The Ashoka Page

lalit@ri.cmu.edu

AWESOME ARTICLE ON INDIAN SOFTWARE INDUSTRY BY FORBES

Where China is becoming the world's major supplier of cheap labor, India is emerging as a supplier of highly technical brainpower. Silicon Valley goes east-way east

IT'S THE LAST THING you would expect in a 65-unit department store chain: Nordstrom, Inc. has decentralized its buying to better tailor inventory to local tastes. Many buyers handle a half-dozen stores, or even fewer, to customize offerings. How can Nordstrom do this while hanging on to centralized finances, volume discounts and economies of scale in shipping? Fancy software. The company's custom inventory and financial software has saved it millions.

It figures. Nordstrom is based in Seattle, home to one of the most intense concentrations of programmers in the U.S. But wait-Nordstrom isn't using all homegrown talent. It went all the way to India for most of this custom software.

Nordstrom's supplier: Bangalore-based Infosys Technologies, a fast-growing software firm with global ambitions. A team of some 50 Infosys engineers is dedicated to Nordstrom projects. They live in India, but spend four-to-six-month tours of duty in Nordstrom offices in the U.S., constantly updating and refining the more than 1 million lines of code that run Nordstrom's business.

India has been exporting computer software for years, but what's new is the extent to which American businesses have begun entrusting critical, leading-edge software development to Indian programmers. Past and present Infosys clients include such marquee American names as Visa, Xerox, General Electric, Reebok, and AT&T.

Engineers born and often trained in India, where English is the principal language of higher education, have for years immigrated to the U.S. to staff the research and development labs of outfits ranging from Intel and AT&T to tiny startups. But engineers who stayed behind in India were hampered from acquiring skills by a lack of knowledge and technology, a result of India's stifling bureaucracy.

That changed after India began its economic liberalization in 1991. At first the country was tapped primarily by "body shoppers" (see box, p.162) for labor-intensive applications like data entry and millennium-bug projects. Capable programmers were available in India at salaries of less than $10,000 a year, a fifth what they would command in the U.S.

The Indian software industry took off. The National Association of Software & Service Cos. in New Delhi estimates that exports hit $1 billion in the year ended March 1997, and are growing at 50% a year.

As engineering skills grew, India became more than just a cheap-labor pool. Only three organizations in the world have achieved a level 5 rating, the highest, at Carnegie Mellon University's Software Engineering Institute. Two are in the U.S.: Boeing's Defense & Space Group and IBM Federal Systems Co. (now Lockheed Martin). The third is Motorola India Electronics Ltd. (MIEL), Motorola's software center in Bangalore.

"We are in India because that's where a lot of talent is," says Amreesh Modi, managing director of Motorola's Global Software Division. "The cost advantage is a short-term bonus."

Take the specialized computer chips that run applications like telephone switches. It can take months between the design of a chip and delivery to a customer. It takes more months for the customer to incorporate it into products and write the software that goes with it. One way to reduce this delay is to build a software simulator for the chip and deliver it immediately to customers, who can then begin writing and testing associated programs. Big chunks of the simulator, compiler and debugging software for many of Motorola's new chip designs are developed in Bangalore. "Our guys are so good that they frequently suggest improvements in the design of the chip itself," says Roger Fordham, managing director of MIEL.

Digital signal processing is the technology that underlies many of the gadgets we can no longer live without-direct-broadcast TV, cellular phones, multimedia, CD-ROMs, secure on-line banking. Who writes the code for these chips? Texas Instruments (India) has 330 software professionals, housed in a spanking new 120,000-square-foot building in Bangalore.

India's expertise shows up in some surprising places. Take space imaging-taking photographs of the earth's surface from orbiting satellites. Oil and gas companies use these photos to route pipelines; disaster managers to evaluate the effects of earthquakes, floods and fires; and agriculture officers to manage insect infestations. U.S. and Russian military satellites take the best pictures for this purpose, but you can't buy them.

Complex software written in India shows up in seemingly unlikely products. The background: an image of Washington, D.C. taken by an Indian satellite. For that, you go to India. "India has the most advanced commercially available remote sensing satellites in orbit today," says John Copple, chief executive of Thornton, Colo.-based Space Imaging Eosat.

In short, while China is developing as a source of cheap labor for the industrial nations, India has become a source for brainpower.

Lawrence Ellison, Oracle's chief, has high hopes for the network computer his Oracle Corp. is touting to beat Intel/Windows PC on the desktop. Oracle's network computer will use an operating system largely developed by the company's India Development Center in Bangalore. "Never in my wildest dreams did I think they could accomplish so much in such a short period of time," says Jerry Baker, chief executive of Network Computer, Inc., the new company jointly owned by Oracle and Netscape that is spearheading the NC system of computing.

Companies that have opened development operations in India, or are thinking about doing so, include IBM, Hewlett-Packard, AT&T, Northern Telecom, Siemens, British Telecom, Digital Equipment, Lucent and Computer Associates. Nontechnology giants like Citicorp have found that they can gain a competitive edge in world markets by using proprietary software developed in India.

Companies that come to India for other business reasons sometimes find serendipitous advantages. When General Electric, in collaboration with local partner Wipro, set up its medical systems unit in Bangalore, GE Medical Systems Chairman John Trani suggested a "stretch" target-shooting for a profit in the very first year. D.A. Prasanna, the venture's chief executive, countered with his own proposal: Let GE buy software from us to help us achieve that goal faster.

Result: The software that digitizes, manipulates, reconstructs and displays images on some of GE's top-of-the-line scanners was developed in India. The Bangalore Rising star Other GE divisions, such as aircraft engines, are doing development work in India so proprietary that GE refuses to talk about it. In an earlier interview, Scott Bayman, GE's country manager in India, conceded that quality of software development in India, is "...slightly ahead of what we get done in the U.S., in our experience."

Nor are Indians just grabbing jobs and deals with foreign companies. "We decided to take the Silicon Valley model, adapt it to our conditions, and see what happened," says N.R. Narayana Murthy, chairman of Infosys Technologies. Infosys was the first Indian company to offer low-cost stock options to its employees (creating dozens of dollar millionaires and at least 300 rupee millionaires), the first to publish audited quarterly financial statements and the first to prepare financial reports conforming to U.S. accounting standards. Infosys stock has appreciated 55-fold in four years on the Mumbai (Bombay) stock exchange, and the company is considering a listing on Nasdaq.

Tata Consultancy Services, one of the software firms of the powerful Tata Group, is India's oldest and largest software firm. It has seen its revenues grow 230% in the past five years, to $205 million.

Says Edward Yourdon, author of The Rise & Resurrection of the American Programmer: "Be prepared to see the MADE IN INDIA logo appear on software products in a few years."

Matrimonial advertisements take up several pages of the Sunday editions of India's major newspapers. For decades, parents with eligible children tried to snare doctors and engineers. "Computer professional" has now gone to the head of the preferred list.