education and training systems that will enable them to have the skilled workforce to be able to develop a major IT capability.

Secondly, they need to understand that the market place is the best way to decide the winners and losers. This is an industry that does not require massive capital investment (with the exception of the telecommunications infrastructure). On the contrary, this is an industry where two people in a garage can start a business successfully. So you don’t want the government trying to dictate policy or try to pick marketplace winners and losers.

Thirdly, we need competition in the telecommunications space because all information services ride on the back of the telecommunications infrastructure. If you don’t have telecommunications competition, you do not get the benefits of innovative new technology, new business models or lower prices.

The US itself is an example where we have tremendous competition in cellular and long distance service. Prices have come down dramatically. But in local telecommunications, we do not have much competition and prices are still high and there isn’t much new technology. I was somewhat surprised that India’s minister announced recently they are not going to provide competition locally. I would encourage the government to rethink that because that’s not good for the spread of technology.

Fourthly, we must all learn to think globally. Even developing countries have to think globally, and of course India is the best example of that. India has not developed the IT industry just for the internal Indian economy. But they have developed the IT industry with the understanding from the beginning that they are going to pursue opportunities and create customers all over the world.

Q. Adequate funds to build up necessary infrastructure for expansion of IT facilities across the country appear to be one of the major constraints for developing countries. As ITAA President what would be your suggestion to the rich nations to help the developing nations get out of this problem? Would you favour an international funding institution exclusively for IT?

A. No I don’t think we need to do that. There is sufficient private capital in the marketplace. The problem is that private capital is not going to invest if there is no real competition and if the investors aren’t confident about the legal and business infrastructure to enable them to earn money and do it in a way that is legal.

In India there are 50 million new cell phone users in one year; China is adding 50 million cell phone users a year. So there is money out there to build the infrastructure to support that growth. Where there is no private capital is where the government is in control of markets, where there is no competition, where people who earn money by investing can’t take their profits out of the country.

Q. They may be shy to invest initially. Rather they would be watching the initiatives being taken by the government.

A. Why would investors be shy about investing? They may be shy of investing if they do not believe in the legal or business infrastructure or because they don’t believe in competition. India is a developing country, China is a developing country. We don’t disagree about that, and yet they have tens of billions of dollars –invested, not by government, but by the private sector, to create the infrastructure.

It’s happening in Brazil. It’s happening in Argentina. Wherever you have real opportunities, it is happening. It is happening in Eastern Europe, in Hungary. Wherever you have a real chance to earn money, investors are there. Investors are not there if government is going to appropriate their investment, or there is not going to be competition, or there is corruption in the system. No one is going to invest in that scenario.

Q. The digital divide every day is a “digital opportunity” you said in one of recent interaction with media. How would like to see a digitally divided world and the prospect of global economy? To what extent the US economy could hurt, till the world (developing and less developing nations in particular) is not digitally united?

A. It’s unrealistic to expect uniformity … Technology spreads differently. Not everybody in the US had a telephone on the first day telephone service was commercially available. Not everybody in the United States had a car when cars became commercially available. But IT has spread faster than any other technology in the history of human kind.

There are approximately 900 million to 1 billion people in the world today who are using the Internet. Ten years back, there were perhaps 10,000 people using the internet. Most of the growth initially took place in the United States, Japan, and Western Europe. Most of the growth in last three years has taken place in the developing countries and will continue to do so. The biggest obstacle to this technology spread is government getting in the way and India’s IT industry is a prime example of that. Prior to 1991, as you know much better than I do, your government had a policy of trying to build barriers around your country’s economy. Your then Finance minister and now Prime Minister Mr. Singh and his government brought down those barriers and made India today a major IT power.

India hasn’t done everything right. But the government has done much that is very positive. For instance, government officials voluntarily reduced excise taxes and other trade barriers. This was voluntarily done earlier this year. That’s a dramatic change from the old India. The old India would have kept up barriers, trying to artificially inflate prices of imported PCs and cell phones. . The new India says, “No we don’t want to do that. We want to bring in whatever is the best around the world so our businesses, our consumers, and our governments can buy the best technology--whether it comes from US or Europe or Japan or China.” Wherever it comes from, don’t restrict it with artificial barriers because that makes a country less competitive.

Q. India is globally positioned today as a software giant. At the same time, the country has also emerged as one of major global destinations for BPO. Do you think that Indian IT industry is of late leaning more towards BPO than its major primary focus as software major. As a major India-client, the US has a very significant role to play in this respect, hence this question.

