The Role of Countries
by Stephen Lane, Group Manager, Infosys Technologies
Many readers have commented about trends in resource availability and infrastructure. Leaving geopolitical risk for another day, then, I’d like to open a discussion about the role of countries in global sourcing with respect to human resources, convenience, and infrastructure in India.
India possesses clear early mover advantages, especially in terms of human resource availability, quality, and cost. These are, for the overwhelming number of companies, the primary motivations for global sourcing. Starting with demographics, India presents a much more positive picture than most other low-cost sourcing locations, including China, with their projected steep declines in the number of working age individuals as a percentage of total population in the next 10-20 years.
However, only 61% of India’s people are literate and a mere 7% in the 18-to-20 age range is enrolled in higher education. The numbers for China are roughly 91% and 15%, respectively. Ensuring a large labor pool, not only to meet future demand but also to maintain a cost advantage, means investment in education and bringing more people into the workforce.
By convenience I mean cultural compatibility, the availability and expertise of potential sourcing partners, business transparency, and travel. Here again, India possesses clear advantages. Leading service providers such as Infosys have well-established relationships brand-name clients and world-class business and corporate governance practices. And, as long as the demand side for global sourcing is focused in Anglophone countries the Indian services industry is well-positioned to maintain its leadership.
How long will be the case, however, is open to question. Especially as demand begins to shift to non-English speaking countries and, as one respondent noted, China begins to realize the results of its large investment in English education.
Finally, in spite of its many wonders, India is not exactly the ideal business travel destination, which brings up infrastructure. Granted, India has far more important needs than making things easier for services companies and business travelers. Nevertheless, companies must heavily invest to make up for the poor infrastructure. At the same time, negative comparisons to China continually appear in the industry press, causing people to note that India’s infrastructure problems are having a negative impact, not only on my industry but on economic advancement in general. True or not, perception is reality.
I raise these points not to sound an alarm about India’s services industry. I am well aware of things that Infosys is doing to ensure its future as well as maintain its role as a good corporate citizen -- as well as efforts by the national and state governments. Moreover, if one were to ask me about China, Russia, Brazil, or other countries I could come up with similar concerns, some even more grave than those facing India.
Nevertheless, although India’s services workers are among the best in the world, they are not some new species immune to changes in the world around them. So, concerning the role of countries in global sourcing – or any other business in the flattening world – I would say that it’s about creating environments where people can flourish.
Comments
Did you mean companies or countries ?
"I’d like to open a discussion about the role of "countries" in global sourcing with respect to human resources, convenience, and infrastructure in India"
Posted by: Venkatesh | September 15, 2006 11:03 PM
Dear Stephen,
It is true that there is going to be a lot of competition for outsourcing projects from non english countries for India. I forsee 2 threats
1.if we are going to depend on our "low cost" advantage alone, our software industry is going for big trouble since there is no value addition for the client
2. language is righnow our main competitive advantage but it can be replicated by the competitors.
So the challenge is to upsell and create new competencies. Get into new verticals that others are not thinking of. for example education/training is an area where we can add more value.
Secondly, rather than looking at foriegn countries, large IT firms shoould look at the domestic market . India is a market which is very value conscious. So even if thee is any reversal at the international market we can have the local market as the buffer.
Posted by: Harish B | September 16, 2006 06:40 PM
Dear Stephen,
This is an interesting article, and I found the underlying thought process relevant in the context of the current global business environment and the changing dynamics of resource-availability. In fact, I had written a similar post on my blog a few minutes back.
Infrastructure seems to be the bete noire for the Indian economic boom right now, and we need to address this issue fast, along with revitalising the talent boom that was once the hallmark of India a few years ago.
Regards,
Gagan.
Posted by: Gagan | September 16, 2006 08:15 PM
Dear Stephen Lane,
Human resource advantage and cost-effectiveness will always remain with India. As far as language is concerned, Indian English is one of the best in the world, both written and spoken. Also, when people talk about education in India, they rely on percentage figures. This percentage is an extremly deceptive term.
If only 7% of Indians are highly educated, in absolute terms it turns out to be 7,0000000. Are all these people working?
Absolutely not. As companies mainly focus on metros, most of the highly educated persons are out of job. Every individual has his own strength. Firms should focus on strengths rather than weaknesses for maximum result.
The problem is that most firms want to hire the best. And everybody seems to have forgotten than best can only be one and not more than one. Other than that one are not the best.
