Tech Industry

Can high tech transform India's economy?

Experts on a Wharton forum discuss why a country that has such a strong knowledge advantage is lagging behind others in overall economic development.

The success of information technology darlings such as Infosys, Wipro and Satyam Infoway has put the Indian subcontinent squarely on the technology map.

Companies in the West continue to outsource their information technology needs to the world's largest democracy, and Indian expatriates have taken Silicon Valley by storm. But in the end, all the software on earth can't draw water from a village well and pave dirt roads...or can it?

Speakers at this year's Wharton India Economic Forum, held Nov. 17 in downtown Philadelphia, were guardedly optimistic about the Indian economy's ability to ride the IT industry's coattails. They cautioned, however, that India shouldn't let these achievements go to its head.

"Why is a country that has such a strong knowledge advantage lagging behind others in overall economic development?" That was the question posed by opening keynote speaker B.K. Syngal, chairman of Reliance Telecom and former chairman and managing director of Videsh Sanchar Nigam Limited (VSNL), India's leading provider of international telecommunications services. Widely regarded as the father of Internet and data services in India, Syngal acknowledged the strides taken thus far but pointedly reminded the audience that the journey has hardly ended.

"While Indians the world over are recognized for the central role they are playing in the IT revolution, most Indians do not even have uninterrupted power supply," he said. "I think that we are patting ourselves on the back too soon for our contribution to the IT industry. I think our progress in IT is driven more by its endorsement by the stock market than by the real and distributed value it has created."

Syngal deplored the lack of branding and marketing initiatives, the large debt burden, and the bureaucratic obstacles to growth in India.

"We all understand reform, we all understand liberalization--but what we need here is discipline," he said, citing the licensing and regulatory nightmares faced by potential international investors. Syngal likened the task of changing attitudes in India to the scaling of Mount Everest and urged the audience to rise to the challenge: "It is only when we reach the top that the feeling of exhilaration is unparalleled. I think we are about there, a few hundred feet away from the summit."

Keeping dreams afloat
Taking its cue from Syngal's broad-brush painting of the Indian technology landscape, a panel titled "Challenges of Entrepreneurship" emphasized the need for a spirit of risk-taking and initiative both in India and abroad. The panel included Surya Panditi, CEO of Avici Systems; Jagdeep Singh, co-founder of OnFiber Communications; and Vijay Thadani, CEO of NIIT Limited.

Panditi stressed the need to find the right people when building a company. He used the acronym MORE (Money, Opportunity, Respect, Experience) to describe the different priorities that employees may have, and he said he tries during the hiring process to find out which of these four is most important to people.

Panditi also said that external relationships with consultants, public relations specialists and so forth were equally key to a company's success. One of the companies Avici contracts with is Infosys, which he mentioned as an example of a "great relationship, leveraging outside capabilities."

Entrepreneurship, said NIIT's Thadani, is also about marrying passion and process with a good dose of perseverance. The steps to NIIT's success, he said, included inspiration (the concept); aspiration (people's goals); respiration (financing and later, process reliability); and perspiration (delivering value to the customer).

"'What is your exit strategy?' is a question commonly asked. I find that painful," Thadani said. "You need as much passion (in entrepreneurship) as you would in raising a child. Do you ask, when raising a child, 'What's my exit strategy going to be?' If you start with that, it's not entrepreneurship--it's opportunism."

Jagdeep Singh echoed Thadani's advice but warned potential start-up dreamers to pick an important business problem right from the outset: "Technologies are not problems. It's easy to get on the latest bandwagon, but major fads have ended up not producing the kind of economic results you'd think they would."

Singh proceeded to advise entrepreneurs to build a world-class team of people and figure out if there are real structural barriers to entry for the business. "It's not enough to say 'first-mover advantage' or 'patent/intellectual protection,'" he said.

Bridging the digital divide
If an entrepreneurial spirit, combined with the recognition that technology cannot march ahead without bringing up the rear, is to bring India into the New Economy, then how best can companies go about fostering it?

Sanjay Bhatnagar, CEO of Enron South Asia, described his company's foray into the Indian market as a layering process. Projects such as the Dabhol power plant and other asset development work came first, followed by a new world-class Internet data center, scheduled to be complete by next year.

"Two things hold projects back," Bhatnagar said. "One is enabling legislation; the second is administrative and bureaucratic hurdles. The power sector is now about 80 percent enabled; but it's still a problem in the telecom industry. Foreign direct investment is still limited to 40 percent in some areas."

Radha Basu, CEO of Support.com, described a world where many services could be provided from India through the Internet. Her company helps computers "heal themselves" with virtual diagnostic and treatment tools. With the "e-support" model, it doesn't matter where the support comes from. Basu predicted that a quantum leap could occur for India when personal and broadband wireless access becomes widely available in urban and rural areas.

Bhatnagar agreed in theory, but cautioned that companies face big practical issues. "True, there is no legacy infrastructure problem in India. But for the private sector to succeed, you need a market," he said. "You have to finance the technology and be realistic: Who's going to use what you're building, and who's going to pay for it? The ability of consumers to consume all that bandwidth takes time."

Perhaps the most encouraging sign of technology's ability to move all economic levels forward simultaneously came at the end of the conference, in the closing keynote discussion. B. Ramalinga Raju, chairman of Satyam Computer Services, and F.C. Kohli, vice chairman of Tata Consultancy Services, gave conference attendees some parting thoughts about the digital divide.

"If the past 10 years have been a decade of IT services from India, then I think the next 10 years will be a decade of virtual services coming here," Raju said. "The contribution of technology can be incremental in the case of well-to-do people who have access to it, but in the case of those less fortunate, the application of technology can bring about differences of orders of magnitude.

"Where a state once could hope to eliminate literacy in 30 to 40 years, the same state is now talking about doing it in a matter of five years, using the television cable network and innovative set-top boxes."

Kohli offered a concrete result of this technology at work: "In Andhra Pradesh, and perhaps soon in Tamil Nadu and Madhya Pradesh, we are doing an experiment. We had 25 illiterate adults, between ages 25 and 35, learning in this way. The lessons were totally computerized. After 10 weeks, they could read the newspaper.

"Of course, we want to export and build up hardware," he added. "And to train more students. But finally, what matters is how we use technology to touch people."

 
To read more articles like this one, visit Knowledge@Wharton.

All materials copyright © 2000 of the Wharton School of the University of Pennsylvania.