A. BPO is one general subset of outsourcing. You can outsource anything. You can outsource cleaning of your building. You can outsource the typing of the article you write. You can outsource your IT. You can outsource human resources. BPO is about being able to convince the customer that you can do some non-essential functions better and cheaper and faster than they can. Different customers react to this and treat things differently. Someone may say, “I really think a call center is absolutely essential to my business. It’s the number one thing we use to retain our customers. I will not outsource my call center. My IT stuff is too complicated for us to do, however, and I will send that outside.”

So the term “BPO” makes it sound more simplistic. It’s all about outsourcing. BPO outsourcing, IT outsourcing…whatever you want to call it…it’s all the same thing. After convincing the customer that the function can be done better or more professionally, the next question is where do you do it? You can do it in the country where you are operating or you do it ten thousand miles away. That’s the challenge for Indian companies--to convince customers in the US, Japan and Europe. The reality is that over time, more and more of these functions will get outsourced. Whether they will go offshore or not is really the interesting part, and that’s the challenge Indian companies are going to face. More and more US companies are there, more and more Chinese companies are there, more and more Russian companies are there to compete for outsourcing opportunities.

Q. What is the prospect of India and China forging an alliance to emerge as global IT super power?

A. As things stand today, China can achieve success theoretically as an outsourcing destination like India. China is the leading manufacturing outsourcing country in the world. In terms of services, they continue to be very slow. Lot of things have to do with that, such as a lack of English speaking people. Some of it may have to do with technical qualifications. A lot of it has to do with the business environment. The Chinese government must do a better job of protecting intellectual property, for instance. They are far behind India in this respect. They are now trying to catch up. International companies are establishing small shops in China. China has to create a better legal infrastructure.

Recently, Indian Prime Minister Manmhoan Singh stressed that “outsourcing” issue would not affect India’s relations with the US? As ITAA President are you in agreement with the Indian PM’s assertion?

I think the Indo-US cooperation will continue. I recently attended the high technology cooperation group meeting that took place after the Presidential election. Both the US government and Indian government are clearly determined to look forward. There is no lessening of interest on the part of the US government as well as the Indian government. The new government continues its progressive attitude toward Indo-US cooperation.

I hope outsourcing issues will not strain Indo-US relations. But it can have both positive and negative effects. The positive effect is strengthening of the business relationship. The more we do business with India, the more it becomes a true two-way street, and that can be very powerful for trade.

The negative effect is that India is seen as a partner in some international trade areas such as IT and BPO, outsourcing, but not a very good trade partner in breaking down other barriers. I would like to see the Indian government begin to act as a forward looking country, instead of a backward looking country that is trying to lead the opposition in the Doha round. It should be seen as a developing country leading the way to bring down the barriers, and I think that is your challenge.

Q. To position India as a trusted sourcing destination is Nasscom’s major objective today, as stated by its President Kiran Karnik. What is your advice or suggestion to the Indian IT companies in this respect? Any tips for them?

A. Nasscom has its program under way. I think Nasscom’s program is very forward looking. They developed it in consultation with people around the world. It is very focused, has very real meaning. Nasscom and Indian industry have to continue to work globally, and that’s the reason we had our extremely successful event in Delhi on cyber security in October. We find an enormous amount of understanding with Nasscom to promote more international collaboration on issues such as data protection, privacy regulations, IP protection, sharing sensitive information globally. There is a need for US and India - government and industry, to collaborate and partner in elevating the importance of cyber security technology and implementation.

Realization of the importance of information security is increasing, in the case of new players in particular. Certainly the major players like Wipro, TCS, infosys, Mphasis, HCL, understand that this issue, security, in many cases is literally a make or break issue for them. If India is somehow viewed as a a place where information is not secure, then that would reverse the outsourcing trend for India. . One of the problems of China is that it is not seen as a trusted place to deal with. Problems relating to intellectual property are a major issue. It is slow in emerging as a major outsourcing destination.

Q. Lastly, you have commended the West Bengal government’s- run by the Left Front led by CPI(M)- initiatives in the Infotech arena. Will ITAA take initiatives to help the Bengal government draw in more foreign investments in IT field? What would be your message to the Bengal government to make the state IT sector more investor-friendly?

A. I was there in November 2003. I met industry people and willing government officials. I am still in touch with the people from West Bengal IT. They are focusing on their number one issue, which is workforce. They are focusing on their education, their training, having a highly skilled workforce. They are focusing on having basic telecommunications and energy and road infrastructure. They are being very aggressive in recruiting companies.

They are offering them a very stable business environment. I think it is a very credible location in trying to compete with other major cities and regions in India, successfully. When anybody asks me, I always mention Kolkata as a very credible destination.

December 4, 2004