Even average individuals can can give best results, just a little bit of training can do all. In my view, group of averagely talented persons can give much better results that a group of extremely talented individuals.
Just look after the Indian cricket team. When Sachin was leading the team, India was losing but when Ganguly became captain, the same team started winning. Or see Australians. They are mainly a group of averagely talented players, rather than a group of highly talented individuals.
It's for a company to decide how it wants to use the average talent of an individual. Abraham Lincon, Mahatma Gandhi, George Washington...none of them were the best. All had the attitude.
Companies can help employees develop attitude.
Posted by: pravir kumar | September 17, 2006 06:40 PM
Hello Stephen,
I am in line with what you pointed out and I agree with Pravir Kumar's point of developing attritude in their employees by companies. However further to that I feel that this is the role of a country to build into their student through educations. Indian universities and colleges should teach the students to "research". Only good score in exams, bookish knowledege and mere information on happenings in USA Tech industry will not help for long. India needs innovative thinkers which can be developed through universities. At this point role of country is vital which can fund the research and stop brain drain.
Posted by: Ambarish Mahajan | September 22, 2006 11:43 AM
This is an interesting and informative article. I got some good knowlegde. Thank you.
Posted by: Hari Prasad | September 23, 2006 05:33 AM
Not only 7% are enrolled, the industry/academic interaction and the general condition of higher education with regard to private participation needs some quick thinking.
Posted by: Mridula | September 24, 2006 11:00 AM
Dear Stephen:
You have raised a very important question on the quality and availability of Indian human resources for powering India's journey ahead. In this regard a food for thought is Infosys Institute of IT.
In this regard it is inevitable that Infosys starts a center of education like an Institute of IT for gaining students through full time, part time and distance education programmes, these students will help power Infosys ahead. Further this institute can also serve as a Research and Development center. In partnership with other colleges the Infosys Institute of IT can help strengthen the IT educational infrastructure. Further through the latent Infosys expertise virtual teaching programmes can be offered by Infosys Inst of IT. _ Sunil S Chiplunkar
Posted by: Sunil S Chiplunkar | September 25, 2006 08:57 AM
Countries must develop the level playing field (fairness platform) for all globalization activity/transactions (rules, regulations, laws, universal credit/funding systems, etc.). Globalization will speed up and stabilize economic growth. Global competition will realize “best of breed” quicker, based on trial and error.
Companies must develop and market the products/services to be sourced. The summation of all product cycles, at any point in time, represents business activity. There is no such thing as “the business cycle” or the need for government intervention, other to ensure the playing field remains level.
Marketing is the understanding of each market (product needed to satisfy the demand at a given price).
Advantages are relative and determined by results, not expected results. That is why we play the game.
Rich Woods, USA
941/966-0710
Posted by: Richard Woods | September 29, 2006 02:53 AM
Countries must develop a global platform (level playing field) for all economic activity/transactions (including automatic audits to enforce the rules, regulations, laws, investment requirements, etc.). Globalization will speed up and stabilize economic growth. Global competition will realize “best of breed” quicker, based on planning or trial/error.
Companies must develop and market the products/services to be produced/ sourced. The summation of all product cycles, at any point in time, represents business activity. There is no such thing as “the business cycle” or the need for government intervention, other than ensure the playing field remains fair for all.
Marketing provides an understanding of each market (product needed to satisfy the demand at a given price). Supply-side economists assume consumers will buy whatever is produced. GMC’s experience proves otherwise. Alternatives will appear.
Advantages are relative and determined by results, not expected results. The competitive advantages customers used to differentiate the products are the only significant advantages. That is why we play the game and why prototyping is critical in a global market.
Rich Woods, USA
Posted by: Rich Woods (Update) | October 3, 2006 02:13 PM
"TCS, for example, in late 2005 won an $850 million, 12-
year BPO contract with Britain’s insurance giant Pearl Group.And
this isn’t about low-cost Indian labor.The work is being done in the
United Kingdom.It signals that the Indians are becoming so accomplished
that they don’t need to rely on cheap labor anymore." These are the lines from Book Bangalore Tigers based on Wipro. I think its not the cost or resources that matter for Indian Services Businesses . As Infy put it ,its the systems and process efficiency that makes any company great company.
Posted by: Phani Raj , Banaglore | October 18, 2006 09:48 AM